Lehman Brothers

LEHMAN BROTHERS

Where vision gets built…

CONTENTS

• INTRODUCTION• ORGANIZATION STRUCTURE• PRODUCTS• SALES ANALYSIS• STRATEGIES• COMPETITORS• TREND PROJECTION• REFERENCES

INTRODUCTION

The journey begins…

LEHMAN BROTHERS

• Lehman brothers holding inc and its subsidiaries together called Lehman brothers

• Leading global investment bank• Serves institutional, corporate,

government and high net worth individuals clients

OVER THE YEARS

• Under the Lehman Family (1850–1969)• Into the Arms of a Giant (1969–1994)• On Their Own Again (1994–present)• Recovery from Disaster (9/11/2001)

LOCATIONS

Headquarters• Worldwide: New York• Regional : Tokyo, London

Additional locations:• North America• Europe• Middle east• Latin America• Asia pacific

PRIMARY BUSINESS

• Capital markets

• Investment banking

• Investment management

OPERATING PRINCIPLES

1. Delivering the entire firm to our clients2. Doing the right thing3. Demonstrating a commitment to excellence4. Promoting and demonstrating teamwork5. Ensuring our organization is a true meritocracy6. Respecting each other7. Demonstrating smart risk management8. Preserving and strengthening the culture9. Giving back to the community10. Acting always with an ownership mentality11. Building and protecting the brand12. Maximizing shareholder value

REVENUE GENERATION

• Structuring transactions• Market maker and intermediary• Originating loans for distribution• Provide investment management• Provide advisory services• Acting as an underwriter• Maintain inventory• Make principal investments

PHILANTHROPY

• Supported daycare for 500 homeless children in Dallas

• Provided 50,000 meals for families in New York

• Funded rebuilding of a primary school in China

• Built 100 houses in Malavli village,India• Provided high school education for 660 girls

in Africa• Launched mentoring program for African-

Caribbean boys

ORGANISATION STRUCTURE

The basic framework…

BOARD OF DIRECTORS

• Richard S. Fuld,Jr.• Michael L. Ainslie• John F. Akers• Roger S. Berlind• Thomas H. Cruikshank• Marsha Johnson Evans• Sir Christopher gent• Roland A. Hernandez• Dr. Henry Kaufman• John D. Macomber

SENIOR MANAGEMENT

• Richard S. Fuld,Jr. (Chairman and CEO)• Jasjit S. Bhattal (CEO,Asia)• Scott J. Freidheim (CAO)• Michael Gelband (Global Head, Fixed

Income)• Dave Goldfarb (Global Head, Strategic

Partnership,Prime Investing and Risk)• Joseph M. Gregory (President and COO)• Jeremy M. Isaacs (CEO,Europe and Asia)• Theodore P.Janulis (Global head,Mortgage

Capital)

SENIOR MANAGEMENT

• Stephen M. Lessing (Head of CRM)• Ian T. Lowitt (CAO)• Herbert H. McDade III (Global head equities)• Hugh e. McGee III (Global head IB)• Roger B. Nagioff (COO ,Europe)• Christopher M. O’Meara (CFO)• Thomas A. Russo (VC and Chief legal officer)• George H. Walker (Global Head IM)

PRODUCTS

The inside story…

FIXED INCOME

Businesses include :• Government and Agency Obligations• Corporate Debt Securities and Loans• High-yield Securities and Leveraged

Bank Loans• Money Market Products• Mortgage and Loan Origination• Mortgage and Asset-backed Securities.

EQUITIES

Products Include :• Listed and Over-the-counter Securities• American Depositary Receipts• Convertibles• Options• Futures• Warrants• Derivatives.

INVESTMENT BANKING

1. Underwriting

2. Advisory Services • Mergers and Acquisitions (M&A) • Restructuring

3. Global Finance Activities• Underwriting• Private Placements• Leveraged Finance• Other Activities

INVESTMENT MANAGEMENT

• Traditional Brokerage Services • Comprehensive Investment• Wealth Advisory• Asset Management• Hedge Funds • Trust and Capital Markets

Execution Services

SALES ANALYSIS

The rewards..

