Confidential Presentation to:

Lehman Brothers

Overview of the Lehman Brothers Municipal Product Group

July 26, 2007 Table of Contents Section Header (used to create Tab Pages and Table of Contents)

I. The Basics of Municipal Bonds II. New Issues & Secondary Trading III. Short Term Municipal Products Group IV. Municipal High Yield V. Municipal Structured Products and Derivatives VI. Municipal Relative Value VII. Municipal Index VIII. The Lehman Advantage IV. Municipal Contacts

1 I. The Basics of Municipal Bonds Municipal Asset Class

! Asset Preservation – Municipal assets are widely considered the safest fixed- income asset class, save Treasuries, boasting a 10-year cumulative rate of 0.1032% since 1970, versus 9.70% for corporate bonds (Moody’s). Approximately 70% of the market is AAA rated. ! Income Stream – Municipal securities range in maturity from daily floaters to bonds maturing out 40 years and longer. Portfolios can be constructed to provide specific tax-exempt cash flows. ! Tax Advantage – Investors often under appreciate the value of tax savings. During 2006, long AAA municipal securities traded between 85% - 95% of the 30-year U.S. Treasury. Consequently, investors in the highest tax bracket could have earned as much as 145% of Treasuries on a tax adjusted basis. ! Lower Volatility – Tax-exempt yield movements lag the Treasury market. Muted municipal yield movements result in stability of investment capital. ! Correlation – Municipal risk is typically less correlated to the core risk in taxable investment portfolios.

2 Tax Status of Assets

! The received on all municipal securities is exempt from the Federal income tax. Investors who purchases municipal securities indigenous to their state of residence are often exempt from state and local taxes as well (although a few states do tax in-state municipal bonds). There are a few states which have no personal income tax whatsoever.

! The interest received from US Treasury securities and agencies is exempt from state & local taxes, but not Federal taxes.

! The interest received on corporates, mortgage backed, as well as asset backed securities is fully taxable.

3 Municipal Tax Benefit

Taxable Equivalent Yield = Yield of Tax-Exempt Asset 1- (Effective Tax Rate/100)

! A New York City resident in the highest federal tax bracket (taxable income over $349,700) has an effective tax rate of 41.823% (state and city tax included). For this investor, the taxable equivalent yield for a 10 year yielding 4.15% would be 7.13%. This means a corporate, asset-backed, or mortgage backed security would need to yield at least 7.13%, and a U.S. Treasury or agency would need to yield at least 6.38% to better the taxable equivalent yield of a municipal bond.

CURRENT YIELDS ON THE FOLLOWING SECURITIES:

*As of 6/25/2007* 4 Fixed Income Asset Class Total Returns

July 1, 2004 – June 30, 2007 (Individual Tax Rate 38.45%) Fixed Income Total Returns (3 Years) 10.00% 9.03%

7.56% 7.50%

5.00% 4.27% 3.97% 3.98% 4.16% 3.63% 3.71% 3.80%

Annualized Returns 3.52%

2.50%

0% ABS MBS Muni U.S Tsy Corporate High Yield Aggregate Eurodollar Global Tsy U.S Agency

• Over the past three years, the taxable-equivalent total returns for the Municipal Index have outperformed all other investment grade fixed income asset classes.

5 Fixed Income Asset Class Risk vs. Reward

Tax Adjusted Total Returns vs. Volatility Fixed Income and Equity Asset Classes Last 10 Years Ending 12%

Russell 2000 STD = 19.72 !

Annualized Return DJIA STD = 15.34 ! S&P 500 STD = 15.03 5% ! 2.00 10.90! Annualized Standard Deviation (%) NASDAQ STD = 28.36 ABS

Source: Lehman Brothers Municipal Index & Strategies • On a comparative basis over the past 10 years, the Municipal Asset Class has offered the highest returns coupled with the least amount of risk of all Fixed Income instruments.

*US Treasury income returns are exempt from State income taxes and adjusted (3.25% in 2002 – 2006, 3.23% in 2001, and 3.18% prior) using a national state average (top bracket), net of Federal income tax.. ** Based on an equally weighted national average Federal and State (top bracket) income tax rate (38.45% for 2003 – 2006, 41.85% for 2002, 42.33% for 2001, and 42.78% prior – local taxes have not been considered in this analysis

6 II. New Issues and Secondary Trading Municipals and Public Finance

Lehman Brothers’ Experience Lehman Brothers is a top underwriter of financings for public sector clients

! Sole Book-Running Manager for the single largest long-term issue in history – State of California’s $7.9 Billion Economic Recovery Bonds (2004) ! Ten-time “Deal of the Year” winner since 1990 (Institutional Investor) ! Top 3 municipal research team (Institutional Investor, 2000 to 2006) ! Leading derivatives & investment products group

Largest 2006 Transactions

July 2006 August 2006 December 2006 December 2006 Regents of the Florida Hurricane State of Texas State of Michigan Catastrophe Fund University of California

$4,600,000,000 $1,365,540,000 $1,300,000,000 $1,350,025,000 Tax and Revenue General Revenue Bonds Full Faith & Revenue Bonds Anticipation Notes GO Notes Senior Manager Senior Manager Senior Manager Senior Manager

7

• This slide talks to the strength of our Municipals and Public Finance business • The key message of this page is that we specialize on large and complex financings where we can add value • This is reflected in the fact that Lehman has the largest average deal size of the industry and a top 3 market share position • Of further interest: " Honored the Institutional Investor “Deal of the Year” ten times since 1990 for innovations in public finance " Top three municipal research team in Institutional Investor survey in five of the last six years " Boast the most widely used measure of municipal market performance - the Lehman Brothers Municipal Bond Index " Top three trader of municipal securities in Institutional Investor survey of the top 300 U.S. money managers Commonwealth of Massachusetts General Obligation Bonds

Lehman Brothers’ Experience Lehman Brothers senior managed the Commonwealth of Massachusetts $1.2 billion General Obligation bond issue in May 2007, incorporating $845 million of LIBOR-indexed Floating Rate Notes.

