LEHMAN BROTHERS TREASURY CO. B.V.

Transcription

1 Final Terms dated 23 May 2007 LEHMAN BROTHERS TREASURY CO. B.V. Issue of up to EUR 15,000,000 Index-Linked Notes due July 2012 Guaranteed by Lehman Brothers Holdings Inc. under the U.S.$60,000,000,000 Euro Medium-Term Note Program PART A CONTRACTUAL TERMS Terms used herein shall be deemed to be defined as such for the purposes of the Terms and Conditions of the Notes (the "Conditions") set forth in the Base Prospectus dated 9 August 2006, the supplemental Prospectus No.1 dated 29 August 2006, the supplemental Prospectus No.2 dated 6 September 2006, the supplemental Prospectus No. 3 dated 26 September 2006, the supplemental Prospectus No. 4 dated 17 October 2006, the supplemental Prospectus No.5 dated 19 December 2006, the supplemental Prospectus No.6 dated 6 February 2007, the supplemental Prospectus No.7 dated 6 February 2007, the supplemental Prospectus No.8 dated 6 February 2007, the supplemental Prospectus No.9 dated 6 February 2007, the supplemental Prospectus No.10 dated 14 February 2007, the supplemental Prospectus No.11 dated 16 March 2007 and the supplemental Prospectus No.12 dated 17 April 2007 which together constitute a base prospectus (the "Base Prospectus") for the purposes of the Prospectus Directive (Directive 2003/71/EC) (the "Prospectus Directive"). This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with the Base Prospectus as so supplemented. There are significant risks associated with the notes described above including, but not limited to interest rate risk, price risk, liquidity risk, redemption risk, and credit risk. Especially, investors in the Notes are exposed to the risks of changes in the foreign exchange rates and interest rates, as well as the credit risk of the Issuer and the Guarantor and accordingly the Notes may fall due for redemption at a value substantially below the return which could be earned on other investments. Investors should consult their own financial, legal, accounting, and tax advisors about the risks associated with an investment in these notes, the appropriate tools to analyze that investment, and the suitability of that investment in each investor s particular circumstances. No investor should purchase the notes described above unless that investor understands and has sufficient financial resources to bear the price, market, liquidity, structure, redemption, and other risks associated with an investment in these notes. Lehman Brothers makes no representation as to the existence of a secondary market for the Notes. The market value can be expected to fluctuate significantly and investors should be prepared to assume the market risks associated with these notes.

2 Full information on the Issuer and the offer of the Notes is available on the basis of the combination of these Final Terms and the Base Prospectus. The Base Prospectus and the supplemental prospectuses are available for viewing at, the Bank of New York, One Canada Square, London E14 5AL and copies may be obtained from JPMorgan Chase Bank, N.A., Trinity Tower, 9 Thomas More Street, London E1W 1YT. The Base Prospectus is also available in electronic form on the Distribution Manager (MPS Finance Banca Mobiliare S.p.A.) s web site, on the Irish Financial Regulator's website ( and on the Distributor (Banca Agricola Mantovana S.p.A.) s website ( THE NOTES DESCRIBED HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT ), OR THE SECURITIES LAWS OF ANY STATE IN THE UNITED STATES, AND ARE SUBJECT TO U.S. TAX LAW REQUIREMENTS. THE NOTES DESCRIBED HEREIN MAY NOT BE OFFERED, SOLD OR DELIVERED AT ANY TIME, DIRECTLY OR INDIRECTLY, WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN EITHER REGULATION S UNDER THE SECURITIES ACT OR THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED). IN PURCHASING THE NOTES, PURCHASERS WILL BE DEEMED TO REPRESENT AND WARRANT THAT THEY ARE NEITHER LOCATED IN THE UNITED STATES NOR A U.S. PERSON AND THAT THEY ARE NOT PURCHASING FOR, OR FOR THE ACCOUNT OR BENEFIT OF, ANY SUCH PERSON. 1. (i) Issuer: Lehman Brothers Treasury Co. BV (ii) Guarantor: Lehman Brothers Holdings Inc. 2. (i) Series Number: 7319 (ii) Tranche Number: 1 3. Specified Currency or Currencies: Euro ("EUR") 4. Aggregate Nominal Amount: (i) Series: Up to EUR 15,000,000 (ii) Tranche: Up to EUR 15,000, Issue Price: 100 per cent 6. Specified Denomination(s) and Units: (i) Specified Denomination(s): EUR 1,000 (ii) Units: 2

3 7. (i) Issue Date: 20 July 2007 (ii) Interest Commencement Date 20 July Maturity Date: 20 July Interest Basis: Fixed Rate to Index Linked Interest (further particulars specified below) 10. Redemption/Payment Basis: Redemption at par 11. Change of Interest or Redemption/Payment Basis: In respect of the Interest Period from and including the Issue Date to but excluding 20 July 2008, the Notes shall be Fixed Rate Notes and the calculation of interest shall be subject to the provisions set out under Fixed Rate Note Provisions below. 12. Put/Call Options: 13. (i) Status of the Notes: Senior Notes In respect of each Interest Period from and including the 20 July 2008 to but excluding the Maturity Date, the Notes shall be Index-Linked Interest Notes and the calculation of interest shall be subject to the provisions set out under Index Linked Interest Note Provisions below. (ii) Status of the Guarantee: Senior Guarantee 14. Method of distribution: Non-syndicated PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE 15. Fixed Rate Note Provisions Applicable (i) Fixed Rate of Interest: 4 per cent. per annum payable annually in arrear (ii) Interest Payment Date: 20 July 2008 (iii) Fixed Coupon Amount: EUR 40 per Note of EUR 1,000 Specified Denomination (iv) Fixed Day Count Fraction: Actual/Actual (ICMA) (v) Broken Amount: (vi) Other terms relating to the method of calculating interest for Fixed Rate Notes: 3

