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Equity Volatility Snapshot • During the past couple of weeks, and particularly last Friday, a host of Q4 earnings

disappointments and macroeconomic issues such as high crude prices weighed heavily on the stock market.

• We examine option volume trends during last week’s expiration and compare them with volume profiles leading up to expirations in 2005. We find that the total volume of option contracts traded tends to increase steadily as expiration approaches, and also tends to be relatively high during periods of heightened risk aversion (such as last Friday).

• During the following 5 trading days, approximately 150 companies in the S&P 500 are expected to report earnings. The industry groups having the largest number of companies reporting are Health Care Equipment & Services and Capital Goods.

• We update the list of stocks identified by the Lehman Brothers Volatility Screen as possibly having rich or cheap options. We also update the Lehman Brothers Earnings Watch to estimate the expected stock price reaction the options market is pricing in for upcoming earnings announcements.

January 24, 2006

Ryan Renicker, CFA

1.212.526.9425 ryan.renicker@lehman.com

Devapriya Mallick 1.212.526.5429

dmallik@lehman.com

Equity Derivatives Strategy | Equity Volatility Snapshot

January 24, 2006 2

Market Fear Escalates: Growing Pains?

As we enter the heart of the Q4 earnings season, a host of recent Q4 earnings disappointments (INTC, YHOO, MOT, GE) as well as macro factors such as high crude oil prices have weighed heavily on the stock market during the past couple of weeks.

This is in stark contrast to the relatively optimistic earnings growth outlook investors appear to have had at the beginning of the year. Investor optimism ahead of the Q4 earnings season had contributed to the market’s initial rally and decline in implied volatility. In fact, from December 30, 2005 to January 11, 2006, the S&P 500 gained nearly 4%, and 1-month S&P 500 implied volatility approached multi-year lows, settling at about 10% on January 11.

However, recent negative events have led to a noticeable increase in short-term risk expectations for the U.S. equity market, as 1-month S&P 500 at-the-money implied volatility rose nearly 2 vol points on Friday alone as the market declined (Figure 1).

Earnings Reports This Week

As Figure 2 illustrates, approximately 150 companies in the S&P 500 Index are expected to report earnings during the next 5 trading days. Health Care Equipment and Services (WLP, CAH, GDT) and Capital Goods (CAT, HON, LMT) are the industry groups having the largest number of companies reporting in the coming week.

Figure 1: SPX Index vs. SPX 1-Month Implied Volatility

Figure 2: EPS Releases for the Coming Week by Industry Group

8%

9%

10%

11%

12%

13%

14%

15%

16%

Jan-0

5

Feb-0

5

Mar-05

Apr-05

May-05

Jun-0

5Ju

l-05

Aug-05

Sep-05

Nov-05

Dec-05

Jan-0

6

SPX

1-M

onth

ATM

IVO

L

1,130

1,150

1,170

1,190

1,210

1,230

1,250

1,270

1,290

S&P

500

Inde

x

1-Month SPX IVOL

S&P 500 Index

S&P 500 Industry Group # Reporting % of TotalHealth Care Equipment & Services 18 11.9%Capital Goods 17 11.3%Materials 13 8.6%Technology Hardware & Equipment 11 7.3%Consumer Durables & Apparel 10 6.6%Energy 10 6.6%Software & Services 10 6.6%Pharmaceuticals & Biotechnology 8 5.3%Semiconductors & Semiconductor Equipment 8 5.3%Utilities 6 4.0%Diversified Financials 5 3.3%Household & Personal Products 5 3.3%Insurance 5 3.3%Media 5 3.3%Food, Beverage & Tobacco 4 2.6%Transportation 4 2.6%Telecommunication Services 3 2.0%Banks 2 1.3%Commercial Services & Supplies 2 1.3%Automobiles & Components 1 0.7%Consumer Services 1 0.7%Food & Staples Retailing 1 0.7%Real Estate 1 0.7%Retailing 1 0.7%

Source: Lehman Brothers, Bloomberg Source: Lehman Brothers, Bloomberg

Record Option Volumes on January Expiration

Equity options and PM-settled index options expire on the Friday preceding the third Saturday of each month. These expiration dates typically have a relatively high volume of option contracts traded. In addition, increased hedging activity can impact the performance and volume of the underlying stocks. We examine option volume trends during last week’s expiration and compare them with volume profiles around expirations in 2005. Since the January expiration week is the only one in the year having four trading days, we analyze 2005 expiration week volumes from Tuesday to Friday for consistency.