May 9, 2007 Transaction Highlights ! The bond issue was the 1st major issuance of LIBOR- $1,271,140,000 indexed Floating Rate Notes (FRNs) in New England. ! Lehman Brothers marketed $845.8 million of FRNs consisting of: – $400 million of callable LIBOR-indexed FRNs and – $445.8 million of non-callable LIBOR-indexed FRNs ! The transaction represents the first Commonwealth General Obligation bond issue to utilize a 30-year final Commonwealth of Massachusetts maturity. General Obligation Bonds ! Our financing structure will provide nearly $37 million in present value savings to the taxpayers of $498,565,000 Series A New Money Massachusetts. $219,440,000 Series B New Money ! Following this issue, Lehman Brothers was again $553,135,000 Series A GO Refunding selected to senior manage a $219 million follow-on new money issue that would release existing PAYGO funds Senior Book-Running Manager to defease outstanding high bonds.

8 Port of Miami Tunnel

Lehman Brothers’ Experience On May 2, 2007, Lehman Brothers, together with the Miami Access Tunnel consortium, was selected to design, build, finance, operate and maintain the Port of Miami Tunnel.

! The Port of Miami Tunnel is a project that will be developed as a public/private partnership (PPP) under a Concession Agreement, under the direction of the Florida Department of Transportation and the County of Miami-Dade. ! The tunnel will: – Provide direct access between the Seaport, I-395 and I-95 – Create an alternative to the Port Bridge, now the only connection to the mainland – Keep the Port of Miami competitive, at the same time maintaining its importance as Miami- Dade County’s second largest economic generator – Improve traffic safety in downtown Miami by removing cargo trucks and cruise line buses from already-congested streets – Facilitate ongoing and future development plans in and around downtown Miami. ! Lehman Brothers was engaged by Miami Access Tunnel, a consortium lead by Babcock & Brown and Bouygues, to provide firm financing commitments and advice regarding financial structuring to support their bid for a 35-year development and concession for the Port of Miami Tunnel Project. ! During the engagement, Lehman Brothers advised the consortium on financing structure, ratings, and credit enhancement. Lehman Brothers also provided product recommendations, capital market pricing indications, and funding commitments for the concession bid. ! Lehman Brothers financing package included the application for Private Activity Bonds authorized under the SAFETEA-LU program, likely making the Tunnel the first to incorporate PABs. In addition, Lehman Brothers’ financing package also included an hedge and credit spread lock that firmly secured the consortium’s bid. The financing package received investment grade ratings and was structured with monoline bond insurance.

9 New Issue Excellence

! Over the past ten years, when acting as the Senior or Co-Senior manager, Lehman Brothers has ranked number one in terms of total par amount and number of issues brought to market for negotiated long-term higher education debt.

January 2006 – January 2007 January 1997 – January 2007

(In $ Millions)

! From 2002 through 2007, Lehman Brothers has Senior or Co-Senior managed more than 232 tax-exempt higher education transactions totaling approximately $21 billion.

10 Experience with Large Municipal Transactions

Lehman Brothers’ Experience Since January 1, 2005, Lehman Brothers has senior managed 57 transactions which had a par amount in excess of $500 million, including:

State Government Local Government Higher Education Transportation February 2007 February 2007 December 2006 June 2005 New York City Dormitory Authority Illinois State State of California Transitional Finance Authority of the State of New York Tollway Authority

$1,132,180,000 $900,000,000 $928,060,000 $770,000,000 GO Various Purpose & Future Tax Secured State Income Tax Toll Highway Senior Priority Refunding Bonds Subordinate Bonds Revenue Bonds Revenue Bonds Senior Manager Senior Manager Senior Manager Senior Manager

Short-Term Housing Utilities Specialty August 2005 June 2006 September 2006 July 2006 State of Texas Virginia Housing Long Island Power Authority Florida Hurricane Development Authority Catastrophe Fund

$6,200,000,000 $550,000,000 $515,110,000 Tax and Revenue Commonwealth Electric System General $1,350,025,000 Anticipation Notes Mortgage Bonds Revenue Bonds Revenue Bonds Senior Manager Senior Manager Senior Manager Senior Manager

11 Secondary Trading Strength

! For years Lehman has been dominant in municipal institutional trading, offering our investors access to broad product offerings, strong liquidity, and superior execution. ! Since 1995, Institutional Investor has consistently ranked Lehman Brothers among the top 3 traders of municipal securities in its survey of the top 300 money managers in the United States. ! Lehman carries an average inventory of $500 million bonds and covers over 300 top institutional accounts. ! Lehman's traders average over 10 years of experience trading the municipal market.

12 Secondary Trading Strength

! Lehman's municipal trading desk covers every part of the municipal market, providing our investors with the broadest possible product selection and maximum liquidity.

"Yield0–5 Years Curve Coverage " 6–10 Years " TraditionalSegment Coverage " 11–20 Years " Zero Coupon " 21–30+ Years " High Yield " Housing Bonds " Structured Products " GeneralSector Obligation Coverage " Taxable Municipals " Revenue " Pre-Refunded " Insured

13 III. Short Term Municipal Products Group Short Term Municipal Products Group

! Industry leader in structuring, and marketing short term municipal instruments.

! Created the first tax-exempt program in 1973 and the first Dutch auction product in 1988.

! Executed the first electronic VRDN trade through the Bloomberg “BOOM” system in June, 2006, moving the dealer community to follow in 2007.

! Continue to form a pipeline of new initiatives (similar to VRDN trading through “BOOM”) that enhances the liquidity and marketability of short term municipal products and continues to reshape the short term marketplace.