4 (vii) Business Day Convention: Following Business Day Convention 16. Floating Rate Note Provisions 17. Zero Coupon Note Provisions 18. Index-Linked Interest Note/other variable-linked interest Note Provisions Applicable (i) (ii) (iii) (iv) (v) Index/Formula/other variable: Calculation Agent responsible for calculating the interest due: Provisions for determining Coupon where calculated by reference to Index and/or Formula and/or other variable: Provisions for determining Coupon where calculation by reference to Index and/or Formula and/or other variable is impossible or impracticable or otherwise disrupted: Specified Interest Payment Dates: See Part C Lehman Brothers International (Europe) See Part C See Part C 20 July in each year from and including 20 July 2009 to and including the Maturity Date (subject to adjustment in accordance with the Business Day Convention) (vi) Business Day Convention: Following Business Day Convention (vii) Additional Business Centre(s) (Condition 3(b)(B)): (viii) Minimum Interest Rate for interest accrual only (Condition 3(b)(vi)): London and TARGET 0.00 per cent. (ix) Maximum Interest Rate: 5.40 per cent. (x) Interest Determination Date(s): See Part C 4

5 (xi) Day Count Fraction: Actual/Actual (ICMA) (xii) Name and address of Calculation Agent, if any, responsible for calculating the principal and/or interest due: Lehman Brothers International (Europe) 25 Bank Street London, E14 5LE 19. Dual Currency Note Provisions PROVISIONS RELATING TO REDEMPTION 20. Call Option 21. Put Option 22. Final Redemption Amount of each Note EUR 1,000 per Note of EUR 1,000 Specified Denomination 23. Early Redemption Amount of each Note Early Redemption Amount(s) of each Note payable on redemption for taxation reasons or on event of default and/or the method of calculating the same (if required or if different from that set out in the Conditions): In respect of each Note, an amount calculated by the Calculated Agent, acting in good faith and a commercially reasonable manner, as the market value of the Notes (disregarding credit risk of the Issuer) determined after taking into account any Unwind Costs in respect of such Note, provided that such amount shall in no case be lower than the nominal amount of the Notes, together with any interest accrued but unpaid, on such day as is selected by the Calculation Agent in its sole and absolute discretion (provided that such day is not more than 15 days before the date fixed for redemption of the Note) Unwind Costs mean an amount equal to the greater of: (a) the EUR value of any transfer or stamp tax cost, any early redemption or termination cost, if any, payable by the Issuer and/or Calculation Agent, as determined by the Calculation Agent, in its sole and absolute discretion, in relation to any swap agreement, financing arrangement or other hedging transaction entered into by, or on behalf of, the Calculation Agent or the Issuer in relation to the issuance of the Notes; and (b) zero. 5

6 GENERAL PROVISIONS APPLICABLE TO THE NOTES 24. Form of Notes: Bearer form. Interests in a temporary global Note will be exchangeable for (i) interests in a permanent global Note in bearer form, or (ii) definitive Notes in bearer form. Interests in a permanent global Note will be exchangeable for definitive Notes in bearer form in the limited circumstances described in the permanent global Note. 25. Talons for future Coupons or Receipts to be attached to Definitive Notes (and dates on which such Talons mature): 26. Details relating to Partly Paid Notes: amount of each payment comprising the Issue Price and date on which each payment is to be made and consequences (if any) of failure to pay, including any right of the Issuer to forfeit the Notes and interest due on late payment: 27. Details relating to Instalment Notes and Instalment Dates: 28. Details relating to Extendible Notes: 29. Details relating to Renewable Notes: 30. Redenomination, renominalisation and reconventioning provisions: 31. Consolidation provisions: The provisions in Condition 18 (Further Issues of Notes) apply 32. Other final terms: DISTRIBUTION 33. (i) If syndicated, names and addresses of Managers and underwriting commitments: (ii) Date of Subscription Agreement: 6

7 (iii) Stabilizing Manager(s) (if any): 34. If non-syndicated, name and address of Dealer: Lehman Brothers International (Europe) 25 Bank Street London, E14 5LE 35. Total commission and concession: The Issuer will pay a management fee in an amount equal to 0.62% of the principal amount of the Notes to the Distribution Manager (MPS Finance Banca Mobiliare S.p.A.) on the Issue Date. The Issuer will also pay a selling fee in an amount equal to 2.48% of the principal amount of the Notes to the Distributor (Banca Agricola Mantovana S.p.A.) on the Issue Date. 36. Selling restrictions: The offering period will commence on 30 May 2007 and will end on 16 July (i) Netherlands Selling Restrictions: (ii) Additional Selling Restrictions: 37. Governing Law: English law LISTING AND ADMISSION TO TRADING APPLICATION These Final Terms comprise the final terms required to list and have admitted to trading the issue of Notes described herein pursuant to the U.S.$ 60,000,000,000 Euro Medium-Term Note Program of Lehman Brothers Holdings Inc., Lehman Brothers Treasury Co. B.V. and Lehman Brothers Bankhaus AG. 7

