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1. February 7, 2006
Equity Volatility Snapshot
Ryan Renicker, CFA • Implied and realized volatility on the SMH have increased steadily in comparison with SWH
1.212.526.9425 implied and realized volatility.
ryan.renicker@lehman.com
Devapriya Mallick
• Within the SWH, MSFT implied volatility is trading cheap relative to realized, as well as versus
1.212.526.5429
dmallik@lehman.com S&P 500 implied volatility.
• We believe demand for downside protection on MSFT has recently decreased, as its put skew
has declined. In addition, volume in MSFT calls has been relatively high versus its puts (YTD),
possibly signaling greater demand for upside participation in MSFT.
• Investors bullish on MSFT on a longer term basis should consider expressing their view by
purchasing the January 2007 calls, as the term structure of MSFT implied volatility is relatively flat.
• We update our Volatility Screen to identify stocks possibly having rich or cheap options. We also
update our Earnings Watch to estimate the expected stock price reaction the options market is
pricing in for upcoming earnings releases.
Lehman Brothers does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of
interest that could affect the objectivity of this report.
Customers of Lehman Brothers in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them,
where such research is available. Customers can access this independent research at www.lehmanlive.com or can call 1-800-2LEHMAN to request a copy of this research.
Investors should consider this report as only a single factor in making their investment decision.
PLEASE SEE ANALYST(S) CERTIFICATION AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 7.

2. Equity Derivatives Strategy | Equity Volatility Snapshot
Market Weakens as Volatility Inches Higher
Equity markets remained under pressure during the past week, on concerns that the lower than
anticipated unemployment rate and rising wage inflation would prompt the Federal Reserve to continue
hiking interest rates. In addition, other factors such as disappointing earnings releases/forecasts (e.g.
TYC, AMZN) weighed on the market, offsetting the positive impact of declining crude oil prices. S&P
500 implied volatility (VIX) increased throughout the week, peaking above 13 last Thursday.
Semiconductor Vols Increasing Relative to Software Vols
During the past couple of months, implied and realized volatility on the Semiconductor HOLDRs Trust
(SMH) have steadily increased relative to the Software HOLDRs Trust (SWH), due to several factors
such as weaker than expected earnings announcements/2006 outlooks by some key constituents in
the SMH (Figure 1).
This is not surprising, since the correlation1 between SMH and SWH returns have steadily declined
during the past couple of years (Figure 2).
Figure 1: SMH Implied Vol Rises, SWH Vols Relatively Stable Figure 2: SWH vs. SMH Returns Have Become Less Correlated
30% 160 90%
28% SMH 3-month Implied Vol
SWH 3-month Implied Vol 140 85%
Correlation
SWH and SMH Prices (Scaled)
26%
Decreasing Steadily
80%
24% 120
Rolling Correlation
75%
22% 100
70%
20%
80
18% 65%
60
16% 60%
SMH
14% 40 SWH 55%
SMH-SWH Correlation
12%
20 50%
5
5
5
5
5
5
5
5
6
6
05
5
-0
-0
r-0
-0
0
-0
-0
l-0
0
0
-0
01
02
03
04
05
06
g-
n-
n-
p-
ay
ar
ct
ov
b
ec
Ju
Ap
Au
n-
n-
n-
n-
n-
n-
Ju
Ja
Fe
Se
O
M
M
N
D
Ja
Ja
Ja
Ja
Ja
Ja
Source: Lehman Brothers, OptionMetrics Source: Lehman Brothers, OptionMetrics
1
We calculate rolling 252 trading-day (1 year) correlations using the daily log returns for the SMH and SWH.
February 7, 2006 2

3. Equity Derivatives Strategy | Equity Volatility Snapshot
MSFT Options Trading Cheap
We believe one factor that has contributed to SWH’s relatively stable (and low) implied volatility is the
low level of risk expectations that have recently been priced into MSFT options. For example, after the
company released strong Q2 results and raised the lower end of revenue guidance, MSFT shares
rallied nearly 5%, its 3-month at-the-money (ATM) implied volatility continued to decline and -- despite
increasing yesterday to slightly below16% - remains near its lowest level in at least 10 years. In
addition, MSFT 3-month ATM implied – 66-trading day realized volatility spread remains near its 1-
year low and is close to zero (Figure 3), compared to its average implied-realized volatility spread of
above 2% since January 2005. Moreover, MSFT ATM 3-month implied volatility has recently traded at
the lower end of its range relative to S&P 500 3-month implied volatility (volatility information based on
yesterday’s close).