14 Lehman Brothers VRDN Remarketing Portfolio

Estimated Breakdown By Outstandings of Lehman Brothers VRDN Remarketing Portfolio

Monthly VRDNs Taxable Weekly VRDNs0.3% Tax-Exempt Daily VRDNs 6.6% 14.5%

AMT Weekly VRDNs AMT Daily VRDNs 17.9% 1.7%

Tax-Exempt Weekly VRDNs 59.0%

Total Outstandings of $30.561 billion ______1. As of May, 2007

15 Lehman Brothers TECP Remarketing Portfolio

Estimated Breakdown By Outstandings of Lehman Brothers TECP Remarketing Portfolio

TaxableTaxable Par CP Discount CP 1.5% 5.6%

AMT CP 12.6%

Tax-Exempt CP 80.3%

Total Outstanding of $7.869 billion ______1. As of May, 2007

16 Year to Date New Issue Excellence

Lehman Brothers is a top short-term underwriter of financings for public sector clients:

Year to Date Municipal Debt League Table Mkt. Total Debt Rank Firm Share Underwritten

1 Morgan Stanley 14.1% $2.3 bn

2 Lehman Brothers 11.1% $1.8 bn

3 JP Morgan Inc 8.6% $1.4 bn

4 Citigroup 8.0% $1.3 bn

5 Banc of America LLC 6.6% $.84 bn

(January 1, 2007 – June 22, 2007)

17 IV. Municipal High Yield Municipal High Yield Overview

! Lehman Brothers Municipal High Yield desk totals 20+ years of experience in making markets and providing liquidity over a wide spectrum of within the municipal realm for our clients

! The trading desk consists of two traders, two salespeople, and two desk analysts who provide research and insight into all municipal sectors that we traffic

18 Municipal High Yield Coverage Universe

! Corporate Backed Municipals: – Provide liquidity and market opinions on an array of corporations who issue debt in the municipal marketplace. The widely traded industries often fall under the umbrella of waste removal, paper, airlines and utilities to name a few. We offer clients directional insight regarding the outlook of improving as well as deteriorating credits.

! Housing Bonds: – Housing bonds are bonds issued by municipalities to assist low-income tenants in finding affordable housing opportunities. Lehman Brothers is an active market-maker in the majority of these debt issues, trading both single and multi- family housing bonds.

19 Municipal High Yield Coverage Universe

! Healthcare: – Not-for-profit healthcare facilities constitute a substantial portion of the high yield municipal debt issuance universe. These include assisted living facilities as well as hospital bonds. Lehman trades a variety of Healthcare credits ranging in quality from investment grade to distressed.

! Tobacco Bonds: – In 1998, 46 states settled a case against the tobacco industry, calling for the tobacco companies to pay states approximately $205 Billion over 25 years (known as the Master Settlement Agreement). As a result, states can issue bonds based on these anticipated future cash flows, and Lehman is an active participant in such “tobacco bond” markets.

20 Municipal High Yield Coverage Universe

! Taxable Municipals: – The demand for taxable municipal bonds has grown substantially in the last five years as the buyer base continues to grow. A limited issuance supply coupled with an influx of overseas buyers has generated active two-way markets for taxable municipals. The most frequent issues are pension bonds, but military housing bonds also play a major role. Lehman is a leading market-maker for such bonds.

21 V. Municipal Structured Products and Derivatives Overview of Municipal Derivatives Group

Municipal Derivatives Group Implements Strategies and Products to Help Issuers Manage Their Assets and Liabilities More Efficiently

Asset-Based Liability-Based

# Debt Service Fund # Synthetic Floating Rate Swap # Reserve Fund # Synthetic Fixed Rate Swap # Project Fund # Rate Lock # Defeasance Fund # Option on Fixed Rate Bonds # Capitalized Interest Fund # Option on Synthetic Fixed Rate

22 Lehman Brothers’ Municipal Derivatives Book

! Book as of 6/1/2007 comprised of: – Over 2,600 trades since 1994 – Trades with 845 distinct issuers – Total outstanding notional amount with municipal issuers exceeding $34 billion

Muni Derivatives Book by Trade Type Muni Derivatives Book by Client Sector

Tobacco Swaption Cap Water & Sewer7% Misc. 15% 7% 4% 2% Muni Revenue 5% GO FPA 12% 14% Housing 16%

Education 20%

Swap Public Power 65% 3%

Health Care Transportation 20% 9%

23 Lehman Brothers Tax-Exempt Derivatives Expertise

Tax-Exempt Derivatives Lehman Brothers is a leader in the Tax-exempt derivatives market.

Derivatives Expertise Capacity: In the past five years, Lehman Brothers has executed Lehman Brothers is a market leader in derivative products over $150 billion (notional amount) in swaps and over and has extensive capacity for both tax-exempt and taxable $20 billion (notional amount) in tax-exempt swaps for transactions. a variety of tax-exempt issuers.

Industry Involvement: RepresentativeRepresentative List List of ClientsClients Lehman Brothers is a founding member of the Tax-exempt LehmanLehman Brothers' Brothers Tax-exempt Derivatives Derivatives Group Group Derivatives Committee of the Association. Notional Amount Issuer Strength in Tax-Exempt Index Swaps: Commonwealth of Massachusetts $1.42B Since 1998, Lehman Brothers has executed over $17 billion in notional amount of tax-exempt swaps based on a Cook County, IL $661.7MM tax-exempt index; the remainder have been costs of funds Dormitory Authority of the State of New York $456.7MM swaps. State of Illinois $384MM

First-Rate Team Members: Veterans Land Board of the State of Texas $312.55MM The tax-exempt / tax-exempts derivatives division includes a staff of 15 professionals with years of experience in tax- Puerto Rico Government Dev. Bank $267MM exempt derivatives. Long Island Power Authority $266MM

Secondary Market Activity: City of Chicago $232.6MM Lehman Brothers is an active secondary market maker City and County of Denver $220.6MM providing aggressive pricing on reversals, terminations and other risk management structures such as swaptions, caps, Jefferson County, Alabama $190.1MM floors, collars, interest rate locks and investment products. Raleigh-Durham International Airport $150MM