8 RESPONSIBILITY The Issuer and the Guarantor accept responsibility for the information contained in these Final Terms. Signed on behalf of the Issuer: By:... Duly authorised Series

9 PART B - OTHER INFORMATION 1. LISTING (i) Listing: The Luxembourg Stock Exchange (ii) Admission to trading: Application has been made for the Notes to be admitted to listing and/or trading on the Luxembourg Stock Exchange with effect from the Issue Date No assurance can be given as to whether or not or when such application for listing/admission to trading will be granted. (iii) Cost of Admission to trading: EUR 2, RATINGS Ratings: The Program has been rated: Standard & Poor's Senior Debt (Long term) A+ An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. Negative means that a rating may be lowered. The addition of a plus (+) sign shows relative standing within the major rating categories. Moodys Senior Debt (Long term) A1 Obligations rated A are considered uppermedium grade and are subject to low credit risk. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category and the modifier 2 indicates a mid-range ranking. Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay 9

10 short-term debt obligations. Fitch Senior Debt (Long term) A+ A+ High credit quality. 'A' ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. The modifier "+" denotes relative status within this rating category. 3. NOTIFICATION The Irish Financial Services Authority, or IFSRA, has provided the competent authorities of various Member States (including, but not limited to, Italy with communication dated 11 August 2006) with a certificate of approval attesting that the Prospectus has been drawn up in accordance with the Prospectus Directive. 4. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE/OFFER Save as discussed in the section headed "Subscription and Sale" of the Base Prospectus, so far as the Issuer is aware, no person involved in the offer of the Notes has an interest material to the offer. 5. REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES (i) Reasons for the offer: The net proceeds will be used for the general corporate purposes of the Lehman Group. (ii) Estimated net proceeds: Up to EUR 15,000,000 (iii) Estimated total expenses: EUR 2, YIELD (Fixed Rate Notes Only) Indication of yield: 7. HISTORIC INTEREST RATES (Floating Rate Notes Only) 8. PERFORMANCE OF INDEX/FORMULA, EXPLANATION OF EFFECT ON VALUE OF INVESTMENT AND ASSOCIATED RISKS AND OTHER 10

11 INFORMATION CONCERNING THE UNDERLYING (Index-linked or other variable Linked Notes only) See Part C Details of the historical performance of the Index may be found in Part C Annex 2. A summary of the risks associated with the Notes are set out in Part C Annex PERFORMANCE OF RATE[S] OF EXCHANGE AND EXPLANATION OF EFFECT ON VALUE OF INVESTMENT (Dual Currency Notes only) 10. OPERATIONAL INFORMATION ISIN Code: XS Common Code: New Global Note intended to be held in a manner which would allow Eurosystem eligibility: Any clearing system(s) other than Euroclear Bank S.A./N.V. and Clearstream Banking Societe Anonyme and the relevant identification number(s): Delivery: The Aggregate Nominal Amount of Notes issued has been translated into U.S. Dollars at the rate of (USD1 = EUR ) producing a sum of (for Notes not denominated in U.S. Dollars): Names and addresses of Additional Paying Agent(s) (if any): Delivery against payment USD 20,271,366 11

12 PART C INDEX LINKED INTEREST PROVISIONS The Rate of Interest ( R ) in respect of each Interest Period from and including the 20 July 2008 to but excluding the Maturity Date shall be determined by the Calculation Agent in accordance with the following formula: R = 5.40% x Index Ratio Where: Index Ratio means: Observation Months means: "CPI Rate m " means: The number of Observation Months during the Interest Period for which CPI Rate m is greater than or equal to the Lower Barrier and less than or equal to the Upper Barrier divided by the total number of Observation Months in the Interest Period. For each Interest Period, the Observation Months shall be the 12 months starting from and including the month in which the Interest Period starts, to but excluding the month in which it ends. For any Observation Month m, the annual CPI rate m shall be calculated based on the Index growth from 15 months prior to Observation Month m to the Index level 3 months prior to Observation Month m, expressed as the following formula, as determined by the Calculation Agent: CPI CPI m 3 m 15 1 "CPI m " means: The level of the Index for any month m. Business Day means: Interest Period means: Any day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open (a TARGET Settlement Day ) and a day on which commercial banks and foreign exchange markets settle payments generally in London and each (if any) Additional Business Centre. The period from and including one Specified Interest Payment Date to but excluding the next Specified Interest Payment Date, subject to adjustment. Lower Barrier means: 1.55% Upper Barrier means: 2.60% Index means: Subject to the provisions of the clauses in the Annex 1 hereto, EUR Excluding Tobacco-Non-revised Consumer Price Index meaning the Non-revised Index of Consumer Prices 12