In addition, a recent decline in MSFT’s 3-month put skew leads us to believe that investors are
beginning to decrease their downside protection against their holdings in MSFT shares (Figure 4). This
inference might also be supported by the relatively high volume of MSFT calls traded (average daily
volume of ~ 70,000 contracts YTD) versus the number of puts traded (average daily volume of ~
27,000 contracts YTD).
Figure 3: MSFT Implied Cheap vs. Realized & SPX Implied Figure 4: Decreasing Downside Protection Against MSFT?
12% 7%
MSFT Implied - Realized Spread MSFT Put Skew
10%
6%
MSFT Implied - S&P 500 Implied MSFT Call Skew
5%
8%
4%
6%
3%
4% 2%
2% 1%
0%
0%
-1%
-2%
-2%
-4% -3%
05
5
05
05
06
05
5
05
5
5
06
5
05
05
l-0
-0
-0
-0
-0
5
5
05
5
5
5
5
5
5
06
5
5
5
p-
-
n-
n-
n-
b-
b-
-0
g-
-0
-0
-0
r-
-0
-0
l-0
0
0
ov
ec
ay
0
-0
ar
ct
Ju
g-
Ja
Ju
Ja
n-
n-
n-
Fe
Ap
Se
Fe
p-
ay
Au
ar
r
ct
ov
O
b
M
ec
N
D
M
Ju
Ap
Au
Ja
Ju
Ja
Fe
Se
O
M
M
N
D
Source: Lehman Brothers, OptionMetrics Source: Lehman Brothers, OptionMetrics
Option Strategy
Moreover, the term structure of MSFT implied volatility is relatively flat, since its longer-dated implied
volatility (January 2007 expiration) is trading less than one vol point above it’s at-the-money March
2006 contract (based on last night’s close). We believe investors bullish on MSFT on a longer term
basis should consider expressing their view by purchasing the January 2007 calls.
February 7, 2006 3

4. Equity Derivatives Strategy | Equity Volatility Snapshot
Lehman Brothers Volatility Screen
We update the list of stocks identified by the Lehman Brothers Volatility Screen as possibly having rich
or cheap options. This screen allows investors to identify potentially rich or cheap one or three month
options to efficiently express directional views on the underlying stock or identify attractive long or short
volatility trading candidates. In Figure 5, we present the current list of stocks having relatively rich
options according to the Lehman Brothers Volatility Screen.
