424B5 1 file001.htm DEFINITIVE MATERIALS

Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-61878

PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 21, 2001)

$17,000,000
LEHMAN BROTHERS HOLDINGS INC.
INDEX-PLUS NOTES DUE AUGUST 3, 2010
LINKED TO A BASKET OF FOUR STOCK INDICES

-----------------

General:

o Senior unsecured debt securities of Lehman Brothers Holdings.

o Linked to a basket of four stock indices: the Nikkei 225(SM) Index, the Dow
Jones EURO STOXX 50(SM) Index, the MSCI Taiwan(SM) Index and the AMEX Hong
Kong 30(SM) Index. These indices will represent 35%, 30%, 25% and 10%,
respectively, of the basket as of the market close on the date of this
prospectus supplement.

o Denominations: $1,000 and whole multiples of $1,000.

o Minimum initial investment: $10,000.

o Stated maturity date: August 3, 2010, subject to postponement if a market
disruption event occurs on the valuation date.

o Valuation date: July 29, 2010, subject to postponement if a market
disruption event occurs.

o Upside participation rate: 105%.

o Threshold level: 600, 60% of the initial basket value.

o The notes will not be listed on a stock exchange.

Payments:

o No interest or other payments prior to maturity.

o On the stated maturity date, Lehman Brothers Holdings will pay to you, per
$1,000 note, an amount equal to:

-- If the final basket value is greater than or equal to the initial
basket value, the sum of:

(1) $1,000 and

final initial
upside basket value - basket value
(2) $1,000 participation x ----------------------------
rate initial basket value

-- If the final basket value is less than the initial basket value and
the closing basket value is at or above the threshold level on all
exchange business days during the measurement period, $1,000.

-- If the final basket value is less than the initial basket value and
the closing basket value has fallen below the threshold level on any
exchange business day during the measurement period, the product of:

(1) $1,000 and

final basket value
(2) --------------------
initial basket value

The measurement period will begin on the date of this prospectus supplement
and end on the valuation date.

Investing in the notes involves risks. Risk Factors begin on page S-7.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.

PER NOTE TOTAL
---------- --------------
Public offering price ......................... 100.0% $17,000,000
Underwriting discount ......................... 2.5% $ 425,000
Proceeds to Lehman Brothers Holdings .......... 97.5% $16,575,000

Lehman Brothers Holdings has granted the underwriter an option to purchase,
within 13 days of the original issuance, up to an additional $2,550,000
aggregate principal amount of notes on the same terms and conditions as set
forth above solely to cover over-allotments, if any.

The notes are expected to be ready for delivery in book-entry form only through
The Depository Trust Company on or about February 3, 2005.

-----------------

Lehman Brothers Inc., a wholly-owned subsidiary of Lehman Brothers Holdings,
makes a market in Lehman Brothers Holdings' securities. It may act as principal
or agent in, and this prospectus may be used in connection with, those
transactions. Any such sales will be made at varying prices related to
prevailing market prices at the time of sale.

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LEHMAN BROTHERS
January 31, 2005

Each component index is a trademark of the sponsor of such component index and
has been licensed for use by Lehman Brothers Holdings Inc. The notes, linked to
the performance of the component indices, are not sponsored, endorsed, sold or
promoted by the sponsors of such component indices and the sponsors of such
component indices make no representation regarding the advisability of
investing in the notes.

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. NO ONE HAS BEEN
AUTHORIZED TO PROVIDE YOU WITH DIFFERENT INFORMATION. YOU SHOULD NOT ASSUME THAT
THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT COVER OF
THE DOCUMENT. SECURITIES ARE NOT BEING OFFERED IN ANY JURISDICTION WHERE THE
OFFER IS NOT PERMITTED.