13 excluding Tobacco, or relevant Successor Index, measuring the rate of inflation in the European Monetary Union excluding tobacco, expressed as an index and published by the relevant Index Sponsor (which is published on Bloomberg page CPTFEMU ). The first publication or announcement of a level of such index for a Reference Month shall be final and conclusive and later revisions to the level for such Reference Month will not be used in any calculations.. Index Sponsor means: Eurostat, or any successor sponsor accepted by the Calculation Agent in accordance with the provisions in the Inflation Annex below. 13

14 ANNEX 1 INFLATION ANNEX All capitalised terms used herein and not otherwise defined will have the same meanings given to them in the 2006 ISDA Inflation Derivatives Definitions. 1. Delay of Publication: (a) If any level of an Index for a Reference Month which is relevant to the calculation of a payment under the Notes (a "Relevant Level") has not been published or announced by the day that is five Business Days prior to the next payment date in respect of which it is required, the Calculation Agent shall determine a Substitute Index Level by using the following methodology: (i) if applicable, the Calculation Agent will take the same action to determine the Substitute Index Level for the Affected Payment Date as that taken by the calculation agent pursuant to the terms and conditions of the Related Bond; or (ii) if (i) does not result in a Substitute Index Level for the Affected Payment Date for any reason, then the Calculation Agent shall determine the Substitute Index Level as follows: Substitute Index Level = Base Level x (Latest Level/Reference Level) Where: "Base Level" means the level of the Index (excluding "flash estimates") published or announced by the Index Sponsor in respect of the month which is 12 calendar months prior to the month for which the Substitute Index Level is being determined. "Latest Level" means the latest level of the Index (excluding "flash estimates") published or announced by the Index Sponsor prior to the month in respect of which the Substitute Index Level is being calculated. "Reference Level" means the level of the Index (excluding "flash estimates") published or announced by the Index Sponsor in respect of the month that is 12 calendar months prior to the month referred to in "Latest Level" above. (b) If a Relevant Level is published or announced at any time after the day that is five Business Days prior to the relevant Affected Payment Date, such Relevant Level will not be used in any calculations. The Substitute Index Level so determined pursuant to this section 1 (a) will be the definitive level for that month. 2. Cessation of Publication: If a level for the Index has not been published or announced for two consecutive months or the Index Sponsor announces that it will no longer continue to publish or announce the Index then the Calculation Agent shall determine a Successor Index (in lieu of any previously applicable Index) for the purposes of the Notes by using the following methodology: (a) If at any time (other than after the designation by the Calculation Agent of a date for the early redemption of the Notes pursuant to 2(e) below) a successor index has been designated by the calculation agent pursuant to the terms and conditions of the Related Bond, such successor index shall be designated a "Successor Index" for the purposes of all subsequent payment dates in relation to the Notes notwithstanding that any other Successor Index may previously have been determined under the other sub-sections of this section 2; or (b) If, a Successor Index has not been determined under (a) above (and there has been no designation of a date for the early redemption of the Notes by the Calculation Agent pursuant 14

15 to 2(e) below), and a notice has been given or an announcement has been made by an Index Sponsor, specifying that an Index will be superseded by a replacement Index specified by the Index Sponsor, and the Calculation Agent determines that such replacement index is calculated using the same or substantially similar formula or method of calculation as used in the calculation of the previously applicable Index, such replacement index shall be the Index for purposes of the Notes from the date that such replacement Index comes into effect; or (c) If a Successor Index has not been designated by the Calculation Agent under (a) or (b) above (and there has been no designation of a date for the early redemption of the Notes by the Calculation Agent pursuant to 2(e) below), the Calculation Agent shall ask five leading independent dealers to state what the replacement index for the Index should be. If between four and five responses are received, and of those four or five responses, three or more leading independent dealers state the same index, this index will be deemed the "Successor Index". If three responses are received, and two or more leading independent dealers state the same index, this index will be deemed the "Successor Index". If fewer than three responses are received, the Calculation Agent will proceed to subsection (d) hereof; or (d) If no Successor Index has been deemed under (a), (b) or (c) above by the fifth Business Day prior to the relevant Affected Date, the Calculation Agent will determine an appropriate alternative index for Affected Payment date, and such index will be deemed a "Successor Index". (e) If the Calculation Agent determines that there is no appropriate alternative index, the Notes will be redeemed at an amount calculated by the Calculation Agent as the Redemption Amount of the Notes plus any interest accrued but unpaid less any Unwind Costs. For the purposes of this sub-section, "Unwind Costs" means the value (determined in the currency in which the Notes are denominated) of any transfer or stamp tax cost, any early redemption or termination cost, if any, borne by the Issuer or affiliate thereof, as determined by the Calculation Agent, in its sole and absolute discretion, in relation to any swap agreement, financing arrangement or other hedging transaction entered into by, or on behalf of, the Issuer in relation to the issuance of the Notes. 3. Rebasing of Index: If the Calculation Agent determines that the Index has been or will be rebased at any time, the Index as so rebased (the "Rebased Index") will be used for purposes of determining the level of an Index from the date of such rebasing; provided, however, that the Calculation Agent shall make such adjustments as are made by the calculation agent pursuant to the terms and conditions of the Related Bond, if any, to the levels of the Rebased Index so that the Rebased Index levels reflect the same rate of inflation as the Index before it was rebased. If there is no Related Bond, the Calculation Agent shall make adjustments to the past levels of the Rebased Index so that the Rebased Index levels reflect the same rate of inflation as the Index before it was rebased. Any such rebasing shall not affect any prior payments made under the Notes. 4. Material Modification Prior to Interest Payment Date: If, on or prior to the day that is five Business Days before the next payment date in respect of which it is required or, as the case may be, five Business Days prior to the date scheduled for redemption of the Notes, the Index Sponsor announces that it will make a material change to an Index then the Calculation Agent shall make any such adjustments to the Index consistent with adjustments made to the Related Bond, or, if there is no Related Bond, only those adjustments necessary for the modified Index to continue as the Index. 15