Figure 5: Stocks Displaying “Rich” Volatility Characteristics
Std Devs from Std Devs from Std Devs from
Lehman Expected 3-Month
Lehman Mean (3-Month Mean (3-Month Mean (3-Month
Ticker Name GICS Sector Company Price Earnings Implied Rich/Cheap
Sector View Implied vs Implied vs Implied vs S&P
Rating Date Volatility
Realized) Sector) 500)
AAPL APPLE COMPUTER INC Information Technology 2-Equal weight 2-Neutral 67.30 4/13/2006 48% 1.7 1.2 1.6 Rich
AG AGCO CORP Industrials 3-Underweight 2-Neutral 19.00 2/9/2006 37% 1.6 2.0 2.4 Rich
ALEX ALEXANDER & BALDWIN INC Industrials 0-Unrated 0-Unrated 49.30 4/27/2006 29% 1.5 1.5 1.7 Rich
AT ALLTEL CORP Telecommunication Servic1-Overweight 1-Positive 59.74 4/21/2006 20% 1.3 1.2 1.7 Rich
BCR BARD (C.R.) INC Health Care 0-Unrated 0-Unrated 61.00 4/19/2006 25% 1.7 1.3 2.1 Rich
BEC BECKMAN COULTER INC Health Care 0-Unrated 0-Unrated 58.23 2/17/2006 30% 1.1 2.0 2.3 Rich
BEN FRANKLIN RESOURCES INC Financials 1-Overweight 1-Positive 96.90 4/28/2006 23% 1.1 1.1 1.8 Rich
BER WR BERKLEY CORP Financials 0-Unrated 0-Unrated 48.36 2/13/2006 24% 1.1 1.4 1.9 Rich
BHI BAKER HUGHES INC Energy 2-Equal weight 1-Positive 75.92 2/16/2006 37% 1.5 1.6 4.3 Rich
BKH BLACK HILLS CORP Utilities RS-Rating Suspe2-Neutral 35.40 2/7/2006 23% 2.2 2.0 1.7 Rich
BLI BIG LOTS INC Consumer Discretionary 0-Unrated 0-Unrated 13.33 2/23/2006 40% 1.9 1.7 1.7 Rich
BMY BRISTOL-MYERS SQUIBB CO Health Care 3-Underweight 1-Positive 22.37 4/28/2006 27% 1.6 2.6 3.0 Rich
BSX BOSTON SCIENTIFIC CORP Health Care 1-Overweight 1-Positive 21.62 2/7/2006 45% 2.3 3.3 3.6 Rich
CAT CATERPILLAR INC Industrials 2-Equal weight 2-Neutral 68.70 4/24/2006 28% 1.8 2.2 2.3 Rich
DLX DELUXE CORP Industrials 0-Unrated 0-Unrated 26.27 4/28/2006 26% 1.1 2.6 2.6 Rich
EAS ENERGY EAST CORPORATION Utilities 0-Unrated 0-Unrated 24.44 2/10/2006 21% 1.2 1.4 1.6 Rich
ESRX EXPRESS SCRIPTS INC Health Care 2-Equal weight 2-Neutral 89.76 2/22/2006 35% 1.1 1.4 1.7 Rich
EXC EXELON CORP Utilities 1-Overweight 3-Negative 56.05 4/25/2006 24% 2.2 1.4 1.3 Rich
FITB FIFTH THIRD BANCORP Financials 2-Equal weight 1-Positive 36.53 4/13/2006 23% 1.1 1.3 1.5 Rich
FLR FLUOR CORP Industrials 2-Equal weight 2-Neutral 87.55 3/1/2006 29% 1.7 1.2 1.4 Rich
FPL FPL GROUP INC Utilities RS-Rating Suspe3-Negative 40.91 4/26/2006 20% 1.4 1.7 1.4 Rich
GPC GENUINE PARTS CO Consumer Discretionary 2-Equal weight 3-Negative 42.24 2/21/2006 20% 2.1 1.5 1.9 Rich
GRMN GARMIN LTD Consumer Discretionary 2-Equal weight 2-Neutral 62.68 2/22/2006 47% 1.2 1.7 2.2 Rich
HNZ HJ HEINZ CO Consumer Staples 2-Equal weight 3-Negative 33.70 2/28/2006 19% 3.7 2.5 2.3 Rich
HP HELMERICH & PAYNE Energy 0-Unrated 0-Unrated 78.70 4/27/2006 37% 1.0 1.2 2.1 Rich
HPQ HEWLETT-PACKARD CO Information Technology 1-Overweight 2-Neutral 30.27 2/15/2006 31% 1.9 1.6 1.9 Rich
HSY HERSHEY CO/THE Consumer Staples 2-Equal weight 3-Negative 51.06 4/21/2006 21% 1.6 2.3 2.1 Rich