Equity Derivatives Strategy | Equity Volatility Snapshot

January 24, 2006 3

We find that the total volume of option contracts traded tends to increase steadily as expiration approaches (Figure 3). This has been true since 2005 for single-stock options as well as options on the S&P 500 Index. Since the macroeconomic and earnings-related concerns during last Friday’s expiration were significant, one would expect above average option activity on that day. Figure 4 shows this indeed was the case; on Friday alone, over 6.5 million option contracts traded on stocks in the S&P 500. This is similar to what occurred during last April’s expiration, when heightened risk aversion following a series of negative market impact events corresponded with high option volumes.

Figure 3: Equity and Index Option Volumes in Expiration Week

Figure 4: Equity Options Volume on Expiration Days

2.5

3.0

3.5

Expiration - 3 Expiration - 2 Expiration - 1 Expiration Date

Days to Expiration

Equi

ty O

ptio

n Vo

lum

e (M

n C

ontr

acts

)

0

100

200

300

400

500

600

SPX

Inde

x O

ptio

n Vo

lum

e (0

00

Con

trac

ts)

Average Equity Option Volume (LHS)Average SPX Option Volume (RHS)

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

Jan-0

5

Feb-05

Mar-05

Apr-05

May-05

Jun-0

5Ju

l-05

Aug-05

Sep-05

Oct-05

Nov-05

Dec-05

Jan-0

6

Option Volume on Expiration Option volume peaks on credit concerns

Highest Volume Ever

Source: Lehman Brothers, OptionMetrics Source: Lehman Brothers, OptionMetrics

We compare last Friday’s single-stock option volume for each sector with their respective average year-to-date option volumes. We find volume increased consistently across the majority of sectors on Friday, with option contracts on stocks belonging to the Energy and Industrials sectors trading, on average, nearly two times their average year-to-date volume (Figure 5).

The CBOE index put/call ratio can be considered a bearish sentiment indicator, since a higher ratio suggests investors are purchasing more put contracts to provide downside protection for their portfolios. We find that the average volume of index puts increased steadily throughout last week, and peaked on Friday (Figure 6). This implies much of Friday’s options activity could have been driven by investors buying downside protection.

Figure 5: Change in Contract Volume by Sector

Figure 6: Rising Index Put/Call Ratios

Sector Average YTD Volume

Volume on Friday

Change in Volume (%)

Energy 12,093 24,023 99%Industrials 5,846 11,580 98%Utilities 954 1,803 89%Health Care 7,789 12,061 55%Information Technology 18,826 27,183 44%Consumer Discretionary 7,067 10,148 44%Financials 8,685 11,615 34%Materials 6,011 6,545 9%Consumer Staples 11,972 9,700 -19%Telecommunication Services 22,295 8,664 -61%

1.20

1.30

1.40

1.50

1.60

1/3/06

1/5/06

1/9/06

1/11/0

6

1/13/0

6

1/18/0

6

1/20/0

60

400,000

800,000

1,200,000

1,600,000

2,000,000Volume of Puts Traded (RHS)

Put/Call Ratio (22-day Avg)

Source: Lehman Brothers, OptionMetrics Source: CBOE

Equity Derivatives Strategy | Equity Volatility Snapshot

January 24, 2006 4

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 potentially attractive long or short volatility trading candidates. Please see Identifying Rich and Cheap Implied Volatility (December 20, 2005) for further details.

In Figure 7, we present the current list of stocks having relatively rich options according to the Lehman Brothers Volatility Screen.