16 5. Manifest Error in Publication: If, within thirty days of publication, the Calculation Agent determines that the Index Sponsor has corrected the level of the Index to remedy a material error in its original publication, the Calculation Agent will notify the Issuer and the Noteholders in accordance with the Terms and Conditions of the Notes of (i) that correction, (ii) the amount that is payable as a result of that correction and (iii) take such other action as it may deem necessary to give effect to such correction. 6. Related Bond: The Related Bond shall be a bond specified in the termsheet or if no bond is specified as the Related Bond herein, the Related Bond shall be the Fallback Bond. If the bond specified to be the Related Bond redeems or matures during the term of the Notes, the Related Bond shall be the Fallback Bond. 7. Fallback Bond: The Fallback Bond will be a bond selected by the Calculation Agent and issued by the government of the country to whose level of inflation the Index relates and which pays a coupon or redemption amount which is calculated by reference to the Index, with a maturity date which falls on (a) the same day as the Maturity Date, (b) the next longest maturity after the Maturity Date if there is no such bond maturing on the Maturity Date, or (c) the next shortest maturity before the Maturity Date if no bond defined in (a) or (b) is selected by Calculation Agent. If the Index relates to the level of inflation in the European Monetary Union, the Calculation Agent will select an inflation-linked bond that is a debt obligation of one of the governments (but not any government agency) of France, Italy, Germany or Spain which pays a coupon or redemption amount which is calculated by reference to the level of inflation in the European Monetary Union. In each case, the Calculation Agent will select the Fallback Bond from those inflation-linked bonds issued on or before the Issue Date of the Notes. If there is more than one bond maturing on the same date, the Fallback Bond shall be selected by the Calculation Agent from those bonds. If the Fallback Bond redeems the Calculation Agent will select a new Fallback Bond on the same basis, but selected from all eligible bonds in issue at the time the original Fallback Bond redeems (including any bond for which the redeemed bond is exchanged). 8. Determinations by the Calculation Agent: All determinations, calculations or valuations made by the Calculation Agent under or pursuant to the terms of the Notes shall be made in its sole and absolute discretion and the Calculation Agent shall be solely responsible for the determination and calculation of any and all determinations, calculations or valuations in accordance with the terms of the Notes. All such determinations, calculations or valuations made by the Calculation Agent shall be conclusive and binding. The Calculation Agent shall not be liable for any loss, liability, cost, claim, action, demand or expense (including without limitation, any costs, charges and expenses paid or incurred in disputing or defending any of the foregoing) arising out of or in relation to or in connection with its appointment or the exercise of this functions, except such as may result from its own wilful default, negligence or bad faith or that of its officers or agents. Nothing contained herein shall prevent the Calculation Agent from dealing in these Notes or from entering into any related transactions, including without limitation any swap or hedging transactions, with the Issuer or any holder of Notes. 9. Reference Month: 16

17 Reference Month means the calendar month for which the level of the Index was reported regardless of when this information was published or announced. If the period for which the Index level was reported is a period other than a month, the Reference Month is the period for which the Index level was reported. 10. Affected Payment date: Affected Payment Date means each payment date in respect of which an Index has not been published or announced. 17

18 ANNEX 2 FURTHER INFORMATION ON THE INDEX 1. Information about the Index The information contained in this Annex relating to the Index consists of extracts from or summaries of information that is publicly available (unless otherwise stated). Neither the Issuer nor the Guarantor has independently verified any such information, and neither accepts any responsibility for error or omission, other than accepting responsibility for accurately reproducing and/or summarising the information relating to the Index. Investors may acquire such further information as they deem necessary in relation to the Index from such publicly available information as they deem appropriate. Investors should make their own investment, hedging and trading decisions (including decisions regarding the suitability of this investment), based upon their own judgment and upon advice from such advisers as such investors deem necessary and not upon any view expressed by the Issuer or the Guarantor. Given the highly specialised nature of these Notes, the Issuer and the Guarantor consider that they are only suitable for highly sophisticated investors who are able to determine themselves the risk of an investment linked to indexes. Consequently, if you are not an investor who falls within the description above you should not consider purchasing these Notes without taking detailed advice from a specialised professional adviser. Summary The Monetary Union Index of Consumer Prices ex-tobacco ( MUCIP ) is an aggregation of relevant Harmonised Indices of Consumer Prices for and reflects consumer price inflation (excluding tobacco) in those EU member states that are members of the Eurozone having adopted the euro as their currency as participants in the third stage of Economic and Monetary Union. General Information Harmonised Indices of Consumer Prices ( HICPs ) are indices of inflation compiled according to methodology developed by the national statistical institutes of member states of the European Union in conjunction with Eurostat. HICP figures are harmonized inflation figures required under Article 121 (consolidated version) of the Treaty establishing the European Community. They are designed for international comparison of consumer price inflation. HICP indices cover household final monetary consumption expenditure. The relative importance of consumers expenditure in terms of particular goods or services varies from country to country. Therefore, there is no uniform basket applying to all member states. Compilation Individual countries first publish their own HICP figures in conjunction with their consumer price indices. Following each country s publication of its own HICP figures, Eurostat aggregates these and publishes aggregate HICP figures for the European Union (the European Index of Consumer Prices or EICP), for the Eurozone (the Monetary Union Index of Consumer Prices or MUICP) and for the European Economic Area (the European Economic Area Index of Consumer Prices or EEAICP)