24 Structured Products

! Lehman Brothers is able to offer our institutional and high net worth clients a breadth of structuring expertise that draws upon our experience in municipal bonds, municipal derivatives and structured products, interest rate derivatives, structured credit products and securitized products ! Lehman works in partnership with investors to design transactions that are customized to the investor’s market views, risk appetite and investment guidelines ! Such transactions offer a simplified and efficient vehicle to implement numerous transactions, such as: – Relative value trades within the municipal market – Relative value trades across markets (taxable vs. tax-exempts) – Yield-enhancement trades – Creation of synthetic municipal credit exposure ! Transactions may be implemented in either a funded (securitized) or unfunded format (swap contract) ! Leverage is possible ! Such transactions appeal to investors who: – Have appetite for structured notes and / or derivative contracts and a desire to maximize yields – Have investment guideline restrictions, accounting or other balance sheet management needs, or any other needs that require a structured, customized solution – Have appetite for taxable income

25 Structured Products

! Structured Product Opportunities Include: - Tender Option Bonds - Municipal bonds are deposited into a trust which issues two classes of trust receipts: Floating Rate Trust Receipt (“FR-TRs”) and Residual Interest Trust Receipts (“RI-TRs”) RI-TRs are inverse floaters, receiving the interest on the underlying bonds less FR-TR interest and any fees. The structure enables the RI-TR holder to achieve the economic equivalent of financing a position in the underlying bonds at short-term tax exempt rates, which are generally the lowest rates available in the U.S. fixed-income marketplace. - Municipal Total Return Swaps - an over the counter agreement to exchange the total return on a specified tax-exempt municipal bond for BMA-based funding for a specified period of time. A total return swap gives the Total Return Receiver the economics of owning the specified tax-exempt municipal bond without actually owning the asset or having to put up the cash to buy it. - Municipal Credit Default Swaps (CDS) - A CDS is an OTC derivative contract between two parties which transfers the default risk of a specified reference entity from one party to the other. In a standard CDS contract, one party purchases credit protection from the other party to cover the loss of face value of an asset issued by a specific reference entity following a credit event

26 Structured Products

! Structured Product Opportunities Include: (continued) - BMA-LIBOR Index Spread Notes (BLIS) – BLIS are principal-protected notes linked to a U.S. Municipal Bond Market Index. The Notes are designed to provide investors with an above- market return by taking advantage of pricing inefficiencies in the U.S. municipal market - Municipal Enhanced Trust Receipts (METRs) - A TOB product which allows high net worth investors to earn current tax-exempt yields higher than those available by directly purchasing municipal bonds.

27 Lehman Municipal Index Swaps (LMIS)

! LMIS in a natural outgrowth of Lehman’s expertise in rules-based total return indices and our leading position is tradable bond indices. ! Developed in response to clients seeking accurate representation of the tax-exempt bond market in derivative structures. ! LMIS is an effective hedge for long municipal cash exposure by reducing basis risk ! The receiver (long LMIS) generates the economics of the Reference Index without actually owning the underlying assets, thereby eliminating the negative carry associated with holding a municipal cash position ! The swap supply is not constrained by the available supply of underlying bonds in the marketplace

28 Lehman Municipal Index Swaps (LMIS)

! LMIS Structure: – LMIS uses a rules-based methodology to efficiently replicate the municipal market – Security’s must meet certain specific eligibility requirements in order to be included in the index to ensure a purely objective process

! The First Two LMIS Being Introduced Are The : – LMIS General Obligation 5-year (Bloomberg Ticker: LMISGO5) – LMIS General Obligation 10-year (Bloomberg Ticker: LMISGO10) – These General Obligation (GO) indices do not include insured, revenue, prerefunded or double-barreled securities – Daily and monthly data will be available for both indices

29 VI. Municipal Relative Value Municipal Relative Value Group

! The municipal relative value group leverages off a database of over 600 trader priced municipal sectors and/or credits. In addition to trader priced data, relative value analysis is performed on over 50,000 bonds in our indices. – Portfolio management strategies based on analysis of empirical data. – Customized reporting and graphic capabilities on relevant risk factors. – Identify market opportunities based on historical spread analysis. – Total return analysis based on over 20 years of data.

30 High-Yield Assets Outperformed from 2003 through 2007.

The Between the Lehman High Yield Municipal Index Versus 30–Year High Grade has tightened dramatically.

400

300

200 Spread (bp)

100

0 1/31/96 2/29/96 3/31/96 4/30/96 5/31/96 6/30/96 7/31/96 8/31/96 9/30/96 1/31/97 2/28/97 3/31/97 4/30/97 5/31/97 6/30/97 7/31/97 8/31/97 9/30/97 1/31/98 2/28/98 3/31/98 4/30/98 5/31/98 6/30/98 7/31/98 8/31/98 9/30/98 1/31/99 2/28/99 3/31/99 4/30/99 5/31/99 6/30/99 7/31/99 8/31/99 9/30/99 1/31/00 2/29/00 3/31/00 4/30/00 5/31/00 6/30/00 7/31/00 8/31/00 9/30/00 1/31/01 2/28/01 3/31/01 4/30/01 5/31/01 6/30/01 7/31/01 8/31/01 9/30/01 1/31/02 2/28/02 3/31/02 4/30/02 5/31/02 6/30/02 7/31/02 8/31/02 9/30/02 1/31/03 2/28/03 3/31/03 4/30/03 5/31/03 6/30/03 7/31/03 8/31/03 9/30/03 1/31/04 2/29/04 3/31/04 4/30/04 5/31/04 6/30/04 7/31/04 8/31/04 9/30/04 1/31/05 2/28/05 3/31/05 4/30/05 5/31/05 6/30/05 7/31/05 8/31/05 9/30/05 1/31/06 2/28/06 3/31/06 4/30/06 5/31/06 6/30/06 7/31/06 8/31/06 9/30/06 1/31/07 2/28/07 3/31/07 4/30/07 5/31/07 6/30/07 11/30/95 11/30/96 11/30/97 11/30/98 11/30/99 11/30/00 11/30/01 11/30/02 11/30/03 11/30/04 11/30/05 11/30/06 10/31/95 12/31/95 10/31/96 12/31/96 10/31/97 12/31/97 10/31/98 12/31/98 10/31/99 12/31/99 10/31/00 12/31/00 10/31/01 12/31/01 10/31/02 12/31/02 10/31/03 12/31/03 10/31/04 12/31/04 10/31/05 12/31/05 10/31/06 12/31/06 Municipal High Yield Index vs. 30 Year High Grade Yield Spread

31 Housing Bond Have Tightened Relative to Their Historical Spreads

Yield Spread 10 Yr Housing Index vs 10 Yr High Grade

32 Long-term Municipal Assets Outperformed Over Last 3 Years

33 Baa Municipal Bonds Outperformed from July 2003 Thru 2007

34 Lehman Brothers Municipal Total Return Analysis

! Provides perspective on investment by relevant risk attributes such as curve, credit, and coupon.