ISRG INTUITIVE SURGICAL INC Health Care 0-Unrated 0-Unrated 106.69 4/21/2006 59% 1.4 2.1 2.2 Rich
JKHY JACK HENRY & ASSOCIATES INC Information Technology 0-Unrated 0-Unrated 21.89 4/20/2006 30% 2.3 1.8 2.0 Rich
JP JEFFERSON-PILOT CORP Financials RS-Rating Suspe2-Neutral 56.89 4/27/2006 25% 4.0 3.5 3.7 Rich
LEA LEAR CORP Consumer Discretionary 3-Underweight 3-Negative 24.65 4/21/2006 49% 1.2 2.3 2.2 Rich
LRY LIBERTY PROPERTY TRUST Financials 2-Equal weight 2-Neutral 44.40 4/25/2006 34% 4.5 4.0 4.1 Rich
MI MARSHALL & ILSLEY CORP Financials 2-Equal weight 2-Neutral 41.76 4/12/2006 21% 3.8 3.0 2.9 Rich
MRBK MERCANTILE BANKSHARES CORPFinancials 1-Overweight 2-Neutral 37.44 4/26/2006 21% 2.4 2.0 2.3 Rich
MYG MAYTAG CORP Consumer Discretionary 0-Unrated 0-Unrated 17.46 4/21/2006 60% 1.9 2.6 2.7 Rich
NAV NAVISTAR INTERNATIONAL Industrials 0-Unrated 0-Unrated 27.06 2/28/2006 39% 1.2 1.6 1.8 Rich
NEM NEWMONT MINING CORP Materials 3-Underweight 1-Positive 60.48 2/27/2006 38% 1.5 1.8 2.8 Rich
OKE ONEOK INC Utilities 1-Overweight 2-Neutral 26.89 2/22/2006 23% 1.4 1.1 1.3 Rich
PGL PEOPLES ENERGY CORP Utilities 2-Equal weight 2-Neutral 36.81 4/28/2006 20% 2.2 1.1 1.3 Rich
RDN RADIAN GROUP INC Financials 1-Overweight 1-Positive 55.55 4/20/2006 27% 1.4 1.6 2.2 Rich
RE EVEREST RE GROUP LTD Financials 1-Overweight 1-Positive 97.45 4/18/2006 25% 1.1 2.3 2.5 Rich
RL POLO RALPH LAUREN CORP Consumer Discretionary 0-Unrated 0-Unrated 57.47 2/7/2006 30% 1.4 1.5 1.8 Rich
RYN RAYONIER INC Financials 0-Unrated 0-Unrated 42.21 4/26/2006 22% 1.4 1.2 1.8 Rich
SAFC SAFECO CORP Financials 1-Overweight 1-Positive 50.67 4/19/2006 23% 2.2 2.3 2.5 Rich
SFG STANCORP FINANCIAL GROUP Financials 3-Underweight 2-Neutral 51.01 4/26/2006 39% 4.2 5.6 5.3 Rich
SHW SHERWIN-WILLIAMS CO/THE Consumer Discretionary 0-Unrated 0-Unrated 52.57 4/21/2006 25% 2.0 2.8 2.5 Rich
SNA SNAP-ON INC Consumer Discretionary 3-Underweight 3-Negative 38.40 4/21/2006 24% 1.7 1.9 2.6 Rich
TBL TIMBERLAND CO-CL A Consumer Discretionary 0-Unrated 0-Unrated 35.08 2/9/2006 30% 2.4 1.2 1.9 Rich
UVN UNIVISION COMMUNICATIONS-A Consumer Discretionary 1-Overweight 3-Negative 31.23 3/2/2006 34% 1.7 1.1 2.1 Rich
VRX VALEANT PHARMACEUTICALS INTHealth Care 0-Unrated 0-Unrated 17.26 2/24/2006 77% 2.7 3.1 3.2 Rich
WDR WADDELL & REED FINANCIAL-A Financials 2-Equal weight 1-Positive 22.28 4/26/2006 38% 3.0 3.6 4.2 Rich
WFMI WHOLE FOODS MARKET INC Consumer Staples 2-Equal weight 2-Neutral 71.95 2/8/2006 33% 1.6 1.6 1.6 Rich
X UNITED STATES STEEL CORP Materials 2-Equal weight 1-Positive 61.57 4/26/2006 49% 1.9 1.5 2.5 Rich
Source: Lehman Brothers, OptionMetrics, Bloomberg, FAME
Note: This screen does not exclude stocks with illiquid options. Investors should consider liquidity before entering into an options position. Stocks that appear as unrated are either
not covered by Lehman Brothers fundamental analysts or are currently subject to research restrictions. Our universe includes stocks included in either the S&P 500 or the NDX.