19 Revisions and Publication Eurostat generally publishes MUICP figures approximately 16 to 18 days following the end of the relevant month. MUICP figures as published by Eurostat are occasionally revised after publication upon more accurate data becoming available. The Index as used in connection with the Notes, however, consists only of the unrevised figures first published by Eurostat (disregarding preliminary estimates). The tables of historical data found on the main pages of Eurostat s website ( contain the revised figures and therefore will not reflect exactly the development of the Index. Unrevised figures can be obtained by subscription to Eurostat s New Cronos database. The most convenient source of information about the development of the Index is currently the internet site of Agence France Trésor ( as the Index is the same as the index used to calculate payments under the French Republic s OATei securities. Disclaimer on behalf of Eurostat The Notes are not in any way sponsored, endorsed, sold or promoted by Eurostat. Eurostat has no obligation to take the needs of Bondholders into consideration in composing, determining or calculating the Index (or causing the Index to be calculated). In addition, Eurostat makes no warranty or representation whatsoever, express or implied, as to the results to be obtained from the use of the Index and/or the level at which the Index stands at any particular time on any particular day or otherwise, and shall not be liable, whether in negligence or otherwise, to any person for any error in the Index or under any obligation to advise any person, including, without limitation, the Issuer or Bondholders, of any error therein. 2. Historical Data (a) Year on Year Change Month Index Level Year on Year change Jan % Feb % Mar % Apr % May % Jun % Jul % Aug % Sep % Oct % Nov % Dec % Jan % Feb % Mar % Apr % May % Jun % Jul % Aug % Sep % Oct % Nov % 19

20 Dec % Jan % Feb % Mar % Apr % May % Jun % Jul % Aug % Sep % Oct % Nov % Dec % Jan % Feb % Mar % Apr % May % Jun % Jul % Aug % Sep % Oct % Nov % Dec % Jan % Feb % Mar % Apr % May % Jun % Jul % Aug % Sep % Oct % Nov % Dec % Jan % Feb % Mar % * Figures rounded to the nearest 2 decimal places for illustration purposes only 20

21 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan Scenario Analysis Hypothesis Annual Coupon IRR* IRR of a BTP** A (Average Scenario) On every coupon period, HICPxt fixes within the range 1.55% -2.60% only for 6 out of the 12 months observed. B (Best HICPxt always fixes within the range Scenario) 1.55% % C (Worst HICPxt never fixes within the range Scenario) 1.55% % Year 1: 4% Year 2-5: 2.7% 2.98% Year 1: 4% Year 2-5: 5.4% 5.09% Year 1: 4% Year 2-5: 0% 0.81% BTP 4% 15 apr % BTP 4% 15 apr % BTP 4% 15 apr % *Assuming an issue price of 100% of the notional amount. ** as calculated on 10 May 2007 The above scenario analysis (the "Analysis") is given to you by Lehman Brothers International (Europe), authorised and regulated by the Financial Services Authority, for information purposes. The Analysis is subject to change without notice, and is neither meant to be, nor should it be construed as, an attempt to define a detailed scenario analysis, for which a complete set of economic terms and indicators would be required. You are advised to make an independent review and to reach your own conclusions regarding the information contained in the Analysis. The Analysis represents the indicative view of Lehman Brothers only and no reliance should be placed on it by any recipient. Accordingly, as a condition of providing the Analysis, you agree that Lehman Brothers makes no representation, warranty or undertaking in relation to the accuracy or validity of the Analysis and shall have no liability to you or any other person for any loss or damage, whether direct or indirect, arising from the Analysis or its use, any Estimated Rating or the inability to obtain a rating for any Relevant Product at a level equal to any Estimated Rating. References herein to "Lehman Brothers" shall include Lehman Brothers International (Europe) and its affiliates Lehman Brothers. All rights reserved. 21

