FWP 1 fwprtwo.txt FWP 12-7-05 RANGE 2 Filed Pursuant to Rule 433 Registration No. 333-121067 December 7, 2005 LEHMAN BROTHERS Fixed Income Derivative Products 10YR NC 4YR Lehman Range Note Lehman Brothers Holdings Inc. has filed a registration statement (including a prospectus) with the U.S. Securities and Exchange Commission (SEC) for this offering. Before you invest, you should read the prospectus dated May 18, 2005, the prospectus supplement dated May 18, 2005, and other documents Lehman Brothers Holdings Inc. has filed with the SEC for more complete information about Lehman Brothers Holdings Inc. and this offering. Buyers should rely upon the prospectus, prospectus supplement and any relevant free writing prospectus for complete details. You may get these documents and other documents Lehman Brothers Holdings Inc. has filed for free by searching the SEC online database (EDGAR(R)) at www.sec.gov, with "Lehman Brothers Holdings Inc." as a search term. Alternatively, Lehman Brothers Inc. or any other dealer participating in the offering will arrange to send you the prospectus, prospectus supplement and final pricing supplement (when completed) if you request it by calling your Lehman Brothers sales representative, such other dealer or 1-212-528-6428/ 1-212-528-8576. A copy of the prospectus may be obtained from Lehman Brothers Inc., Attn: Structured Note Desk, 3rd Floor, 745 Seventh Avenue, New York, NY 10019. --------------------------- Issuer: Lehman Brothers Holdings --------------------------- Ratings: Moody's A1/ S&P A+/ Fitch A+ --------------------------- Issue Size: $ 25,000,000 --------------------------- CUSIP: 52517PD32 --------------------------- Trade Date 12/7/05 --------------------------- Settlement Date: 12/28/05 --------------------------- Maturity Date: 12/28/15, subject to Issuer's Call option --------------------------- Issue Price: 100.0% -------------------- Redemption Price 100.0% -------------------- Coupon (3mo LIBOR + 287bps) x Index Subject to a minimum coupon of 0.00% Determination: 2 London Business Days prior to the beginning of the coupon period Reset: Quarterly -------------------- Interest Calculation Period / Daycount Basis Quarterly, unadjusted modified following 30/360 -------------------- Coupon Payment Paid quarterly starting on March 28, 2006 and ending on the Maturity Date subject to Issuer's Call Option -------------------- Index: For any Interest Calculation Period, the number of calendar days in respect of which the difference SPREAD REF = 30Y USD SWAP REF - 2Y USD SWAP REF is greater than or equal to 0.00% during that Interest Calculation Period divided by the total number of calendar days in the Interest Calculation Period, subject to the Rate Cut Off. -------------------- Rate Cut Off: SPREAD REF for Saturday, Sunday or a day which is not a Business Day will be SPREAD REF for the immediately prior Business Day. SPREAD REF applicable to the day ("Rate Cut-Off Date") 5 Business Days prior to a Coupon Payment Date will remain in effect until the Coupon Payment Date. -------------------- 30Y USD SWAP REF For any day, the rate for U.S. Dollar swaps with a maturity of 30 years, expressed as a percentage, which appears on the Reuters Screen ISDAFIX1 Page as of 11:00a.m., New York City time, on that day. 2Y USD SWAP REF For any day, the rate for U.S. Dollar swaps with a maturity of 2 years, expressed as a percentage, which appears on the Reuters Screen ISDAFIX1 Page as of 11:00a.m., New York City time, on that day. SPREAD REF For any day (Subject to Rate Cut Off), SPREAD REF = 30Y USD SWAP REF - 2Y USD SWAP REF -------------------- Issuers Call Option The Issuer has the right on every coupon payment date starting 4 Years from the Issue Date (December 28, 2009), provided that the Issuer gives 5 Business Days notice to the investor, to call the Note at par (par being 100.00%), with the effect that all amounts that may otherwise be payable following the call date shall cease to be payable. Notwithstanding the above, all payments due on the call date shall be made in full regardless of any calling of the Note by the Issuer. -------------------- Business Days London and New York -------------------- Calculating Agent Lehman Brothers Special Financing -------------------- Denomination: US$ 1,000/1,000 -------------------- Risk Factors Issuer Credit Risk Investors are subject to the credit risk of the Issuer. The credit ratings assigned to the Issuer represent the Rating Agencies' opinion regarding its credit quality and are not a guarantee of quality. Rating Agencies attempt to evaluate the safety of principal and interest payments and do not evaluate the risks of fluctuations in market value. Therefore, the ratings assigned to the Issuer may not fully reflect the true risks of an investment in the Notes. Market Risk There are various factors that affect the market value of the Notes. These include, but are not limited to, the general level of interest rates, shape of the yield curve and level of implied interest rate volatility. Accordingly, the secondary market price of the Notes will depend primarily on all of the above factors, perceptions of