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TABLE OF CONTENTS

PAGE
----

PROSPECTUS SUPPLEMENT

SUMMARY INFORMATION -- Q&A................................................. S-3
RISK FACTORS............................................................... S-7
USE OF PROCEEDS AND HEDGING................................................ S-12
RATIO OF EARNINGS TO FIXED CHARGES......................................... S-12
DESCRIPTION OF THE NOTES................................................... S-13
THE BASKET................................................................. S-18
THE NIKKEI 225 INDEX....................................................... S-19
THE DOW JONES EURO STOXX 50 INDEX.......................................... S-22
THE MSCI TAIWAN INDEX...................................................... S-26
THE AMEX HONG KONG 30 INDEX................................................ S-31
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.............................. S-36
CERTAIN ERISA CONSIDERATIONS............................................... S-39
BOOK-ENTRY ISSUANCE........................................................ S-40
UNDERWRITING............................................................... S-42
EXPERTS .................................................................. S-43

PROSPECTUS

PROSPECTUS SUMMARY......................................................... 2
WHERE YOU CAN FIND MORE INFORMATION........................................ 6
USE OF PROCEEDS AND HEDGING................................................ 7
RATIO OF EARNINGS TO FIXED CHARGES......................................... 8
DESCRIPTION OF DEBT SECURITIES............................................. 8
DESCRIPTION OF WARRANTS.................................................... 17
DESCRIPTION OF PURCHASE CONTRACTS.......................................... 22
DESCRIPTION OF UNITS....................................................... 25
FORM, EXCHANGE AND TRANSFER................................................ 29
BOOK-ENTRY PROCEDURES AND SETTLEMENT....................................... 30
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.............................. 32
PLAN OF DISTRIBUTION....................................................... 32
ERISA CONSIDERATIONS....................................................... 34
LEGAL MATTERS.............................................................. 35
EXPERTS .................................................................. 35

S-2

SUMMARY INFORMATION--Q&A

This summary highlights selected information from the prospectus supplement and
the accompanying prospectus to help you understand the notes. You should
carefully read this prospectus supplement and the accompanying prospectus to
understand fully the terms of the notes and the tax and other considerations
that are important to you in making a decision about whether to invest in the
notes. You should pay special attention to the "Risk Factors" section beginning
on page S-7 to determine whether an investment in the notes is appropriate for
you.

WHAT ARE THE NOTES?

The notes are a series of senior debt of Lehman Brothers Holdings Inc. ("Lehman
Brothers Holdings") whose value is linked to the performance of a basket of four
stock indices. The component indices are the Nikkei 225 Index, the Dow Jones
EURO STOXX 50 Index, the MSCI Taiwan Index and the AMEX Hong Kong 30 Index. See
"The Nikkei 225 Index," "The Dow Jones EURO STOXX 50 Index," "The MSCI Taiwan
Index" and "The AMEX Hong Kong 30 Index." The notes will rank equally with all
other unsecured debt of Lehman Brothers Holdings, except subordinated debt, and
will mature on August 3, 2010, subject to postponement if a market disruption
event occurs on the valuation date.

WHO PUBLISHES THE COMPONENT INDICES AND WHAT DO THEY MEASURE?

Nikkei 225 Index. The Nikkei 225 Index is a stock index published by Nihon
Keizai Shimbun, Inc. ("NKS") that measures the composite price performance of
selected Japanese stocks. The Nikkei 225 Index is currently based on 225 stocks
traded on the Tokyo Stock Exchange (the "TSE") and represents a broad cross
section of Japanese industry. All 225 underlying stocks are stocks listed in the
First Section of the TSE and are, therefore, among the most actively traded
stocks on the TSE. The Nikkei 225 Index is a modified, price-weighted index,
which means an underlying stock's weight in the Nikkei 225 Index is based on its
price per share rather than the total market capitalization of the issuer of the
underlying stock.

