Merrill Lynch Introduces New Equity Research Rating System

NEW YORK, May 14, 2008 — Merrill Lynch Global Research announced today a new system of equity ratings, which is designed to provide clients with enhanced transparency into analysts' views, greater differentiation among the equity ratings within a sector, and closer alignment between rating distributions and historical stock performance. The new equity ratings structure, to launch June 2, 2008, is unique in that it provides clients with an absolute return system with a relative twist.

"The investment performance of our institutional and individual investors is always paramount," said Candace Browning, president of Merrill Lynch Global Research. "The basis of the new equity rating system is to reinforce our ongoing drive to encourage Merrill Lynch analysts to adopt the perspective and mindset of top-performing investors."

In the new system, "Buy" stocks are expected to have a total return of at least 10 percent and are the most attractive stocks in a coverage cluster*. "Neutral" stock prices are expected to remain flat or increase, but be less attractive than Buy-rated stocks. "Underperform" stocks are (a) expected to have either a negative total return; or (b) have a positive total return but be the least attractive stocks in a coverage cluster. Merrill Lynch Research defines "coverage cluster" as a group of stocks covered by a single analyst or two or more analysts sharing a common industry, sector, region or other classification(s).

The new system also introduces dispersion guidelines that limit the number of the stocks in each investment rating category: Buy-rated stocks may not exceed 70 percent, Neutral-rated stocks may not exceed 30 percent and Underperform stocks must be at least 20 percent of each coverage cluster.

A ratings table, which will be on all Merrill Lynch Equity Research reports, is provided below:




Investment Rating-- Total Return Expectation (within 12-month period of date of initial rating)--- Ratings Dispersion Guidelines for Coverage Cluster *

rating - Return expectation - % recommendations
Buy --- 10 percent---- 70 percent
Neutral--- 0 percent--- 30 percent
Underperform--- N/A ---- 20 percent

* A Coverage Cluster is comprised of stocks covered by a single analyst or two or more analysts sharing a common industry, sector, region or other classifications.

"The rationale behind the introduction of rating dispersion requirements is compelling. By introducing distribution guidelines, we can be certain that our analysts' distributions correlate more closely with historical return statistics," said Ms. Browning. "I am confident that the new Merrill Lynch equity rating system will enhance our ability to provide incremental alpha-generating investment returns to our clients."

Merrill Lynch is also requiring an investment thesis, providing the rationale behind the analyst's recommendation, and a price objective target for every stock under coverage to maximize the transparency and support the analytical and intellectual basis of analysts' convictions and recommendations. In addition, Merrill Lynch analysts will continue to provide clients with volatility risk ratings and dividend ratings.