Figure 7: Stocks Displaying “Rich” Volatility Characteristics

Ticker Name GICS SectorLehman

Company Rating

Lehman Sector View Price

Expected Earnings

Date

3-Month Implied

Volatility

Std Devs from Mean (3-Month

Implied vs Realized)

Std Devs from Mean (3-Month

Implied vs Sector)

Std Devs from Mean (3-Month Implied vs S&P

500)

Rich/Cheap

ACV ALBERTO-CULVER CO Consumer Staples 0-Unrated 0-Unrated 43.87 1/26/2006 25% 1.7 2.1 1.9 RichADTN ADTRAN INC Information Technology 1-Overweight 2-Neutral 31.43 4/18/2006 47% 1.2 2.0 1.5 RichALEX ALEXANDER & BALDWIN INC Industrials 0-Unrated 0-Unrated 51.90 2/1/2006 30% 2.3 1.9 1.8 RichAMH AMERUS GROUP CO Financials 1-Overweight 2-Neutral 60.00 2/1/2006 24% 1.2 1.3 1.2 RichBCR BARD (C.R.) INC Health Care 0-Unrated 0-Unrated 64.28 1/25/2006 25% 1.9 1.6 1.7 RichBEC BECKMAN COULTER INC Health Care 0-Unrated 0-Unrated 57.58 2/17/2006 32% 1.7 3.5 3.0 RichBKH BLACK HILLS CORP Utilities RS-Rating Suspe2-Neutral 35.60 2/7/2006 23% 1.6 2.1 1.5 RichBLI BIG LOTS INC Consumer Discretionary 0-Unrated 0-Unrated 13.02 2/23/2006 38% 1.3 1.1 1.1 RichBMY BRISTOL-MYERS SQUIBB CO Health Care 3-Underweight 1-Positive 22.10 1/25/2006 25% 2.2 1.9 1.9 RichBSX BOSTON SCIENTIFIC CORP Health Care 1-Overweight 1-Positive 23.34 2/1/2006 36% 1.4 1.3 1.3 RichCAG CONAGRA FOODS INC Consumer Staples 0-Unrated 0-Unrated 20.87 4/13/2006 19% 1.2 1.4 1.1 RichCEY CERTEGY INC Information Technology 1-Overweight 2-Neutral 43.50 1/27/2006 30% 2.0 1.4 1.4 RichDBD DIEBOLD INC Information Technology 0-Unrated 0-Unrated 39.03 1/31/2006 28% 1.1 1.5 1.7 RichEAS ENERGY EAST CORPORATION Utilities 0-Unrated 0-Unrated 24.77 2/10/2006 23% 1.3 2.5 2.0 RichED CONSOLIDATED EDISON INC Utilities 2-Equal weight 3-Negative 46.69 1/26/2006 18% 2.3 1.4 1.3 RichEXC EXELON CORP Utilities 1-Overweight 3-Negative 58.55 1/24/2006 25% 1.8 1.8 1.4 RichFPL FPL GROUP INC Utilities RS-Rating Suspe3-Negative 42.05 1/27/2006 20% 1.0 1.9 1.3 RichHPQ HEWLETT-PACKARD CO Information Technology 1-Overweight 2-Neutral 31.34 2/16/2006 31% 1.5 1.5 1.5 RichISRG INTUITIVE SURGICAL INC