Dividend Income Stocks

12	Schultz Financial Mgmt Corp *Risk-Controlled Portfolios for Serious Investors*

Folio Statistics

(As of 12-30-2005)

	Dividend Income	DJ Ind Average
2005 Return	8.90%	1.72%
2004 Return	23.10%	5.31%
2003 Return	23.85%	28.28%
2002 Return*	-5.55%	-10.13%
Dividend Yield	2.41%	2.40%
PE Ratio	13.66	16.55
Volatility	13.12	11.94
Beta	0.72	0.93
Market Cap	23.8 bil	98.0 bil

*Since Inception Date: June 24, 2002

Investment performance figures from 2003 are based on actual results of a representative client. Results prior to 2003 are those of our model folio account since its inception. These figures do not include our investment management fees.

Objective:

The objective of this folio is to provide significant dividend income in addition to long term growth. The volatility of this folio will be similar to that of the Dow Jones Industrial Average.

Investment Approach:

First, we develop our list of candidate stocks that we consider for selection. We follow a strict screening process that takes into consideration market capitalization, valuation, debt, volatility, and yield to narrow our stock candidate list to 100 stocks..

Second, we sort those 100 stocks using a proprietary Stock Ranking System (scores 0-99, higher being better) and consider only those with ranks above 60. In order to ensure prudent diversification in the portfolio we limit the portfolio to 5 (or less) banking stocks and 5 (or less) energy / utility stocks. Daily, we monitor the earnings rank of those stocks in our Stock Candidate List, in order to determine if a change to our stock folio should be made.

Third, we look out for bad news that is specific to a particular company that we own, that causes a large price decline of 6% or more on high trading volume. In that situation, regardless of the ranking, we would sell the stock and replace it with our highest rated candidate stock that we don't already own in the folio.

Stock Candidates

To qualify as a candidate for consideration in this folio, a company must have a market capitalization above 4 billion and be one of the 100 highest dividend paying companies with debt to equity ratio of less than 1.5, volatility less than 1.5 times the S&P 500, and be attractively priced relative to its earnings and growth rate. The stock candidate list is updated weekly.

Stock Ranking System

If the stock rank of a company in our folio drops below the 30th percentile, we will sell the stock, and replace it with the highest ranked stock in our current candidate list that we don't currently own (subject to sector limits that we have established).