Dow Jones EURO STOXX 50 Index. The Dow Jones EURO STOXX 50 Index is a stock
index published by STOXX Limited ("STOXX") that measures the aggregate price
changes in selected Eurozone stocks against a fixed base quantity weight. The
Dow Jones EURO STOXX 50 Index is currently based on 50 stocks of market sector
leaders from within the Dow Jones EURO STOXX index. The component stocks have a
high degree of liquidity and represent the largest companies across all market
sectors defined by the Dow Jones Global Classification Standard. The Dow Jones
EURO STOXX 50 Index is a free float capitalization weighted stock index, which
means an underlying stock's weight in the Dow Jones EURO STOXX 50 Index is based
on free float adjusted market capitalization of the issuer of the underlying
stock.

MSCI Taiwan Index. The MSCI Taiwan Index is a stock index published by Morgan
Stanley Capital International Inc. ("MSCI") that measures the free float
adjusted market capitalization of selected securities listed on the Taiwan Stock
Exchange. The MSCI Taiwan Index is currently based on 100 stocks representing
each industry group in Taiwan. The MSCI Taiwan Index is a market capitalization
weighted index, which means an underlying stock's weight in the MSCI Taiwan
Index is based on the total market capitalization of the issuer of the
underlying stock.

AMEX Hong Kong 30 Index. The AMEX Hong Kong 30 Index is a stock index published
by the American Stock Exchange, Inc. (the "American Stock Exchange") that
measures the market value performance of 30 actively traded stocks listed on The
Stock Exchange of Hong Kong Ltd. (the "HKSE"). The AMEX Hong Kong 30 Index is
currently designed to represent a substantial segment of the Hong Kong stock
market. The AMEX Hong Kong 30 Index is a market capitalization weighted stock
index, which means an underlying stock's weight in the AMEX Hong Kong 30 Index
is based on the total market capitalization of the issuer of the underlying
stock.

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Please note that an investment in the notes does not entitle you to any
ownership or other interest in the securities underlying the component indices.

WHAT PAYMENTS WILL I RECEIVE ON THE NOTES BEFORE MATURITY?

None. No interest or other payments will be made on the notes before maturity.

S-3

WHAT WILL I RECEIVE IF I HOLD THE NOTES UNTIL THE STATED MATURITY DATE?

On the stated maturity date, Lehman Brothers Holdings will pay to you, per
$1,000 note, an amount equal to:

o If the final basket value is greater than or equal to the initial basket
value, the sum of:

(1) $1,000 and
final initial
upside basket value - basket value
(2) $1,000 x participation x -------------------------------
rate initial basket value

o If the final basket value is less than the initial basket value and the
closing basket value is at or above the threshold level on all exchange
business days during the measurement period, $1,000.

o If the final basket value is less than the initial basket value and the
closing basket value has fallen below the threshold level on any exchange
business day during the measurement period, the product of:

(1) $1,000 and

final basket value
(2) --------------------
initial basket value

The initial basket value is 1,000. The final basket value will be the closing
basket value on the valuation date, which will be the third business day before
the stated maturity date. The closing basket value on any particular day will
generally be based on the closing levels of the component indices on such day.
It will generally equal the sum of the closing level of the Nikkei 225 Index on
such date multiplied by 0.030735, the Dow Jones EURO STOXX 50 Index multiplied
by 0.100518, the MSCI Taiwan Index multiplied by 0.996532 and the AMEX Hong Kong
30 Index multiplied by 0.146342. The multipliers have been fixed on the date of
this prospectus supplement so that the component indices constitute the initial
percentages of the basket set forth below under "The Basket." The multipliers
are subject to adjustment under certain circumstances.

If the third business day before the stated maturity date is not an exchange
business day or the calculation agent determines that one or more market
disruption events have occurred with respect to one or more of the component
indices on that day, the calculation agent will, subject to certain limitations,
determine the final basket level by reference to the closing basket value on the
next exchange business day on which there is not a market disruption event. Any
such postponement of the date that would otherwise be the valuation date will
cause the stated maturity date to be postponed until three business days after
the date that the final basket value is determined.