Health Care 0-Unrated 0-Unrated 129.58 2/2/2006 64% 1.1 3.4 3.1 RichJP JEFFERSON-PILOT CORP Financials RS-Rating Suspe2-Neutral 56.93 2/6/2006 21% 3.1 2.3 2.1 RichKSE KEYSPAN CORP Utilities 2-Equal weight 2-Neutral 36.50 2/24/2006 17% 1.1 1.4 1.7 RichLEA LEAR CORP Consumer Discretionary 3-Underweight 3-Negative 24.23 1/26/2006 53% 2.6 3.0 2.7 RichMI MARSHALL & ILSLEY CORP Financials 2-Equal weight 2-Neutral 40.99 4/12/2006 20% 2.6 2.5 1.8 RichMRBK MERCANTILE BANKSHARES CORPFinancials 1-Overweight 2-Neutral 56.12 1/24/2006 20% 1.6 1.6 1.5 RichMYG MAYTAG CORP Consumer Discretionary 0-Unrated 0-Unrated 17.43 2/3/2006 55% 1.8 2.2 2.3 RichNYT NEW YORK TIMES CO -CL A Consumer Discretionary 2-Equal weight 3-Negative 27.31 1/24/2006 26% 1.1 2.7 2.3 RichPCL PLUM CREEK TIMBER CO Financials 0-Unrated 0-Unrated 37.86 1/30/2006 22% 2.4 1.4 1.1 RichPGL PEOPLES ENERGY CORP Utilities 2-Equal weight 2-Neutral 36.96 1/27/2006 21% 2.0 1.3 1.2 RichPKG PACKAGING CORP OF AMERICA Materials 0-Unrated 0-Unrated 23.02 4/18/2006 50% 3.0 3.6 3.7 RichSAFC SAFECO CORP Financials 1-Overweight 1-Positive 55.82 1/24/2006 22% 1.5 1.6 1.4 RichSNA SNAP-ON INC Consumer Discretionary 3-Underweight 3-Negative 38.60 2/2/2006 24% 1.4 1.6 2.0 RichSNV SYNOVUS FINANCIAL CORP Financials 3-Underweight 2-Neutral 27.14 4/26/2006 23% 1.1 1.5 1.7 RichSWFT SWIFT TRANSPORTATION CO INCIndustrials 0-Unrated 0-Unrated 22.17 4/25/2006 41% 1.4 1.8 1.9 RichTRB TRIBUNE CO Consumer Discretionary 3-Underweight 3-Negative 29.90 2/1/2006 25% 1.5 1.8 1.6 RichVRTX VERTEX PHARMACEUTICALS INC Health Care 0-Unrated 0-Unrated 33.46 2/7/2006 64% 1.9 2.0 2.0 RichVRX VALEANT PHARMACEUTICALS INTHealth Care 0-Unrated 0-Unrated 18.00 2/24/2006 74% 2.6 3.3 3.2 RichWABC WESTAMERICA BANCORPORATIOFinancials 2-Equal weight 2-Neutral 52.15 4/19/2006 20% 2.4 1.2 1.1 RichWAT WATERS CORP Health Care 2-Equal weight 1-Positive 37.76 1/24/2006 29% 1.3 1.2 1.4 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 8, we provide the current list of stocks having relatively cheap options according to the Lehman Brothers Volatility Screen.