In Figure 6, we provide the current list of stocks having relatively cheap options according to the
Lehman Brothers Volatility Screen.
Figure 6: Stocks Displaying “Cheap” Volatility Characteristics
Std Devs from Std Devs from Std Devs from
Lehman Expected 3-Month
Lehman Mean (3-Month Mean (3-Month Mean (3-Month
Ticker Name GICS Sector Company Price Earnings Implied Rich/Cheap
Sector View Implied vs Implied vs Implied vs S&P
Rating Date Volatility
Realized) Sector) 500)
ACS AFFILIATED COMPUTER SVCS-A Information Technology 1-Overweight 2-Neutral 62.72 4/21/2006 23% -2.5 -1.9 -1.0 Cheap
CBE COOPER INDUSTRIES LTD-CL A Industrials 1-Overweight 1-Positive 82.76 4/20/2006 18% -1.3 -1.7 -1.1 Cheap
CMS CMS ENERGY CORP Utilities 2-Equal weight 3-Negative 14.17 2/23/2006 22% -1.2 -1.6 -1.4 Cheap
COL ROCKWELL COLLINS INC. Industrials 1-Overweight 1-Positive 50.00 4/27/2006 19% -3.5 -2.1 -1.6 Cheap
MCRL MICREL INC Information Technology 3-Underweight 1-Positive 14.30 4/28/2006 40% -2.1 -1.6 -1.2 Cheap
MNST MONSTER WORLDWIDE INC Industrials 0-Unrated 0-Unrated 46.77 4/26/2006 37% -1.2 -1.2 -1.1 Cheap
PLCM POLYCOM INC Information Technology 1-Overweight 2-Neutral 19.30 4/20/2006 34% -2.5 -2.2 -1.3 Cheap
POS CATALINA MARKETING CORP Consumer Discretionary 0-Unrated 0-Unrated 22.40 5/18/2006 19% -5.3 -3.9 -4.0 Cheap
RSAS RSA SECURITY INC Information Technology 2-Equal weight 1-Positive 14.68 4/27/2006 36% -1.1 -2.0 -1.8 Cheap
SBL SYMBOL TECHNOLOGIES INC Information Technology 1-Overweight 2-Neutral 12.62 3/1/2006 35% -1.7 -1.7 -1.8 Cheap
SMTC SEMTECH CORP Information Technology 2-Equal weight 1-Positive 19.54 3/1/2006 34% -2.6 -2.1 -1.4 Cheap
Source: Lehman Brothers, OptionMetrics, Bloomberg, FAME
Note: Acquisition targets with very low volatility have been removed from this list. Stocks that appear as unrated are either not covered by Lehman Brothers fundamental analysts or
are currently subject to research restrictions. Our universe includes stocks included in either the S&P 500 or the NDX.
February 7, 2006 4

5. Equity Derivatives Strategy | Equity Volatility Snapshot
Earnings Watch: Companies Reporting 1/24 – 1/30
We incorporate implied volatility information to ascertain the expected stock price reaction priced in
by the options market for upcoming earnings announcements. Please see Options Strategy Monthly:
th
Low Volatility in the 7 Inning? (January 10, 2006) for further details.
In Figure 7, we present this week’s edition of the Earnings Watch.