As a result, on the stated maturity date you will only receive more than $1,000
per $1,000 note if the final basket value on the valuation date is greater than
the initial basket value. If the final basket value on the valuation date is
less than the initial basket value and the closing basket value has fallen below
the threshold level on any exchange business day during the measurement period,
you will receive less than $1,000 per $1,000 note on the stated maturity date.

AMOUNT PAYABLE AT MATURITY -- EXAMPLES

Here are three examples of hypothetical calculations of the amount payable per
$1,000 note on the stated maturity date.

EXAMPLE 1. ASSUMING THE FINAL BASKET VALUE ON THE VALUATION DATE IS 1,200:

Because the final basket value is greater than the initial basket value, the
appropriate formula for calculating the amount payable on the stated maturity
date per $1,000 note is:

1,200 - 1,000
$1,000 + $1,000 x 105% x -------------- = $1,210
1,000

As a result, on the stated maturity date, you would receive $1,210 per $1,000
note.

EXAMPLE 2. ASSUMING THE FINAL BASKET VALUE ON THE VALUATION DATE IS 750 AND THE
CLOSING BASKET VALUE WAS AT OR ABOVE THE THRESHOLD LEVEL ON ALL EXCHANGE
BUSINESS DAYS DURING THE MEASUREMENT PERIOD:

Because the final basket value is less than 1,000 and the closing basket value
is at or above 600 on all exchange business days during the measurement period,
on the stated maturity date, you would receive $1,000 per $1,000 note.

S-4

EXAMPLE 3. ASSUMING THE FINAL BASKET VALUE ON THE VALUATION DATE IS 750 AND THE
CLOSING BASKET VALUE FELL BELOW THE THRESHOLD LEVEL ON AN EXCHANGE BUSINESS DAY
DURING THE MEASUREMENT PERIOD:

Because the final basket value is less than 1,000 and the closing basket value
fell below 600 on an exchange business day during the measurement period, the
appropriate formula for calculating the amount payable on the stated maturity
date per $1,000 note is:

750
$1,000 x -------- = $750
1,000

As a result, on the stated maturity date, you would receive $750 per $1,000
note.

HOW HAVE THE COMPONENT INDICES PERFORMED HISTORICALLY?

Lehman Brothers Holdings has provided tables, beginning on page S-21, showing
the performance of each of the component indices from January 1, 2000 through
January 31, 2005. Lehman Brothers Holdings has provided this historical
information to help you evaluate the behavior of the component indices so that
you can make an informed decision with respect to an investment in the notes.
You should realize, however, that past performance is not necessarily indicative
of how the component indices or the notes will perform in the future.

HOW WILL I BE ABLE TO FIND THE LEVELS OF THE COMPONENT INDICES AT ANY POINT IN
TIME?

Nikkei 225 Index. You can obtain the level of the Nikkei 225 Index at any time
from the Bloomberg(R) service under the symbol "NKY," or from the Nikkei
website, at www.nni.nikkei.co.jp/.

Dow Jones EURO STOXX 50 Index. You can obtain the level of the Dow Jones EURO
STOXX 50 Index at any time from the Bloomberg(R) service under the symbol
"SX5E," or from the Dow Jones website, at www.djindexes.com.

MSCI Taiwan Index. You can obtain the level of the MSCI Taiwan Index at any time
from the Bloomberg(R) service under the symbol "TWY," or from the MSCI website,
at www.msci.com.

AMEX Hong Kong 30 Index. You can obtain the level of the AMEX Hong Kong 30 Index
at any time from the Bloomberg(R) service under the symbol "HKX," or from the
AMEX website, at www.amex.com.

ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?

Yes, the notes are subject to a number of risks. See "Risk Factors" beginning on
page S-7.

WHAT ABOUT TAXES?