Figure 8: Stocks Displaying “Cheap” Volatility Characteristics

Ticker Name GICS SectorLehman

Company Rating

Lehman Sector View Price

Expected Earnings

Date

3-Month Implied

Volatility

Std Devs from Mean (3-Month

Implied vs Realized)

Std Devs from Mean (3-Month

Implied vs Sector)

Std Devs from Mean (3-Month Implied vs S&P

500)

Rich/Cheap

ATK ALLIANT TECHSYSTEMS INC Industrials 2-Equal weight 1-Positive 77.26 2/2/2006 18% -1.8 -3.0 -2.8 CheapCMS CMS ENERGY CORP Utilities 2-Equal weight 3-Negative 15.00 2/23/2006 22% -1.9 -1.8 -2.0 CheapCSL CARLISLE COS INC Industrials 0-Unrated 0-Unrated 67.68 2/3/2006 20% -1.5 -1.3 -1.2 CheapFFIV F5 NETWORKS INC Information Technology 1-Overweight 2-Neutral 60.94 4/20/2006 44% -2.1 -2.1 -2.0 CheapGT GOODYEAR TIRE & RUBBER CO Consumer Discretionary 0-Unrated 0-Unrated 17.96 2/21/2006 34% -1.2 -1.3 -1.3 CheapHON HONEYWELL INTERNATIONAL INCIndustrials 2-Equal weight 1-Positive 36.05 1/26/2006 20% -1.8 -2.9 -2.2 CheapHPC HERCULES INC Materials 0-Unrated 0-Unrated 11.14 2/2/2006 28% -1.6 -1.5 -1.5 CheapIGT INTL GAME TECHNOLOGY Consumer Discretionary 0-Unrated 0-Unrated 35.67 4/21/2006 24% -1.1 -1.7 -1.8 CheapKEY KEYCORP Financials 3-Underweight 1-Positive 34.94 4/13/2006 15% -1.4 -1.5 -1.4 CheapLRCX LAM RESEARCH CORP Information Technology 1-Overweight 1-Positive 42.46 4/13/2006 36% -1.1 -1.4 -1.0 CheapOMC OMNICOM GROUP Consumer Discretionary 0-Unrated 0-Unrated 83.06 2/22/2006 18% -1.2 -1.4 -1.6 CheapRTN RAYTHEON COMPANY Industrials 2-Equal weight 1-Positive 40.31 2/2/2006 16% -1.3 -1.5 -1.3 CheapSEIC SEI INVESTMENTS COMPANY Financials 0-Unrated 0-Unrated 38.71 2/3/2006 23% -2.1 -1.4 -1.5 CheapSMTC SEMTECH CORP Information Technology 2-Equal weight 1-Positive 17.91 3/1/2006 37% -2.3 -1.5 -1.2 CheapTE TECO ENERGY INC Utilities 2-Equal weight 3-Negative 17.52 1/31/2006 17% -1.1 -1.4 -1.4 CheapWMI WASTE MANAGEMENT INC Industrials 1-Overweight 2-Neutral 31.27 2/14/2006 17% -1.2 -1.1 -1.0 CheapXEL XCEL ENERGY INC Utilities 2-Equal weight 3-Negative 19.15 2/1/2006 13% -1.3 -3.5 -1.3 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.