! Validates total return based investment strategies over various interest rate environments.

35 Lehman Municipal Index vs. Laddered Portfolio*

Index Based Strategies Outperform Ladder Portfolios in Most Markets

Total Returns (%)

20.00

15.00

10.00

5.00

0

-5.00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 YTD 2007 Laddered Lehman Brothers Municipal Index Lehman 15 Year Municipal Index

* Laddered Portfolio = Equal weighted Index composed of 1 up to 10 year maturities of Aa3 or better, non-AMT bonds, priced beginning of month between 97 - 101

36 Lehman Municipal Index vs. Laddered Portfolio

Index Based Strategies Provide Superior Performance Over Time

Cumulative Returns Ending 6/30/07 50%

38%

25%

13%

0% 7 yr 5 Yr 3 Yr 1 Yr Lehman Muni Index Laddered

37 Total Return By Curve

The 15+ Year Spots on the Curve Has Performed Well Over Time

Cumulative Returns Cumulative Returns Last 10 Years (7/1/97 – 6/30/07) Last 7 Years (7/1/00 – 6/30/07)

100.0000 70.000 61.72 83.94 85.31 80.23 58.51 53.92 75.0000 69.19 52.500 62.79 45.93 55.57 41.58 36.45 50.0000 46.74 40.24 35.000 29.58 23.92

25.0000 17.500 Cumulative Returns (%) Cumulative Returns Cumulative Returns (%) Cumulative Returns

0 0 1 Yr GO3 Yr GO5 Yr GO7 Yr GO10 Yr GO15 Yr GO20 Yr GOLong GO 1 Yr GO3 Yr GO5 Yr GO7 Yr GO10 Yr GO15 Yr GO20 Yr GOLong GO

38 Total Returns By Curve

15+ Year Spots on the Curve Has Performed Well Over The Past 3-5 Years

Cumulative Returns Cumulative Returns Last 5 Years (7/1/02 – 6/30/07) Last 3 Years (7/1/04 – 6/30/07)

40.000 25.000 34.81 32.84 20.50 29.30 18.29 30.000 18.750 24.26 15.66 21.22 12.91 20.000 17.36 12.500 10.63 13.47 8.95 11.52 7.42 7.44 10.000 6.250 Cumulative Returns (%) Cumulative Returns (%) Cumulative Returns

0 0 1 Yr GO3 Yr GO5 Yr GO7 Yr GO10 Yr GO15 Yr GO20 Yr GOLong GO 1 Yr GO3 Yr GO5 Yr GO7 Yr GO10 Yr GO15 Yr GO20 Yr GOLong GO

39 Historical Return Volatility

Standard Deviation of Monthly Returns Standard Deviation of Monthly Returns Last 10 Years (7/1/97 – 6/30/07) Last 3 Years (7/1/04 – 6/30/07)

1.50 1.08 1.50 1.10 1.36 1.38 1.02 1.01 1.26 0.95

1.13 1.04 0.83 0.75

0.81 0.57 0.75 0.55 0.51 0.34 0.38 0.28 0.24 0.16 Standard Deviation (%) Standard Deviation (%) Standard

0 0 1 Yr GO3 Yr GO5 Yr GO7 Yr GO10 Yr GO15 Yr GO20 Yr GOLong GO 1 Yr GO3 Yr GO5 Yr GO7 Yr GO10 Yr GO15 Yr GO20 Yr GOLong GO

40 Discounts Outperform

Cumulative Returns Cumulative Returns Last 10 Years (7/1/97 – 6/30/07) Last 10 Years (7/1/97 – 6/30/07)

110.0000 103.58 130.0000 126.10

82.5000 97.5000 63.87 77.99

55.0000 65.0000

27.5000 32.5000 Cumulative Returns (%) Cumulative Returns Cumulative Returns (%) Cumulative Returns

0 0 Premium Avg DiscountMDur = 5.07 Avg MDur = 12.36 Long Premium Avg Long MDur Discount = 6.17 Avg MDur = 15.81

41 Discounts Outperform

Cumulative Returns Cumulative Returns Last 3 Years (7/1/04 – 6/30/07) Last 3 Years (7/1/04 – 6/30/07)

30.000 28.33 50.000 47.63

22.500 37.500

15.000 25.000 12.52 20.52

7.500 12.500 Cumulative Returns (%) Cumulative Returns (%) Cumulative Returns

0 0 Premium Avg MDurDiscount = 5.46 Avg MDur = 11.86 Long Premium Avg Long MDur Discount = 6.68 Avg MDur = 17.06

42 Coupon Selection Has A Significant Impact

Year 2006 Total Return on Long Insured Municipal Bonds

9.00 8.88

6.82 6.63 6.75 6.28 6.25 6.33 6.28 5.79 5.48 5.38 4.84 4.52 4.50 Total (%) Return 2.25

0 Long Insured 4.75 CouponLong Insured (9.63) 5.00 Coupon Long Insured(8.75) 5.25 Coupon Long Insured (7.93) 5.50 Coupon Long Insured (9.14) 5.75 CouponLong Insured (7.41) 6.00 CouponLong Insured (7.12) 6.25 CouponLong Insured (2.64) 6.50 CouponLehman (8.52) Municipal IndexLehman (6.12) Muni Long10 Index Year (9.17)Insured Zero15 Coupon Year Insured (9.22) Zero Coupon (13.65)