issuer credit quality and remaining time to maturity. Liquidity Risk Neither Lehman Brothers nor the Issuer is obligated to make a secondary market in these Notes. Where Lehman Brothers or the Issuer does purchase Notes, the bid/offer spread in most cases may be wider than plain-vanilla corporate and agency bonds. Due to the above factors, 100% of the principal amount is only protected at maturity. There is a risk that the investor may receive substantially less that 100% should they wish to sell their Notes prior to maturity. Conflicts of Interest Lehman Brothers Inc., the Issuer or one or more of their respective affiliates may, at present or in the future, publish research reports with respect to movements in interest rates generally or the shape of the yield curve specifically. This research is modified from time to time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding the Notes. Any of these activities may affect the market value of the Notes. This investment bears risk related to the prescribed ranges. If 2Y USD SWAP REF is greater than 30Y USD SWAP REF the note will accrue at zero. Specifically, selling this security during a period in which the coupon is accruing at zero, or during a period in which the market's perception of the probability of the note accruing at zero is high, will result in a dollar price significantly less than 100%. Selling this or any fixed income security prior to maturity or call date may result in a dollar price less than 100%, and therefore a potential loss of principal. Certain United States Federal Income Tax Consequences Treatment of Notes as Variable Rate Debt Instruments The Issuer believes that the Notes provide for interest at an "objective rate" and therefore constitute "variable rate debt instruments," as those terms are defined in the original issue discount regulations. The Issuer intends to report interest deductions with respect to the Notes based on this treatment. Under such characterization, holders of the Notes would report interest as ordinary income at the time it is paid or accrued in accordance with their method of accounting for tax purposes. Investors who purchase the Notes at a market discount or premium should consult their tax advisors regarding the appropriate rate of accrual or amortization for such market discount or premium. Investors should consult their tax advisors regarding possible alternative treatments of the Notes, including the possible application of the contingent payment debt regulations. See "United States Federal Income Tax Consequences--Debt Securities-- Consequences to United States Holders" in the prospectus. Historical Levels of 2Y USD SWAP REF and 30Y USD SWAP REF The historical experience of 2Y USD SWAP REF and 30Y USD SWAP REF should not be taken as an indication of the future performance of 2Y USD SWAP REF or 30Y USD SWAP REF during the term of the Notes. Fluctuations in the level of 2Y USD SWAP REF or 30Y USD SWAP REF make the Notes' effective interest rate difficult to predict and can result in effective interest rates to investors that are lower than anticipated. In addition, historical interest rates are not necessarily indicative of future interest rates. Fluctuations in interest rates and interest rate trends that have occurred in the past are not necessarily indicative of fluctuations that may occur in the future, which may be wider or narrower than those that have occurred historically.
Rate as at Rate as at Hypothetical Hypothetical Rate Cut-Off Dates 30Y USD SWAP REF 2Y USD SWAP REF Rate Cut-Off Dates 30Y USD SWAP REF 2Y USD SWAP REF ------------------ ---------------- --------------- ------------------ ---------------- --------------- 21-Sep-05 4.906 4.342 23-Sep-96 7.418 6.425 21-Jun-05 4.748 4.047 21-Jun-96 7.499 6.551 21-Mar-05 5.319 4.123 21-Mar-96 7.041 5.924 21-Dec-04 5.19 3.434 21-Dec-95 6.491 5.48 21-Sep-04 5.167 2.828 21-Sep-95 6.991 5.991 21-Jun-04 5.768 3.183 21-Jun-95 7.002 5.851 22-Mar-04 4.961 1.802 21-Mar-95 7.906 6.967 22-Dec-03 5.294 2.164 21-Dec-94 8.359 8.002 22-Sep-03 5.46 1.982 21-Sep-94 8.349 6.753 23-Jun-03 4.678 1.348 21-Jun-94 8.082 6.26 21-Mar-03 5.345 2.105 21-Mar-94 7.521 5.364 23-Dec-02 5.273 2.101 21-Dec-93 6.982 4.376 23-Sep-02 5.119 2.336 21-Sep-93 6.778 4.022 21-Jun-02 5.876 3.253 21-Jun-93 7.445 4.348 21-Mar-02 6.373 4.14 22-Mar-93 7.605 4.133 21-Dec-01 6.207 3.62 21-Dec-92 7.752 4.926 21-Sep-01 6.063 3.45 21-Sep-92 7.681 4.062 21-Jun-01 6.405 4.536 22-Jun-92 0 5.31 21-Mar-01 6.054 4.774 23-Mar-92 0 6.28 21-Dec-00 6.219 5.818 23-Dec-91 0 5.02 21-Sep-00 7.092 6.777 23-Sep-91 0 6.52 21-Jun-00 7.34 7.284 21-Jun-91 0 7.64 21-Mar-00 7.23 7.091 21-Mar-91 0 7.67 21-Dec-99 7.34 6.787 21-Dec-90 0 7.95 21-Sep-99 7.074 6.22 21-Sep-90 0 8.68 21-Jun-99 6.754 6.018 21-Jun-90 0 8.83 22-Mar-99 6.226 5.519 21-Mar-90 0 9.18 21-Dec-98 5.777 5.087 21-Dec-89 0 8.23 21-Sep-98 5.928 5.165 21-Sep-89 0 9 22-Jun-98 6.105 5.847 21-Jun-89 0 9.11 23-Mar-98 6.272 5.861 21-Mar-89 0 10.93 22-Dec-97 6.286 6.021 21-Dec-88 0 9.66 22-Sep-97 6.689 6.098 21-Sep-88 0 9.1 23-Jun-97 7.017 6.302 21-Jun-88 0 8.84 21-Mar-97 7.286 6.498 21-Mar-88 0 8.11 23-Dec-96 6.929 6.009 21-Dec-87 0 8.61