Equity Derivatives Strategy | Equity Volatility Snapshot

January 24, 2006 5

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: Low Volatility in the 7th Inning? (January 10, 2006) for further details.

In Figure 9 and Figure 10, we present this week’s edition of the Earnings Watch.

Figure 9: Expected Absolute Stock Price Reactions to Upcoming Earnings Announcements

Ticker NameExpected Earnings

Date

Price (1/23/06)

Implied 1-day Stock Price Move

Average Absolute Stock Price Move Following

Earnings Announcements

Average Stock Price Move Following Earnings

AnnouncementsAVY AVERY DENNISON CORP 24-Jan-06 57.43 2.6% 4.3% 2.3%BNI BURLINGTON NORTHERN SANTA F 24-Jan-06 71.63 2.8% 1.4% 1.0%CA COMPUTER ASSOCIATES INTL INC 24-Jan-06 28.96 4.4% 3.6% -1.0%CBE COOPER INDUSTRIES LTD-CL A 24-Jan-06 78.69 3.1% 1.8% 0.7%CSX CSX CORP 24-Jan-06 52.38 2.3% 2.6% 1.4%CTX CENTEX CORP 24-Jan-06 73.41 1.9% 2.3% 0.5%CVG CONVERGYS CORP 24-Jan-06 15.55 4.5% 4.4% 0.9%EXC EXELON CORP 24-Jan-06 58.55 3.1% 1.4% 0.5%GDW GOLDEN WEST FINANCIAL CORP 24-Jan-06 68.45 2.2% 1.1% -0.1%GLW CORNING INC 24-Jan-06 23.71 6.4% 7.6% 6.3%JNJ JOHNSON & JOHNSON 24-Jan-06 61.19 1.8% 1.3% 1.3%MCD MCDONALD'S CORP 24-Jan-06 35.71 2.4% 1.0% -0.5%NOC NORTHROP GRUMMAN CORP 24-Jan-06 60.76 0.9% 1.3% 0.0%NYT NEW YORK TIMES CO -CL A 24-Jan-06 27.31 3.3% 1.2% -0.6%SUNW SUN MICROSYSTEMS INC 24-Jan-06 4.39 6.2% 4.4% -4.2%ZION ZIONS BANCORPORATION 24-Jan-06 76.05 1.7% 2.2% 1.0%ABC AMERISOURCEBERGEN CORP 25-Jan-06 40.98 1.7% 1.5% 1.0%ABK AMBAC FINANCIAL GROUP INC 25-Jan-06 74.27 2.2% 3.4% -3.0%ABT ABBOTT LABORATORIES 25-Jan-06 40.51 2.1% 1.9% -0.9%ADP AUTOMATIC DATA PROCESSING 25-Jan-06 45.39 1.5% 3.1% 2.7%AHC AMERADA HESS CORP 25-Jan-06 146.00 4.3% 1.8% -0.8%ALTR ALTERA CORPORATION 25-Jan-06 18.44 6.4% 5.6% 2.0%APD AIR PRODUCTS & CHEMICALS INC 25-Jan-06 59.77 1.4% 2.1% 0.1%ASH ASHLAND INC 25-Jan-06 64.28 3.3% 1.6% 0.9%ATI ALLEGHENY TECHNOLOGIES INC 25-Jan-06 41.72 4.4% 5.2% 1.6%BLS BELLSOUTH CORP 25-Jan-06 26.81 1.0% 1.1% 0.5%BMS BEMIS COMPANY 25-Jan-06 28.80 1.6% 2.5% 1.2%BMY BRISTOL-MYERS SQUIBB CO 25-Jan-06 22.10 3.7% 1.9% -1.1%BR BURLINGTON RESOURCES INC 25-Jan-06 91.30 1.1% 1.4% 0.0%CL COLGATE-PALMOLIVE CO 25-Jan-06 53.92 2.1% 2.4% 1.2%COP CONOCOPHILLIPS 25-Jan-06 64.91 1.5% 1.3% -0.5%GD GENERAL DYNAMICS CORP 25-Jan-06 114.63 1.5% 2.1% 0.4%HSY HERSHEY CO/THE 25-Jan-06 53.54 2.4% 2.1% 1.6%IFF INTL FLAVORS & FRAGRANCES 25-Jan-06 34.12 4.3% 2.7% -0.4%KMG KERR-MCGEE CORP 25-Jan-06 103.45 3.8% 1.3% -0.6%LSI LSI LOGIC CORP 25-Jan-06 8.50 8.7% 7.5% -4.9%MHP MCGRAW-HILL COMPANIES INC 25-Jan-06 49.63 2.7% 2.7% 2.0%MKC MCCORMICK & CO-NON VTG SHRS 25-Jan-06 31.25 4.5% 3.2% -2.0%MXIM MAXIM INTEGRATED PRODUCTS 25-Jan-06 39.00 5.3% 4.4% 1.3%NSC NORFOLK SOUTHERN CORP 25-Jan-06 45.45 2.5% 3.2% 0.2%NVLS NOVELLUS SYSTEMS INC 25-Jan-06 27.18 4.8% 6.3% -4.5%PMCS PMC - SIERRA INC 25-Jan-06 9.35 5.1% 7.5% -1.9%PMTC PARAMETRIC TECHNOLOGY CORP 25-Jan-06 6.71 5.5% 5.1% -1.5%PX PRAXAIR INC 25-Jan-06 52.49 1.5% 1.4% 0.1%QCOM QUALCOMM INC 25-Jan-06 46.92 5.8% 5.9% 2.1%ROK ROCKWELL AUTOMATION INC 25-Jan-06 63.97 1.9% 5.5% -0.7%SANM SANMINA-SCI CORP 25-Jan-06 4.48 2.5% 12.0% -0.4%STJ ST JUDE MEDICAL INC 25-Jan-06 53.00 3.9% 3.1% 2.4%SWK STANLEY WORKS/THE 25-Jan-06 51.57 1.8% 4.2% -1.5%WLP WELLPOINT INC 25-Jan-06 71.66 4.1% 4.3% -0.6%XRX XEROX CORP 25-Jan-06 14.40 3.9% 4.7% 0.8% 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.

Equity Derivatives Strategy | Equity Volatility Snapshot

January 24, 2006 6

Figure 10: Expected Absolute Stock Price Reactions to Upcoming Earnings Announcements (contd.)