HIGHLIGHTS OF 2006

• Net revenues $17.6 billion (20% increase)• Earnings per share $6.81 ( 25% increase)• Stock price rose to $73.67 (17 % increase)

HIGHLIGHTS OF 2006

• 2006 Sales (mil.) $46,709 (44.1% growth)• 2006 Net Income (mil.) $4,007(22.9% growth)• 2006 Employees 25,900 (13.1% growth)

INCOME STATEMENT

Income Statement  

Total Revenue $46,709

Gross Profit $16,170

Total Operating Expense $40,804

Operating Income $5,905

Net Income before taxes $5,905

Net Income After taxes $3,960

Net Profit Margin 8.0%

FINANCIAL STATUS

TOTAL ASSETS $503,545

TOTAL LIABILITIES $484,354

TOTAL STOCKHOLDERS’ EQUITY

$19,191

OVER LAST 5 YEARS

2006 2005 2004 2003 2002

Net Revenue

$17,583 $14630 $11576 $8647 $6155

Net income

$4007 $3260 $2369 $1699 $975

Total assets

$503545 $410063 $357168 $312061 $260336

STRATEGIES

The style of doing things…

IN BRIEF

• Hired worldwide for senior level jobs• Opened an office in Dubai an India• Strengthened asset management and private equity in

Europe• Established investment management in Asia• Added new asset classes• Expanded energy trading platform • Expanded global client base• 2-for-1 common stock split in the form of stock

dividend.

NEW VENTURES

• Acquired Campus Door, provider of student loans

• Entered Japan's mortgage capital business through L-STaRS one funding limited issue

• Acquired Townsend Analytics, a software development and financial services provider

• Invested in BATS trading Inc ad BIDS• Together with IBM formed China

Investment Fund

ADVISORY

• Financial advisor to AT&T in acquiring BellSouth Corporation

• Advised Citadel Investment group and Och-Ziff capital management group about Hedge funds Advised abbey national PLC in its sale to Resolution PLC

• Advised KKR led consortium in acquiring France telecom group’s stake in PagesJaunes groups SA

COMPETITIORS

The main driving force…

COMPARISON TO INDUSTRY & MARKET

Valuation Company Industry1 Market2

Price/Sales Ratio 0.55 1.88 2.06

Price/Earnings Ratio 7.04 20.01 18.01

Price/Book Ratio 1.40 2.16 2.06

Price/Cash Flow Ratio -- 19.60 12.51

•1Industry: Security And Commodity Brokers, Dealers, Exchanges, And Services•2Market: Public companies trading on the NYSE, AMEX, and NASDAQ

TOP COMPETITORS  Revenue Profit Margin Employees Market Cap

Morgan Stanley $76,551.0 14.3% 58,333 $63,805.4

UBS AG (USA) $73,127.5 30.6% 80,637 $104,934.9

Goldman Sachs Group, Inc.

$69,353.0 20.4% 28,012 $72,888.1

Merrill Lynch & Co., Inc.

$68,622.0 16.7% 61,900 $60,193.1

Lehman Brothers Holdings Inc.

$46,709.0 11.9% 28,323 $29,607.2

Credit Suisse Group (ADR)

$42,069.6 39.9% 45,600 $68,708.8

Nomura Holdings, Inc. (ADR)

$17,311.7 18.5% 16,145 $34,287.5

The Bear Stearns Companies Inc.

$16,551.4 16.0% 15,120 $12,582.0

TREND PROJECTION

What the future holds…

INDUSTRY

• Global equity indices will gain 10%

• Equity offering calendar to increase to 15%

• $9.6 trillion of global fixed income origination

• M&A activity to grow by 15%

COMPANY

• Equities will boost and grow at about 50 %

• Fixed income will continue to grow at around 15 %

• Investment banking may grow at about 15% owing to new territories

• Investment management will rise and grow at 45%

RISKS

• Market risk• Competitive environment• Business environment• Liquidity• Credit ratings• Credit exposure• Operational risk• Legal,Regulatory and Reputational risk

REFERENCES

• Lehman Brothers 2006 annual report

• www.lehman.com

• www.investor.reuters.com

• Google Finance

• Yahoo Finance

• SEC filing for LEH

SWATHI VELISETTY

MMS – I

JBIMS

113