43 Long Insured Total Returns By Coupon

Cumulative Returns 12/31/1999 – 6/30/2007 on Long Insured Bonds

90.0000 88.96 82.11 77.96 72.58 72.11 72.88 69.04 65.73 64.85 67.5000 63.86 62.60

53.89

45.0000 Total (%) Return 22.5000

0 Long Insured 4.75 CouponLong Insured (11.30) 5.00 Coupon Long Insured (9.96) 5.25 Coupon Long Insured (10.76) 5.50 Coupon Long Insured (9.34) 5.75 CouponLong Insured (7.47) 6.00 CouponLong Insured (6.68) 6.25 CouponLong Insured (3.04) 6.50 CouponLehman (12.76) Municipal LehmanIndex (6.65) Muni Long10 Index Year Insured(10.79) Zero15 Coupon Year Insured (9.11) Zero Coupon (13.73)

44 VII. Municipal Bond Index Lehman Brothers Municipal Indices

! Definitive measure of the Municipal Bond Market with over 2,500 tax-exempt benchmarks.

– Voted #1 in Fixed Income Indices by Institutional Investor since the inception of the category in 1997.

– Dominant total return benchmark with over a 95% market share.

– Provides economic, quantitative, strategic, credit, relative value and market- specific analysis.

– A strong indication of our commitment to providing outstanding service and cultivating enduring relationships.

45 Lehman Brothers Municipal Indices

! Lehman can manage tax-exempt assets more effectively by utilizing index based strategies.

– Historically strong performing portfolio structures can be replicated.

– Leverage Lehman’s research franchise for enhanced index strategies.

– Index bond and sector spreads are monitored to uncover relative value opportunities.

46 Barbell Versus Laddered Portfolio

Barbell Structure Has Underperformed the Ladder Structure

Barbell vs. Laddered Portfolio Barbell vs. Laddered Portfolio Cumulative Returns thru 6/30/07 Standard Deviations thru 6/30/07 45% 3Yr & Long 45% 3Yr & Long 2% 5, 7, 10, 15, 20 Yr Each 2% 5, 7, 10, 15, 20 Yr Each

1.08 1.08 68.16 1.10 1.05 70.0000 65.82 0.96 0.97 0.95

0.83 52.5000 0.75 46.24 45.59 0.70 0.65 0.64

35.0000 0.55

24.22 24.38

17.5000 14.55 13.63 0.28

4.70 4.64

0 0 Last 10 Yrs Last 7 Yrs Last 5 Yrs Last 3 Yrs Last 1 Yr Last 10 Yrs Last 7 Yrs Last 5 Yrs Last 3 Yrs Last 1 Yr Barbell Laddered Barbell Laddered

47 Taxable Equivalent Total Returns

The Taxable-equivalent Return for a New York City Investor in the Top Tax Bracket (41.823% ) Based on Our Non-amt/non-zero New York Municipal Bond Index for the Last 12 Months Would Have Been 8.18%

48 Which Risk Factors Will Impact Performance Most?

! Curve (duration/nominal maturity) ! Coupon selection (de minimis exposure) ! Optionality ! Issuer weightings ! Rating distribution ! State allocation ! Sector weightings

49 VIII. The Lehman Advantage Overview of Lehman Brothers

One of the world’s leading investment banks, founded in 1850, Profile of with over $560 billion in total assets the ! Serves the financial needs of corporations, institutions, Firm ! governments and high-net-worth investors worldwide Actively participates in the global capital markets through a ! network 44 offices of with over 27,000 employees

Client/ AFocused “One Firm” coverage organizational of major corporate structure clients and culture and investing Customer customers and institutions -Driven ! Comprehensive product and service capabilities Strategy ! Global scope of business activities

of full “One Firm” philosophy stresses teamwork for the coordination Value- ! resources Added Preeminent capabilities in advisory, financing and trading services Differential contribution to achieve client’s objectives Returns ! Long-term relationships enhance ability to add value

50 The Lehman Advantage in Municipals

! For individual investors, municipal bonds represent some of the best value in the fixed income marketplace. In order to unlock this value, however, investors and advisors need access to the new issue and secondary trading capabilities of a top tier investment bank. ! Lehman Brothers is a market leader in municipal new issue underwriting, secondary trading, structured products, derivatives, variable rate tax-exempt securities, research, and tax-exempt indices. ! Over 85 investment bankers in New York and 9 regional offices throughout the United States ! 71 professionals in syndicate, research, institutional sales, trading and derivatives ! Our 47 institutional salespeople in New York and regional offices provide comprehensive national & local coverage ! $275 Billion annual trading volume of tax exempt bonds

51 The Lehman Advantage in Municipals

! Sole Book-Running Manager for the single largest long-term fixed rate bond issue in history – State of California’s $7.9 Billion Economic Recovery Bonds (2004) ! Ten-time “Deal of the Year” winner since 1990 (Institutional Investor) ! Top firm in the “All America Fixed-Income Research Team” rankings; seventh year in a row and 13 out of the past 17 years (Institutional Investor) ! 2006 All America Fixed Income Research Team First Team; Municipals Strategy (Institutional Investor) ! 2006 All America Fixed Income Research Team Second Team; Municipals Generalist (Institutional Investor) ! Lehman Brothers’ Municipal Bond Index is the most widely used total return measure in the municipal market