22 1. Notes linked to a level of Inflation ANNEX 3 RISK SUMMARY A consumer price index or other formula linked to a measure of inflation to which the Notes are linked may be subject to significant fluctuations that may not correlate with other indices. Any movement in the level of the Index may result in a reduction in the interest payable on the Notes or, in the case of Notes with a redemption amount linked to inflation, in a reduction in the amount payable on redemption which in some cases could result in Noteholders receiving back less than the amount originally invested. The seasonal nature of an Index may result in higher or lower inflation rates being observed for any sub-period than the rate in relation to any particular Interest Period. An Index to which interest payments and/or the redemption amount of Inflation-Linked Notes are linked is only one measure of inflation for the relevant jurisdiction, and such Index may not correlate perfectly with the rate of inflation experienced by residents in such jurisdiction. Interest Payments and/or the redemption amount of Inflation-Linked Notes may be based on a calculation made by reference to the inflation rate for a period which has no relation to the date of payment on the Notes and therefore could be substantially different from the level of inflation at the time of the payment of interest or, as the case may be, principal on the Notes. 2. Notes pursuant to which amounts are determined by reference to an Index Ratio Notes issued pursuant to the Program may include Notes in respect of which, for one or more Interest Periods, the rate of interest is calculated by multiplying a rate, currency exchange rate, index, formula or other factor or combination thereof (each a Reference Rate ) by a fraction (the Index Ratio ) whose denominator is the total number of days (each an Observation Day ) within a period (an Observation Period ) and whose numerator is the actual number of days during that Observation Period on which a predetermined event (the Fixing Event ) occurs. The Fixing Event may be an event upon which one or more indices, formulae, currency exchange rates, rates or a combination thereof, is greater than and/or equal to and/or lower than and/or equal to a predetermined level or levels of another rate, currency exchange rate, index, formula or constant, as specified in the Final Terms. The indices, formulae, currency exchange rates, rates and other factors or combination thereof used to determine the Fixing Event and, consequently, the Index Ratio for Range Accrual Notes may be different from the Reference Rate for such Notes and may therefore fluctuate independently of such rate. This may result in the market value of the Notes falling even when the Reference Rate in respect of an Interest Period is rising. If, during the relevant Observation Period, the Fixing Event occurs only on a small number of days or does not occur at all, the Index Ratio may be very low or, as the case may be, zero and, as a result, the rate of interest payable on the Notes in respect of such Interest Period may be very low, or, as the case may be, zero (save for any minimum rate of interest specified in the Final Terms). This will have a detrimental effect on the market value of the Notes. Where the Observation Days fall in a different chronological period from the Interest Period, the indices, formulae, currency exchange rates, rates or combination thereof which were used to determine the Index Ratio may be different from those which prevail at the time at which the interest amount is being paid. This may have a detrimental effect on the market value of the Notes.

23 For example, the rate of interest for each Interest Period for a Range Accrual Note may be calculated by multiplying the Reference Rate by the Index Ratio for one specified Observation Period. If the Index Ratio determined by the Calculation Agent is contingent upon the number of days in the Observation Period on which USD LIBOR with a designated maturity of 6 months ( 6m USD LIBOR ) falls within a range of values set out in the relevant Final Terms and during that Observation Period the number of days in which 6m USD LIBOR is within such range is low (for example, 5 days in an Observation Period of 30 days, giving an Index Ratio equal to 5/30), then the rate of interest payable for each Interest Period in relation to such Note will be calculated by reference to such Index Ratio and any change in 6m USD LIBOR will not affect the Index Ratio in subsequent Interest Periods. In such circumstances, the rate of interest payable in respect of all Interest Periods and the market value of the Notes will be detrimentally affected in a material and significant way.

24 ANNEX 4 TAX REGIME Payment of principal, interest and premium, if any, on the Notes will be made without withholding or deduction for or on account of taxes in The Netherlands, in the case of payments by the Issuer, or the United States, in the case of payments by the Guarantor, or the Republic of Italy, subject to certain exceptions as further discussed in the Terms and Conditions of the Notes. The Issuer does not assume any liability in respect of any deduction or withholding for or on account of any present or future taxes, duties or any other governmental charge in respect of the Notes, except for any such tax, duty or charge imposed in the Republic of Ireland, within the limits set forth by Condition 9 (Payment of Addition Amounts; Tax Redemption) of the Terms and Conditions. The Guarantor does not assume any liability in respect of any deduction or withholding for or on account of any present or future taxes, duties or any other governmental charge in respect of the Notes, except for any such tax, duty or charge imposed in the United States, within the limits set forth by Condition 9 (Payment of Addition Amounts; Tax Redemption) of the Terms and Conditions. Prospective purchasers are advised to consult their own tax advisers concerning the overall tax consequences of their interest in the Notes. Taxation of the Republic of Ireland On the basis that neither the LBTCBV nor LBHI is resident in Ireland for tax purposes, payments of principal, interest and premium, if any, on the Notes may be made without deduction or withholding for or on account of taxes in the Republic of Ireland. Taxation of the Republic of Italy In the near future, also on the basis of the approval of a bill currently under discussion in the Parliament, the Italian Government could be authorised to amend the tax regime applicable to financial income, which may impact upon the tax regime of the Notes. Interest Italian Resident Noteholders Pursuant to Legislative Decree No. 239 of 1 April, 1996, as amended (the Decree 239 ), where an Italian resident Noteholder is (i) an individual not engaged in a business activity to which the Notes are connected, (ii) a non-commercial partnership, (iii) a non-commercial private or public institution, or (iv) an investor exempt from Italian corporate taxation, interest payments relating to the Notes (including any difference between the redemption amount and the issue price, the Interest ), are subject to a 12.5% substitutive tax (imposta sostitutiva). In case the Notes are held by an investor engaged in a business activity and are effectively connected with same business activity, the Interest will be subject to the imposta sostitutiva and will be included in the relevant income tax return. As a consequence, the Interest will be subject to the ordinary income tax and the imposta sostitutiva may be recovered as a deduction from the income tax due.