Figure 7: Expected Absolute Stock Price Reactions to Upcoming Earnings Announcements
Average Absolute Stock Price Average Stock Price Move
Expected Implied 1-day Stock
Ticker Name Price (1/23/06) Move Following Earnings Following Earnings
Earnings Date Price Move
Announcements Announcements
BMC BMC SOFTWARE INC 07-Feb-06 21.39 6.1% 5.9% -5.0%
CD CENDANT CORP 07-Feb-06 16.00 3.4% 1.7% -1.3%
CSC COMPUTER SCIENCES CORP 07-Feb-06 50.14 5.1% 4.7% -0.2%
CSCO CISCO SYSTEMS INC 07-Feb-06 17.83 4.6% 5.4% -4.9%
WWY WRIGLEY WM JR CO 07-Feb-06 64.70 0.7% 1.8% 0.6%
CI CIGNA CORP 08-Feb-06 119.27 3.1% 4.0% -0.6%
CINF CINCINNATI FINANCIAL CORP 08-Feb-06 44.23 0.0% 1.3% 0.7%
EDS ELECTRONIC DATA SYSTEMS CORP 08-Feb-06 24.99 3.1% 4.0% 0.5%
PEP PEPSICO INC 08-Feb-06 56.77 1.8% 1.7% 0.9%
PRU PRUDENTIAL FINANCIAL INC 08-Feb-06 75.25 1.8% 2.2% 1.0%
RAI REYNOLDS AMERICAN INC 08-Feb-06 101.78 2.9% 2.3% 0.1%
TMK TORCHMARK CORP 08-Feb-06 55.34 0.3% 2.2% -1.1%
VFC VF CORP 08-Feb-06 55.17 0.8% 2.1% 1.0%
ADI ANALOG DEVICES 09-Feb-06 40.18 3.5% 1.9% 0.4%
AET AETNA INC 09-Feb-06 97.60 2.1% 4.1% 2.6%
AIV APARTMENT INVT & MGMT CO -A 09-Feb-06 42.70 0.9% 2.1% -1.1%
AN AUTONATION INC 09-Feb-06 22.35 2.4% 2.1% 1.6%
AOC AON CORP 09-Feb-06 33.54 4.3% 6.8% 4.1%
AW ALLIED WASTE INDUSTRIES INC 09-Feb-06 9.49 1.6% 7.2% -1.3%
AYE ALLEGHENY ENERGY INC 09-Feb-06 34.60 1.0% 3.8% 1.2%
CCE COCA-COLA ENTERPRISES 09-Feb-06 19.34 1.1% 5.9% -0.2%
MAR MARRIOTT INTERNATIONAL-CL A 09-Feb-06 66.80 1.2% 2.4% 0.2%
MBI MBIA INC 09-Feb-06 60.17 2.5% 1.9% 0.7%
MET METLIFE INC 09-Feb-06 49.11 0.1% 3.2% 1.6%
TAP MOLSON COORS BREWING CO -B 09-Feb-06 62.57 3.1% 5.3% -1.2%
XL XL CAPITAL LTD -CLASS A 09-Feb-06 67.20 1.5% 1.9% 0.3%
ECL ECOLAB INC 10-Feb-06 35.30 1.0% 2.1% 1.2%
ODP OFFICE DEPOT INC 10-Feb-06 33.11 2.9% 3.4% 1.2%
WPI WATSON PHARMACEUTICALS INC 10-Feb-06 31.75 3.9% 5.7% 0.4%
A AGILENT TECHNOLOGIES INC 13-Feb-06 34.74 3.8% 5.8% 1.7%
LNC LINCOLN NATIONAL CORP 13-Feb-06 52.67 1.5% 3.0% 1.7%
OMX OFFICEMAX INC 13-Feb-06 28.02 1.2% 3.2% -1.4%
Source: Source: Lehman Brothers, Bloomberg
Note: This list does not exclude illiquid options. Investors should consider liquidity of options before entering a trade. For details on the methodology we use to calculate the implied
stock price move, please see “Earnings Impact on Implied and Realized Volatility”, included in the Options Strategy Monthly, January 10, 2006.
February 7, 2006 5

6. Equity Derivatives Strategy | Equity Volatility Snapshot
Volatility Screen User Interface
Obtain Implied Volatility
Analytics for an
Individual Stock
Screen Universe for
Rich/Cheap Volatility, By
Sector, Analyst Rating,
Earnings Period
Implied and Realized Volatility Implied and Realized Rich/Cheap Indicators for
for Individual Stock Screened Individual Stock Screened
Note: Stocks that appear as unrated are either not covered by Lehman Brothers fundamental analysts or are currently subject to research restrictions.
