Confidential Presentation :

Structured Products Asia TARN CMS Inverse Floater

26 November 2007

10Y USD Target Redemption Inverse Floater Note

Yield Enhancement in Easing Cycles

Yield Enhancement in Easing Cycles

Monetizing forward Rate bias for short tem yield enhancement

Yield Enhancement in Easing Cycles
It is well documented that effects of monetary policy impact the real economy with a lag. Research indicates a lag of between 6 to 9 months in the US for the effects of change to impact the real economy During easing cycles, central banks have tended to act preemptively to reduce downside risks to growth This has resulted the realized rates that has been historically much lower than indicated by the forwards, referred to as a forward rate bias by practitioners The forward premium in easing cycles can be monetized for short term yield enhancement by means of taking a position with coupons linked to the difference between a fixed rate and the realized CMS10y A typical position would be an inverse floater where the investor is taking a short position in caps linked to CMS10y Such inverse floaters can be combined with a Target Redemption Mechanism to provide short term yield enhancement

Predicted 1y10y and Realized USDCMS10Y Historicals

8.0 8.0

Easing Cycles are associated with forward rate bias

7.0 6.0 4.0 5.0 4.0 3.0 1995 2.0 6.0

0.0 1997 1999 2001 2003 2005

Predicted 1y10y

Realized 10y

Fed Funds

Trade Overview
Trade Overview

Upward sloping yield curves present short rates that exhibit a rate bias
Trade Rationale
The notes have a automatic redemption mechanism linked to a Target level - when the sum of coupons paid attains the target level, the note is redeemed and all further payments are cancelled The note offers an high initial fixed coupon, fixed close to the redemption level. Subsequent coupons are floating payments linked to the difference between 6.5% and the USDCMS10 The notes may redeem as early as 15 months from issuance in case CMSUSD10 is sufficiently lower than the strike level Target Redemption notes high-yielding short-term investment in exchange for investors assuming the risk of long-term poor performance

Note Mechanism Start

Start Date T+1 YEar Pay [ ] Fixed Coupon

Quarter 5 KO based on CMS10

Coupon = (6.5% - CMS10)*Daycount Sum of Coupons above Target?

Q6-Y10 Redemption NO
Coupon = (6.5% - CMS10)*Daycount Sum of Coupons above Target

YES
Redemption Coupon=Target Sum of Coupons

YES

Trade Overview (contd)

Trade Overview

Valuation Metrics of Target Redemption Notes

TARN Characteristics
Higher forward CMS10y rates mean that the investor risks the possibility of long term poor performance The 10 year swap rate is currently being pushed towards 10 year lows, seen last during the 2002-2004 easing cycle CMS10 forwards still remain higher, providing a window of opportunity to enter into inverse TARNs at attractive coupon levels TARNs characteristically exhibit much stronger path dependency when compared against other rates structures TARN coupon amounts are dependent on the forward volatility of the CMS10 year rates Higher forward rate volatility implies greater risk of long term poor performance and better opportunity for yield enhancement Higher forward volatility also allows investors to enter into the TARN at an closer to target initial coupon level The note earns the investor a coupon amount equal to the target level on either redemption or attaining maturity Backtesting over the last 10 years indicates that the notes have always redeemed in within the first year and a half of issuance

TARN Coupon Characteristics

6.00%

CMS USD 10Y Forwards

High Coupon High Coupon High Coupon Fully Protected
5.50% 5.00% 4.50% 4.00%

Higher Forwards Higher Forward Vols Distance to Target Capital Protection

3.50% 3.00% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

CMS10y Forwards

Timing and Valuation

Timing and Valuation

Higher Forward volatilities providing closer to Redemption level initial Coupons

Timing and Opportunity Valuation Perspective
Implied Vol (%)

Implied Forward Black Volatilities

19.00 18.00 17.00 16.00 15.00 14.00 13.00 Jun-07

Since the unfolding of the credit events the implied forward volatilities on the 10y swaps have risen significantly This gives the investor the opportunity to enter into the structure at a closer-to-target initial coupon level The near end of the USD forward curve has dropped substantially, the forwards on the longer maturity swaps have not been significantly depressed The high level of the 10y forwards gives investors the opportunity for good short term yield enhancement The long position the investor holds in the underlying Cap on 10Y CMS at 6.50% strike is inexpensive as it is substantially out of the money

Jul-07

Aug-07

Sep-07

O ct-07

Nov-07

Forward Vol 3y10y

Forward Vol 5y10y

USD CMS10y and CMS1y Forward Curve

6.00% 5.50% 5.00% 4.50% 4.00% 3.50% 3.00% 2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

CMS10y Forwards

CMS1y Forwards

Terms and Conditions

Terms and Conditions

Summary Terms and Historical Performance

Indicative Terms & Conditions
Target Investors Issuer Notional Maturity Issue Price Index Target Amount Coupon Amount Private Banks Lehman Brothers Treasury Co. B.V. USD [ ] 10 year 100% USD CMS 10 Year 11.85% Year 1: 11.35% Thereafter: Max(0%, 6.5%-CMS10y) Sum of Coupons capped at Target Coupon Frequency Basis Quarterly 30/360, unadjusted
40.00% 22.48% 20.00% 0.00% 0.00% Q uarter 5 Q uarter 6 Time to Redemption Late r than Q 6

Historical Performance
Investors sell the risk of long term performance for yield enhancement in a Target Redemption note. Backtesting over the last 10 years indicates that the note has always redeemed within a half year of commencement of the variable coupon payout. The structure has redeemed with within on the first variable coupon payment date almost 78% of the time.

Distribution of Time to Redemption over 10 Years

Distribution 100.00% 80.00% 60.00% 77.52%

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