No statutory, judicial or administrative authority directly addresses the
characterization of the notes or instruments similar to the notes for United
States federal income tax purposes. Although the issue is not free from doubt,
Lehman Brothers Holdings intends to treat, and by purchasing the notes, for all
purposes you will agree to treat a note as a financial contract with cash
settlement rather than as a debt instrument. As a result, upon a sale, exchange
or other disposition of a note or upon cash settlement at maturity, you will
recognize gain or loss equal to the difference between the amount of cash
received and your basis in the note. Assuming the note is treated as a financial
contract for United States federal income tax purposes, the gain or loss will be
treated as long term capital gain or loss. See "United States Federal Income Tax
Consequences."

WHO IS LEHMAN BROTHERS HOLDINGS?

Lehman Brothers Holdings is one of the leading global investment banks, serving
institutional, corporate, government and high-net-worth clients and customers.
Lehman Brothers Holdings' worldwide headquarters in New York and regional
headquarters in London and Tokyo are complemented by offices in additional
locations in the United States, Europe, the Middle East, Latin America and the
Asia Pacific region. See "Lehman Brothers Holdings Inc." and "Where You Can Find
More Information" on page 2 and 6, respectively, of the accompanying prospectus.

S-5

You may request a copy of any document Lehman Brothers Holdings Inc. files with
the Securities and Exchange Commission, or the SEC, pursuant to the Securities
Exchange Act of 1934, at no cost, by writing or telephoning Lehman Brothers
Holdings at the following address, which replaces the address provided in the
accompanying prospectus:

Office of the Corporate Secretary
399 Park Avenue
New York, New York 10022
(212) 526-0858

Lehman Brothers Holdings' principal executive offices are located at the
following address, which likewise replaces the address provided in the
accompanying prospectus:

745 Seventh Avenue
New York, New York 10019
(212) 526-7000

WHAT IS THE ROLE OF LEHMAN BROTHERS INC.?

Lehman Brothers Inc., a subsidiary of Lehman Brothers Holdings, is the
underwriter for the offering and sale of the notes. Lehman Brothers Inc. will
also be the calculation agent for purposes of calculating the amount payable to
you at maturity. Potential conflicts of interest may exist between Lehman
Brothers Inc. and you as a beneficial owner of the notes. See "Risk
Factors--Potential conflicts of interest exist because Lehman Brothers Holdings
controls Lehman Brothers Inc., which will act as the calculation agent" and
"Description of the Notes--Calculation agent."

After the initial offering, Lehman Brothers Inc. intends to buy and sell the
notes to create a secondary market in the notes and may stabilize or maintain
the market price of the notes during the initial distribution of the notes.
However, Lehman Brothers Inc. will not be obligated to engage in any of these
market activities or to continue them once they have begun.

IN WHAT FORM WILL THE NOTES BE ISSUED?

The notes will be represented by one or more global securities that will be
deposited with and registered in the name of The Depository Trust Company
("DTC") or its nominee. Except in very limited circumstances, you will not
receive a certificate for your notes.

WILL THE NOTES BE LISTED ON A STOCK EXCHANGE?

No, the notes will not be listed on a stock exchange.

S-6

RISK FACTORS

You should carefully consider the risk factors provided below as well as the
other information contained in this prospectus supplement, the accompanying
prospectus and the documents incorporated in this document by reference. As
described in more detail below, the trading price of the notes may vary
considerably before the stated maturity date due, among other things, to
fluctuations in the prices of the securities underlying the component indices
and other events that are difficult to predict and beyond Lehman Brothers
Holdings' control.

You should reach an investment decision only after you have carefully considered
with your advisors the suitability of an investment in the notes in light of
your particular circumstances.