Ticker NameExpected Earnings

Date

Price (1/23/06)

Implied 1-day Stock Price Move

Average Absolute Stock Price Move Following

Earnings Announcements

Average Stock Price Move Following Earnings

AnnouncementsACV ALBERTO-CULVER CO 26-Jan-06 43.87 2.6% 4.1% 3.4%AMGN AMGEN INC 26-Jan-06 74.90 3.6% 4.2% 0.1%ANDW ANDREW CORP 26-Jan-06 11.21 4.0% 9.6% -3.6%BAX BAXTER INTERNATIONAL INC. 26-Jan-06 38.39 2.9% 2.1% -0.2%BC BRUNSWICK CORP 26-Jan-06 40.20 2.1% 4.5% 0.6%BDX BECTON DICKINSON & CO 26-Jan-06 59.21 1.8% 3.2% 2.8%BEN FRANKLIN RESOURCES INC 26-Jan-06 97.29 1.5% 1.3% 1.0%BLL BALL CORP 26-Jan-06 40.59 2.3% 2.5% 0.9%BRCM BROADCOM CORP-CL A 26-Jan-06 56.88 6.5% 5.6% -0.9%CAH CARDINAL HEALTH INC 26-Jan-06 69.45 2.9% 4.3% 3.3%CAT CATERPILLAR INC 26-Jan-06 61.04 3.5% 4.5% -2.7%COL ROCKWELL COLLINS INC. 26-Jan-06 43.80 3.4% 2.2% 1.6%CPWR COMPUWARE CORP 26-Jan-06 8.37 4.1% 8.5% 5.9%DGX QUEST DIAGNOSTICS 26-Jan-06 49.00 3.2% 2.8% 2.1%DHR DANAHER CORP 26-Jan-06 54.35 2.2% 2.0% 0.6%DJ DOW JONES & CO INC 26-Jan-06 37.88 2.9% 2.5% -2.5%DOV DOVER CORP 26-Jan-06 43.31 1.6% 2.9% -0.5%DOW DOW CHEMICAL 26-Jan-06 42.43 3.3% 1.4% 0.0%EMN EASTMAN CHEMICAL COMPANY 26-Jan-06 51.28 2.2% 4.1% 2.8%FDC FIRST DATA CORP 26-Jan-06 42.34 3.3% 2.5% -0.4%GWW WW GRAINGER INC 26-Jan-06 73.30 2.5% 3.9% 2.0%HIG HARTFORD FINANCIAL SVCS GRP 26-Jan-06 85.54 0.4% 3.4% 1.3%HON HONEYWELL INTERNATIONAL INC 26-Jan-06 36.05 2.4% 2.4% -1.0%JNS JANUS CAPITAL GROUP INC 26-Jan-06 21.19 4.0% 3.8% 0.4%KLAC KLA-TENCOR CORPORATION 26-Jan-06 51.77 4.1% 3.7% 0.1%LEG LEGGETT & PLATT INC 26-Jan-06 23.30 1.7% 4.6% 2.0%LLY ELI LILLY & CO 26-Jan-06 57.21 2.3% 1.8% -0.2%LMT LOCKHEED MARTIN CORP 26-Jan-06 65.40 1.6% 1.5% 0.4%MCK MCKESSON CORP 26-Jan-06 49.94 3.9% 4.7% 2.8%MIL MILLIPORE CORP 26-Jan-06 65.00 2.5% 5.9% 1.3%MRO MARATHON OIL CORP 26-Jan-06 72.55 3.6% 2.2% -1.0%MSFT MICROSOFT CORP 26-Jan-06 26.35 2.6% 2.9% 0.6%MWV MEADWESTVACO CORP 26-Jan-06 26.90 0.8% 0.8% 0.6%NCR NCR CORPORATION 26-Jan-06 37.25 3.1% 2.1% -1.5%NE NOBLE CORP 26-Jan-06 84.30 2.8% 1.7% 0.6%NWL NEWELL RUBBERMAID INC 26-Jan-06 23.99 1.2% 4.6% 1.7%PKI PERKINELMER INC 26-Jan-06 22.95 2.6% 4.4% 1.5%RHI ROBERT HALF INTL INC 26-Jan-06 36.58 4.9% 8.2% 4.5%SHW SHERWIN-WILLIAMS CO/THE 26-Jan-06 48.70 2.6% 2.7% -1.3%SO SOUTHERN CO 26-Jan-06 35.23 0.9% 1.2% -0.3%SYK STRYKER CORP 26-Jan-06 45.00 2.8% 6.1% -2.3%T AT&T INC 26-Jan-06 24.45 2.2% 1.4% -0.1%TLAB TELLABS INC 26-Jan-06 10.95 6.2% 6.0% 1.1%TXT TEXTRON INC 26-Jan-06 75.76 1.9% 3.4% 2.3%UIS UNISYS CORP 26-Jan-06 6.18 10.3% 3.8% -3.8%UPS