25 Pursuant to Decree 239, imposta sostitutiva is applied by banks, società di intermediazione mobiliare ( SIMs ), fiduciary companies, società di gestione del risparmio ( SGRs ), stock exchange agents and other entities identified by the relevant decrees of the Ministry of Finance (the Intermediaries ). The imposta sostitutiva does not apply, inter alia, to the following subjects, to the extent that the Notes and the relevant Coupons are deposited in a timely manner, directly or indirectly, with an Intermediary: (i) (ii) (iii) (iv) Corporate investors Where an Italian resident Noteholder is a corporation or a similar commercial entity (including a permanent establishment in Italy of a foreign entity to which the Notes are effectively connected), Interest accrued on the Notes must be included in: (I) the relevant Noteholder s yearly taxable income for corporate income tax purposes ( IRES ), applying at a rate equal to 33%; and (II) in certain circumstances, depending on the status of the Noteholder, also in its net value of production for the purposes of regional tax on productive activities ( IRAP ), generally applying at the rate of 4.25% Such Interest is therefore subject to general Italian corporate taxation according to the ordinary rules; Investment funds Italian investment funds (which includes Fondo Comune d Investimento, or SICAV), as well as Luxembourg investment funds regulated by article 11-bis of Law Decree No. 512 of 30 September 1983 (collectively, the Funds ) are subject to a 12.5% substitutive tax on their annual net accrued result. Interest is included in the calculation of such annual net accrued result. Pension funds Pension funds (subject to the tax regime set forth by Legislative Decree No. 252 of 5 December 2005, the Pension Funds ) are subject to an 11% substitutive tax on their annual net accrued result. Interest is included in the calculation of said annual net accrued result; and Real estate investment funds Payments of Interest in respect of the Notes to Italian resident real estate investment funds established pursuant to Article 37 of Legislative Decree No. 58 of 24 February 1998 (the Real Estate Investment Funds ) are generally subject neither to imposta sostitutiva nor to any other income tax in the hands of the same Real Estate Investment Funds. Non - Italian Resident Noteholders Interest payments on the Notes to a non-italian resident Noteholder (not having a permanent establishment in Italy to which the Notes are effectively connected) are not subject to tax in Italy subject, if the Notes are held in Italy, to the non-italian resident Noteholder declares itself to be a non-italian resident according to Italian tax regulations. Early Redemption Without prejudice to the above provisions, pursuant to Article 26(3) of Presidential Decree No. 600 of 29 September 1973, in the event that Notes having an original maturity of at least 18

26 months are redeemed, in full or in part, prior to 18 months from their issue date, Italian resident Noteholders will be required to pay, by way of a withholding to be applied by the Italian intermediary responsible for payment of Interest or the redemption of the Notes, an amount equal to 20% of Interest accrued up to the time of the early redemption. This provision should not apply to an Italian Noteholder which is (i) a company or similar private or public commercial entity (including the Italian permanent establishment of foreign entities) or (ii) a commercial partnership,. Payments made by the Guarantor There are no guidelines from the Italian tax authorities and/or any case law directly regarding the Italian tax regime of payments in respect of bonds made by a guarantor. Under a certain interpretation of Italian tax law, in case payments on the Notes are made by the Guarantor the same rules outlined above should apply. However, there can be no assurance that the Italian tax authorities will not impose an alternative treatment of such payments, or that the Italian courts would not support such an alternative treatment. Capital Gains Where an Italian resident Noteholder is an individual not holding the Notes in connection with an entrepreneurial activity and certain other persons, any capital gain realised by such Noteholder from the sale or redemption of the Notes would be subject to a substitutive tax (the CGT ), levied at the current rate of 12.50%. For the purposes of determining the taxable capital gain, any Interest on the Notes accrued and unpaid up to the time of the purchase and the sale of the Notes must be deducted from the purchase price and the sale price, respectively. In respect of the application of CGT, taxpayers may opt for one of the three regimes described below. Under the "tax declaration" regime (regime della dichiarazione), which is the default regime, the CGT on capital gains will be chargeable, on a cumulative basis, on all capital gains, net of any incurred capital loss, realised by the Noteholders in connection with all sales or redemptions of the Notes carried out during any given tax year. The Noteholders must indicate the overall capital gains realised in any tax year, net of any relevant incurred capital loss, in the annual tax return and pay CGT on such gains together with any balance of income tax due for such year. Capital losses in excess of capital gains may be carried forward against capital gains realised in any of the four succeeding tax years. As an alternative to the tax declaration regime, the Noteholders may elect to pay the CGT separately on capital gains realised on each sale or redemption of the Notes (the "risparmio amministrato" regime). Such separate taxation of capital gains is allowed subject to (i) the Notes being deposited with Italian banks, SIMs or certain authorised financial intermediaries; and (ii) an express election for the risparmio amministrato regime being punctually made in writing by the relevant Noteholder. The depository is responsible for accounting for CGT in respect of capital gains realised on each sale or redemption of the Notes (as well as in respect of capital gains realised upon the revocation of its mandate), net of any incurred capital loss, and is