X0202 4 2007-12-31 0 0000940510 BORDERS GROUP INC BGP 0001336528 Pershing Square Capital Management, L.P. 888 SEVENTH AVENUE, 29TH FLOOR NEW YORK NY 10019 0 0 1 0 0001336477 PS Management GP, LLC 888 SEVENTH AVENUE, 29TH FLOOR NEW YORK NY 10019 0 0 1 0 0001056513 ACKMAN WILLIAM A 888 SEVENTH AVENUE, 29TH FLOOR NEW YORK NY 10019 0 0 1 0 Total Return Swap 10.74 2007-12-31 4 J 1 1 A 2009-02-04 Common Stock 312500 1 I See footnote Total Return Swap 10.55 2008-01-02 4 J 1 1 A 2009-02-04 Common Stock 116800 2 I See footnote The reporting person, for the account of Pershing Square International, Ltd. ("PSIL"), entered into two separate cash-settled total return swaps with a broker-dealer counterparty for a commission equal to $0.02 per notional share subject to such swaps. The first swap (the "First Swap") was entered into on December 31, 2007 and expires on February 4, 2009. Under the terms of the First Swap (i) PSIL is obligated to pay to the counterparty any negative price performance under $10.7415 for each of the 312,500 notional BGP common shares subject to the swap (the "First Swap Reference Shares"), plus interest, and (ii) the counterparty is obligated to pay to PSIL any positive price performance over $10.7415 for each of the First Swap Reference Shares, plus any dividends paid during the life of the swap. The second swap (the "Second Swap"), also for the account of PSIL, was entered into on January 2, 2008 and expires on February 4, 2009. Under the terms of the Second Swap (i) PSIL is obligated to pay to the counterparty any negative price performance under $10.5534 for each of the 116,800 notional BGP common shares subject to the swap (the "Second Swap Reference Shares," together with the First Swap Reference Shares, the "Reference Shares"), plus interest, and (ii) the counterparty is obligated to pay to PSIL any positive price performance over $10.5534 for each of the Second Swap Reference Shares, plus any dividends paid during the life of the swap. In the case of both the First Swap and Second Swap, all balances will be cash settled and there will be no transfer to or from PSIL of voting or dispositive power over the Reference Shares. In addition to Pershing Square Capital Management, L.P. ("PS Capital"), this Form 4 is being filed jointly by PS Management GP, LLC ("PS Management") and William A. Ackman, each of whom has the same business address as PS Capital. PSIL is an investment fund for which PS Capital acts as investment manager and therefore PS Capital may be deemed to be the beneficial owner of the derivative securities reported herein. PS Management is the general partner of PS Capital and therefore may be deemed to be the beneficial owner of the derivative securities reported herein. William A. Ackman is the managing member of PS Management and therefore may be deemed the beneficial owner of the derivative securities. Each of PS Capital, PS Management, and Mr. Ackman disclaims beneficial ownership of the derivative securities reported herein, except to the extent of its or his pecuniary interest therein, if any. /s/ William A. Ackman, Pershing Square Capital Management, L.P. 2008-01-03 /s/ William A. Ackman, PS Management GP, LLC 2008-01-03 /s/ William A. Ackman 2008-01-03