UNITED PARCEL SERVICE-CL B 26-Jan-06 75.21 2.1% 1.5% 0.7%UST UST INC 26-Jan-06 41.10 0.8% 4.1% -0.7%VZ VERIZON COMMUNICATIONS INC 26-Jan-06 31.00 1.9% 1.4% 0.8%ABI APPLIED BIOSYSTEMS GROUP-AP 27-Jan-06 27.53 3.8% 4.0% 3.8%BDK BLACK & DECKER CORP 27-Jan-06 84.56 2.3% 3.3% -0.2%BOL BAUSCH & LOMB INC 27-Jan-06 70.29 4.3% 2.9% 1.0%CVX CHEVRON CORP 27-Jan-06 62.21 1.0% 1.1% 0.3%D DOMINION RESOURCES INC/VA 27-Jan-06 78.13 1.9% 1.1% -0.7%GCI GANNETT CO 27-Jan-06 62.86 1.1% 0.9% -0.1%GDT GUIDANT CORP 27-Jan-06 76.00 1.9% 1.5% -0.8%HAL HALLIBURTON CO 27-Jan-06 77.01 4.4% 3.7% 0.6%HCR MANOR CARE INC 27-Jan-06 39.25 0.9% 2.6% 1.3%ITT ITT INDUSTRIES INC 27-Jan-06 105.67 2.7% 3.4% 0.8%NUE NUCOR CORP 27-Jan-06 72.40 1.5% 2.3% 1.7%PG PROCTER & GAMBLE CO 27-Jan-06 57.64 1.4% 1.3% -0.5%PGL PEOPLES ENERGY CORP 27-Jan-06 36.96 2.3% 1.6% -0.9%RBK REEBOK INTERNATIONAL LTD 27-Jan-06 58.86 0.1% 4.1% 0.5%TROW T ROWE PRICE GROUP INC 27-Jan-06 76.18 2.0% 1.8% 1.3%AFL AFLAC INC 30-Jan-06 47.16 1.8% 4.3% 1.1%CMI CUMMINS INC 30-Jan-06 93.40 2.9% 3.5% 1.0%EK EASTMAN KODAK CO 30-Jan-06 24.41 2.2% 6.3% -0.1%FISV FISERV INC 30-Jan-06 43.77 1.7% 5.5% -0.4%MAT MATTEL INC 30-Jan-06 14.89 0.9% 4.2% -1.0%SEE SEALED AIR CORP 30-Jan-06 55.03 2.9% 2.8% 1.4%SGP SCHERING-PLOUGH CORP 30-Jan-06 19.71 2.2% 1.5% 1.3%SYY SYSCO CORP 30-Jan-06 30.40 1.6% 2.4% 0.1%UNM UNUMPROVIDENT CORP 30-Jan-06 22.28 2.5% 5.1% 1.9%XOM EXXON MOBIL CORP 30-Jan-06 61.20 2.0% 1.5% -0.8%ZMH ZIMMER HOLDINGS INC 30-Jan-06 69.00 2.4% 3.4% 0.8% Source: 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.

Equity Derivatives Strategy | Equity Volatility Snapshot

January 24, 2006 7

Volatility Screen User Interface

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

Company Details

Rich/Cheap Metrics: 3-Month

Implied Volatility

Rich/Cheap Metrics: 1-Month

Implied Volatility

Number of Standard Deviations Above or Below Spreads’ 2-Year Average

If > 1 then “Rich”. If < -1 then “Cheap”Current 1-Month Implied Volatility

Screen Universe for Rich/Cheap Volatility, By Sector, Analyst Rating,

Earnings Period

Obtain Implied Volatility Analytics for an Individual Stock

Implied and Realized Volatility for Individual Stock Screened

Implied and Realized Rich/Cheap Indicators for Individual Stock Screened

Equity Derivatives Strategy | Equity Volatility Snapshot

January 24, 2006 8

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Equity Derivatives Strategy | Equity Volatility Snapshot

January 24, 2006 9

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