52 Lehman Brothers’ Leading Fixed Income Franchise

Lehman Brothers’ Experience Lehman Brothers’ global debt franchise is among the most highly ranked for underwriting, sales / trading and research Best Fixed Income Franchise Underwriting League Tables Awards No. 1 in Fixed Income Research Proven Results in Institutional Investor 7 Years in a Row Investment Grade Underwriting 2006 ($bn) 2006 Awards Amount Market No. 1 in Overall Fixed Income Market Share Rank Underwriter ($bn) Share (%) No. 1 in High Grade Credit Fixed Income Research Quality 1 Citigroup 110.7 15.9 2006 No.1 No. 1 Overall Fixed Income Sales Quality 2 JPMorgan 84.6 12.1 No. 1 Overall Fixed Income Trading Quality 2005 No.1 3 Lehman Brothers 67.3 9.7 No. 1 Overall Fixed Income Research Quality 2004 No.1 4 Morgan Stanley 64.3 9.2 2003 No.1 5 Goldman Sachs & Co. 64.3 9.2 2002 No.1 2001 No.1 6 Banc of America 63.5 9.1 2000 No.1 7 Merrill Lynch & Co., Inc. 42.7 6.1 8 Credit Suisse 33.2 4.8 Number of No. 1 Ranked Analysts (2006) Leading Distribution Capability 9 Barclays Capital 29.0 4.1 50 10 Deutsche Bank, AG 27.7 4.0 40 Industry Leader in Underwriting 30 2006 Survey Financings for Public Sector Clients 20 10 Market Greenwich Amount Market #1 #1 Share of Quality Rank Underwriter ($bn) Share (%) 0 Trading Index 1 Citigroup 216.6 14.3 LEH JPM BS UBS BOA CS GS ML RBS WB Activity 2 UBS 191.8 12.6 3 JPMorgan 106.0 7.0 4 Lehman Brothers 102.1 6.7 Leading Indices 5 Bear Stearns 99.2 6.5% ! Ranked No. 1 by Institutional Investor in 2006 Note: Long-Term Negotiated Issues from 2002–2006 ! The “S&P 500” of the bond market ! Book-Running Manager for the single largest long-term fixed rate bond issue in history – State of California’s ! Provides Lehman Brothers with unique insights into $7.9bn Economic Recovery Bonds (2004) investor behavior ! Top 3 municipal research team (Institutional Investor, ! Managed exclusively by Lehman Brothers 2000 to 2006) U.S. Dollar Bond House of the Year ! Used by 90% of U.S. fixed income investors ! Leading derivatives and investment products group 2005 2004 2002 2001

53 Leadership Breadth Across the Platform

Lehman Brothers’ Experience We hold top-tier market positions across major asset classes

2006 League Table Summary – Excluding Self-Funding (1)

Proc + US DEBT, EQUITY & Proc + US SHORT TERM Proc + GLOBAL DEBT OvrAlt. Mkt sh EQUITY-RELATED OvrAlt. Mkt sh STRAIGHT DEBT OvrAlt. Mkt sh 1 Citigroup 336.9 8.6 1 Citigroup 242.3 10.1 1 Citigroup 33.1 17.0 2 JP Morgan 264.7 6.8 2 Lehman Brothers 219.8 9.2 2 Lehman Brothers 26.6 13.7 3 Lehman Brothers 248.4 6.4 3 JP Morgan 217.4 9.1 3 JP Morgan 24.7 12.7 4 Deutsche Bank AG 244.9 6.3 4 Morgan Stanley 180.5 7.6 4 Merrill Lynch & Co Inc 19.5 10.0 5 Morgan Stanley 231.0 5.9 5 Merrill Lynch & Co Inc 169.4 7.1 5 Morgan Stanley 17.3 8.9

MORTGAGE BACKED Proc + US STRAIGHT DEBT Proc + US LONG TERM Proc + DEBT OvrAlt. Mkt sh (INCL. MBS,ABS,TM) OvrAlt. Mkt sh STRAIGHT DEBT OvrAlt. Mkt sh 1 Bear Stearns & Co Inc 57.8 11.4 1 Citigroup 201.0 10.1 1 Citigroup 169.3 9.4 2 Royal Bank of Scotland Group 52.3 10.3 2 JP Morgan 188.4 9.5 2 JP Morgan 164.2 9.1 3 Lehman Brothers 46.2 9.1 3 Lehman Brothers 184.4 9.3 3 Lehman Brothers 157.9 8.8 4 UBS 39.8 7.9 4 Merrill Lynch & Co Inc 141.6 7.1 4 Deutsche Bank AG 126.6 7.0 5 Deutsche bank AG 36.1 7.1 5 Morgan Stanley 139.4 7.0 5 Merrill Lynch & Co Inc 122.9 6.8

US FEDERAL CREDIT Proc + US STRAIGHT DEBT Proc + US INVESTMENT GRADE Proc + AGENCIES (LONG TERM) OvrAlt. Mkt sh (EXCL. MBS,ABS,TM) OvrAlt. Mkt sh CORPORATES (LONG TERM) OvrAlt. Mkt sh

1 Lehman Brothers 24.5 12.4 1 JP Morgan 99.4 13.5 1 Citigroup 66.2 16.4 2 Merrill Lynch 24.3 12.2 2 Citigroup 96.0 13.1 2 JP Morgan 55.1 13.6 3 JP Morgan 23.8 12.0 3 Lehman Brothers 68.8 9.4 3 Morgan Stanley 40.2 10.0 4 Morgan Stanley 14.7 7.4 4 Morgan Stanley 65.3 8.9 4 Lehman Brothers 38.2 9.5 5 Citigroup 13.8 7.0 5 Merrill Lynch & Co Inc 58.7 8.0 5 Banc of America Securities LLC 37.0 9.2

______1Long term denotes 18 months and longer. Full credit to book, equal if joint. Includes public and 144a securities. International Bonds excludes pfandbrief and self-led issues. Source: Thompson Financial Inc. for league tables ending July 2006. Note: Proc+OvrAlt. is an abbreviation for Proceeds + Over Allotment and is denominated in Billions of Dollars. Note: Past performance is not indicative of future results