Volatility Screen Summary Output
Number of Standard Deviations Above or Below
Spreads’ 2-Year Average
Current 1-Month If > 1 then “Rich”. If < -1 then “Cheap”
Implied Volatility
Rich/Cheap Metrics: Rich/Cheap Metrics:
Company Details 1-Month 3-Month
Implied Volatility Implied Volatility
February 7, 2006 6

7. Equity Derivatives Strategy | Equity Volatility Snapshot
Analyst Certification:
The respective research analysts responsible for the fundamental ratings hereby certify (1) that the views expressed in this research email accurately reflect our
personal views about any or all of the subject securities or issuers referred to in this email and (2) no part of our compensation was, is or will be directly or indirectly
related to the specific recommendations or views expressed in this email.
I, Ryan Renicker, hereby certify (1) that the views expressed in this research email accurately reflect my personal views about any or all of the subject securities or
issuers referred to in this email and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed
in this email.
To the extent that any of the conclusions are based on a quantitative model, Lehman Brothers hereby certifies (1) that the views expressed in this research email
accurately reflect the firm's quantitative research model (2) no part of the firm's compensation was, is or will be directly or indirectly related to the specific
recommendations or views expressed in this research report.
Important Disclosures
Lehman Brothers does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a
conflict of interest that could affect the objectivity of this email communication.
Customers of Lehman Brothers in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to
them, where such research is available. Customers can access this independent research at www.lehmanlive.com or can call 1-800-2-LEHMAN to request a copy of
this research.
Investors should consider this communication as only a single factor in making their investment decision.
The analysts responsible for preparing this report have received compensation based upon various factors including the Firm’s total revenues, a portion of which is
generated by investment banking activities.
Stock price and ratings history charts along with other important disclosures are available on our disclosure website at www.lehman.com/disclosures
And may also be obtained by sending a written request to: LEHMAN BROTHERS CONTROL ROOM , 745 SEVENTH AVENUE, 19TH FLOOR NEW YORK, NY
10019
Options are not suitable for all investors and the risks of option trading should be weighed against the potential rewards.
Supporting documents that form the basis of the recommendations are available on request. Please note that the trade ideas within
this report in no way relate to the fundamental ratings applied to European stocks by Lehman Brothers' Equity Research.
Guide to Lehman Brothers Equity Research Rating System
Our coverage analysts use a relative rating system in which they rate stocks as 1-Overweight, 2- Equal weight or 3-Underweight (see definitions below) relative to other
companies covered by the analyst or a team of analysts that are deemed to be in the same industry sector (“the sector coverage universe”). To see a list of companies that
comprise a particular sector coverage universe, please go to www.lehman.com/disclosures.
In addition to the stock rating, we provide sector views which rate the outlook for the sector coverage universe as 1-Positive, 2-Neutral or 3-Negative (see definitions below).
A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investors should carefully read the entire research report including the
definitions of all ratings and not infer its contents from ratings alone.
Stock Rating
1-Overweight - The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.
2-Equal weight - The stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.
3-Underweight - The stock is expected to underperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.
RS-Rating Suspended - The rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances
including when Lehman Brothers is acting in an advisory capacity on a merger or strategic transaction involving the company.Sector View
1-Positive - sector coverage universe fundamentals are improving.
2-Neutral - sector coverage universe fundamentals are steady, neither improving nor deteriorating.
3-Negative - sector coverage universe fundamentals are deteriorating.
February 7, 2006 7

8. Equity Derivatives Strategy | Equity Volatility Snapshot
Distribution of Ratings:
Lehman Brothers Equity Research has 1845 companies under coverage.
42% have been assigned a 1-Overweight rating which, for purposes of mandatory disclosures, is classified as a Buy rating, 35% of companies with this rating are investment
banking clients of the Firm.
41% have been assigned a 2-Equal weight rating which, for purposes of mandatory disclosures, is classified as a Hold rating, 6% of companies with this rating are
investment banking clients of the Firm.
17% have been assigned a 3-Underweight rating which, for purposes of mandatory disclosures, is classified as a Sell rating, 75% of companies with this rating are
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