Scotia Capital has revised its investment rating system for equity research. Effective immediately, the Firm has moved from a five-tier system to a three-tier system. The new system defines recommendations in relation to all of the companies the analyst covers in the sector.

Analysts will now apply one of the following ratings to the stocks they cover:

Sector Outperform: The stock is expected to outperform the average total return of the analyst’s coverage universe over the next 12 months.

Sector Perform: The stock is expected to perform approximately in line with the average total return of the analyst’s coverage universe over the next 12 months.

Sector Underperform: The stock is expected to underperform the average total return of the analyst’s coverage universe over the next 12 months.

The Firm has also enhanced its risk rating system to provide better transparency as to the underlying financial and operational risk of each stock covered. Historical financial results, share price volatility, credit ratings, and analyst forecasts are evaluated in this process.

The final rating also incorporates judgment as well as statistical criteria. Consistency and predictability of earnings, earnings per share growth, dividends, cash flow from operations and strength of balance sheet are key factors considered. Scotia Capital has a committee responsible for assigning risk ratings for each stock. The risk ratings have been updated as follows:

Low: Low financial and operational risk, high predictability of financial results, low stock volatility.

Medium: Moderate financial and operational risk, moderate predictability of financial results, moderate stock volatility.

High – High financial and/or operational risk, low predictability of financial results, high stock volatility.

Caution Warranted – Exceptionally high financial and/or operational risk, exceptionally low predictability of financial results, exceptionally high stock volatility. For risk tolerant investors only.

Venture – Risk and return consistent with Venture Capital. For risk tolerant investors only.