We are pleased to announce a new, comprehensive stock and industry rating system as of September 7, 2002. The new system is based upon expected performance of a stock compared with the other stocks in the analyst's universe of industry coverage. In addition, the analyst will rate the industry he or she covers relative to the primary market index for the region (for example, S&P 500).
How Does the New Rating System Work?
First, the new system will have three performance categories, rather than the present five. The expected preformance of each stock will be rated relative to the other stocks in the analyst's universe of industry coverage. In addition, our analysts will now rate their industries relative to the overall equity market in the geographical region (for example, U.S., Europe) that they cover. These new ratings will serve to provide a better framework for comparison among companies and industries. Our risk rating system will remain unchanged, as we believe it provides clear and concise direction.
You'll begin seeing these changes reflected on statements for your nonmanaged accounts and on research reports in September, with the complete system in place by year end.
We believe that, over time, our new ratings system will enhance and strengthen the quality of the research we offer you as a Salomon Smith Barney client.
 Industry and Analyst Coverage Search
 Stock Ratings
In the U.S. and other major markets, stock ratings are based upon expected performance over the next 12 to 18 months relative to the analyst's industry coverage universe. In emerging markets, the same ratings classifications are used, but the stocks are rated based upon expected performance relative to the primary market index in the region or country.
| Code |
Rating |
Definition |
| 1 |
Outperform |
Stock is expected to outperform the analyst's industry coverage universe over the coming 12-18 months |
| 2 |
In-line |
Stock is expected to perform approximately in-line with the analyst's industry coverage universe over the coming 12-18 months |
| 3 |
Underperform |
Stock is expected to underpreform the analyst's industry coverage universe over the coming 12-18 months |
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Please note, research rating 8Z indicates coverage of the security has been dropped.
Stock Risk
Our risk ratings remain unchanged; however, each geographic region will be allowed to make adjustments in the risk rating grid to reflect the norms in that regional market.
| Code |
Rating |
Definition |
| L |
Low |
High predictability of financial results and low volatility |
| M |
Medium |
Moderate predictability of financial results and moderate volatility |
| H |
High |
Low predictability of financial results and high volatility |
| S |
Speculative |
Exceptionally low predictability of financial results; highest risk and volatility |
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Industry Ratings
Industry and Analyst Coverage Search
Analysts will rate their industry relative to the primary market index appropriate to that global region (such as the S&P 500 in the U.S.). Analysts will rate an industry as Overweight, Marketweight or Underweight depending on their projection of the industry's performance relative to the primary market index.
| Industry |
Definition |
| Overweight |
Expect industry to perform better than the primary market index for the region in the next 12-18 months |
| Marketweight |
Expect industry to perform in line with the primary market index for the region in the next 12-18 months |
| Underweight |
Expect industry to perform worse than the primary market index for the region in the next 12-18 months |
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Explanation of Closed End Investment Companies
CEF Ratings
Fund ratings are relative to its peer group and/or take into consideration the stability of the fund's dividend where applicable.
| Code |
Rating |
| 1 |
Outperform |
| 2 |
In-line |
| 3 |
Underperform |
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CEF Ratings
Risk ratings should take into account the norms in each global region.
| Code |
Rating |
Definition |
| L |
Low |
Fund invests in high quality, liquid securities with little to no financial leverage or foreign currency exposure. |
| M |
Medium |
Overall, the fund invests in moderate to high quality, liquid securities with reasonable financial leverage and provides primarily United States Dollar currency exposure. |
| H |
High |
Fund may invest in low quality, less liquid securities, have exposure to foreign currencies and above average degrees of financial leverage. |
| S |
Speculative |
Fund invests in low grade, illiquid and highly volatile securities and currencies and may also use high degrees of financial leverage.
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Initially, you'll find this industry rating in the summary discussion on the front page of each Salomon Smith Barney research report. Ultimately, we will list industry ratings after the individual stock ratings.
In addition to changing the rating system, we have also established an Equity Research Policy Committee in the United States, and are in the process of establishing similar committees in each major geographic region. The Committee will be responsible for, among other things, reviewing individual stock ratings and price targets, as well as valuations and risks, for clarity and consistency. The Committee will work to assure that these ratings are consistent with Salomon Smith Barney's overall investment strategy, and will challenge the analysts' thinking if inconsistencies in any of these relationships arise.
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