54 Providing Expert Client Advice

Lehman Brothers’ Experience Institutional investors are ultimately judged versus their benchmarks. Lehman Brothers is the world’s leading provider of Fixed Income benchmarks ! Lehman Brothers was the first firm to publish bond indices in 1973 ! Voted #1 Index provider by Institutional Investor since rankings began in 1997 ! Coverage of over 64,000 securities with a market value greater than $28 trillion ! Approximately $5.5 trillion in assets managed against Lehman Brothers’ Indices globally ! Lehman Brothers’ Global Aggregate Index close to $1 trillion in assets managed against ! Voted #1 Index Franchise in Europe in 2006 by Institutional Investor and EUROMONEY ! Launched 1st comprehensive series of China Bond Indices in 2004 ! Key 2005 index launches: U.S. ABS Floating-Rate Notes, U.S. Hybrid ARMs, Hedge Fund Index ! Changes to 2006 Index Launch: Commodities Index, Inflation-Swaps Indices, U.S. High Yield Index, FX Index, Indian Govt Index

A growing share of Over 90% of U.S. Used by a majority Asian investors are asset managers are of European turning to Lehman benchmarked to the Aggregate Index Brothers’ Indices Lehman Brothers investors from Treasury-only Indices benchmarks

______Note: Past performance is not indicative of future results

55

The power of this page is that Lehman Brothers – as the undisputed leader in Fixed Income indices – has a clear advantage in understanding the needs of the global institutional investor Lehman Brothers: Setting the Standard

Institutional Rising Star Awards for Investor “A Decade of Excellence in Europe 1996-2006” 2006 Survey RESEARCH* #1 Overall Quality & Franchise Strength “Most Improved Investment 2006 No. 1 Bank of the Decade” #1 Market Penetration 2005 No. 1 Awards for Excellence 2004 No. 1 2003 No. 1 2002 No. 1 1st Comprehensive 2001 No. 1 Series of China “Best Investment Bank” (2005) 2000 No. 1 1999 No. 3 Bond Indices – “Best Global Asset Backed Securities House” (2006) 1998 No. 4 1997 No. 2 2004 “Best Debt House in Italy” (2005, 2006) 1996 No. 1 1995 No. 2 “Best Debt House USA” (2005) 1994 No. 1 1993 No. 1 “Best Debt Credit Derivatives House” (2005) 1992 No. 1 1991 No. 1 “Best Debt House North America” (2005) 1990 No. 1 Review of the Year 2004 “Best Debt House Netherlands” (2005) “Most Innovative Bank” “Asian Innovation of the Year” (2005) 2 0 0 Orion Consultants 6 2005 Year-End Performance Evaluation 2006 Prime Brokerage Survey #1 Corporate Sales Performance “Best Credit Derivatives House” #1 Corporate Research Performance #1 Asia ex. Japan “Best House”

______*Source: 2006 Institutional Investor All-America Fixed Income Research survey, based on voting by representatives of approximately 370 institutions managing an estimated $8.2 trillion in fixed income assets. Rank based on total number of team positions. Note: Past performance is not indicative of future results

56 Lehman Brothers’ Global Fixed Income Franchise Lehman Brothers’ Experience Lehman Brothers provides a global sales force of nearly 2,000 sales professionals worldwide Lehman Brothers’ Global Network of Fixed Income Professionals

Cazenovia 2 Princeton 1 London 7 55 101 Frankfurt 9 Tel Aviv 1 Chicago 26 25 5 56 146 8 118 435 Boston 17 1 3 21 Zurich 5 Dubuque 1 Paris 1 8 1 Jersey City 7 Denver 1 Milan 3 14

White Plains 17

New 18 276 270 York 215 11 294 19 4 40 Seattle 3 45 1192

Portland 1 Westport 1 Seoul 2 6 Philadelphia 1 San 1 2 Hamilton, 1 Francisco 18 6 27 Bermuda Tokyo 5 19 29 Sharon 4 60 66 179 Volant 1 Taipei 1 Los Angeles 8 3 1 4 16 Washington 1 2 Hong Kong 3 5 12 10 30

Bangkok 11 Houston 1 2 4

Atlanta 8 Singapore 8 1

Maitland 1

Miami 1 1 2 San Juan 1

FID Administration FID Origination FID Research FID Sales Global Syndicate Total FID Trading Municipal Sales Municipal Research Municipal Trading Public Finance Banking Lehman Brothers was honored with several industry-leading awards from International Financing Review, including U.S. Dollar Bond House of the Year, North American Securitization House of the Year, and European Leveraged Loan House of the Year

57 IV. Municipal Contacts Municipal Contacts

58 Disclaimer

!This document is for information purposes only and it should not be regarded as an offer to sell or as a solicitation of an offer to buy the securities or other instruments mentioned in it. No part of this document may be reproduced in any manner without the written permission of Lehman Brothers Inc. We do not represent that this information is accurate or complete and it should not be relied upon as such. Opinions expressed herein are subject to change without notice. The products mentioned in this document may not be eligible for sale in some states or countries, nor suitable for all types of investors; their value and the income they produce may fluctuate and/or be adversely affected by exchange rates, interest rates, or other factors. Debt securities may be subject to call features or other redemption features, such as sinking funds, and may be redeemed in whole or in part before maturity. These occurrences may affect yield. Additional information will be provided upon request. Trading or investing in futures and derivatives can result in substantial risk or unlimited losses. !Income from municipal securities may be subject to state and local income taxes and to the Alternative Minimum Tax (AMT). This information does not constitute tax advice. Investors should consult their tax advisor or attorney with regard to their personal tax situation. Call features may exist which could affect yield; complete information will be provided upon request. Municipal security offerings are subject to changes in price and/or availability. For more information regarding a specific municipal security, please consult the Official Statement. !Lehman Brothers Inc. and/or its affiliated companies may make a market or deal as principal in the securities mentioned in this document or in options or other derivatives based thereon. In addition, Lehman Brothers Inc., its affiliated companies, shareholders, directors, officers and/or employees, may from time to time have long or short positions in such securities or in options, futures, or other derivative instruments based thereon. One or more directors, officers, and/or employees of Lehman Brothers Inc. or its affiliated companies may be a director of the issuer of the securities mentioned in this document. Lehman Brothers Inc. or its affiliated companies may have managed or co-managed a of securities for any issuer mentioned in this document within the last three years. Ó 2005 Lehman Brothers Inc. All rights reserved. Member SIPC.

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