THESE NOTES ARE DIFFERENT FROM CONVENTIONAL DEBT SECURITIES OF LEHMAN BROTHERS
HOLDINGS IN SEVERAL WAYS.

o THE PAYMENT YOU RECEIVE AT MATURITY MAY BE LESS THAN THE PRICE AT WHICH THE
NOTES ARE INITIALLY BEING SOLD TO THE PUBLIC. If the final basket value is
less than the initial basket value and the closing basket value is at or
above the threshold level on all exchange business days during the
measurement period, Lehman Brothers Holdings will pay you $1,000 per $1,000
note, notwithstanding that the closing basket value may have been higher
than the initial basket value at some time during the term of the notes. If
the final basket value is less than the initial basket value and the closing
basket value fell below the threshold level on any exchange business day
during the measurement period, Lehman Brothers Holdings will pay you less
than $1,000 per $1,000 note. You will not receive any payment on the stated
maturity date if the final basket value is zero.

o THE PAYMENT YOU RECEIVE AT MATURITY MAY BE LESS THAN THE YIELD ON A
CONVENTIONAL DEBT SECURITY OF COMPARABLE MATURITY. The amount Lehman
Brothers Holdings pays you on the stated maturity date may be less than the
return you could earn on other investments. Because the amount you receive
on the stated maturity date may be less than, equal to or only slightly
greater than the price at which the notes are initially being sold to the
public, the effective yield to maturity on the notes may be less than that
which would be payable on a conventional fixed-rate, non-callable debt
security of Lehman Brothers Holdings. In addition, any return on the notes
may not fully compensate you for any opportunity cost to you of investing in
the notes when you take into account inflation and other factors relating to
the time value of money.

o NO INTEREST OR OTHER PAYMENTS WILL BE PAID ON THE NOTES PRIOR TO MATURITY.

YOUR RETURN ON THE NOTES COULD BE LESS THAN IF YOU OWNED THE SECURITIES
UNDERLYING THE COMPONENT INDICES.

o YOUR RETURN WILL NOT REFLECT DIVIDENDS ON THE SECURITIES UNDERLYING THE
COMPONENT INDICES. Your return on the notes will not reflect the return you
would realize if you actually owned the securities underlying the component
indices and received the dividends paid on those securities. This is because
the calculation agent will calculate the amount payable to you by reference
to the levels of the component indices, which are calculated by reference to
the prices of the securities underlying the component indices without taking
into consideration the value of dividends paid on those securities.

o YOUR RETURN WILL NOT BE ADJUSTED FOR CHANGES IN CURRENCY EXCHANGE RATES.
Although the securities underlying the component indices are traded in
foreign currencies and the notes are denominated in U.S. dollars, the amount
payable at maturity will not be adjusted for the currency exchange rates in
effect at maturity. Any amount in addition to the principal amount of each
note payable to you at maturity is based solely upon the percentage increase
in the component indices. Changes in exchange rates, however, may reflect
changes in various non-U.S. economies, which in turn may affect the value of
the component indices and the notes.

HISTORICAL VALUES OF THE COMPONENT INDICES SHOULD NOT BE TAKEN AS AN INDICATION
OF THE FUTURE PERFORMANCE OF THOSE COMPONENT INDICES DURING THE TERM OF THE
NOTES.

The trading prices of the securities underlying the component indices will
determine the basket value. As a result, it is impossible to predict whether the

S-7

basket value will fall or rise. Trading prices of the securities underlying the
component indices will be influenced by complex and interrelated political,
economic, financial and other factors that can affect the markets in which those
securities are traded and the values of the underlying securities themselves.

CHANGES IN THE VALUE OF ONE OR MORE OF THE COMPONENT INDICES MAY OFFSET EACH
OTHER.

Price movements in the component indices may not correlate with each other. At a
time when the value of one or more of the component indices increases, the value
of one or more of the other component indices may not increase as much or may
even decline in value. Therefore, in calculating the closing basket value on the
valuation date, increases in the value of one or more of the component indices
may be moderated, or wholly offset, by lesser increases or declines in the value
of one or more of the other component indices, particularly if such indices
represent a greater percentage of the basket at that time. You can review the
historical prices of each of the component indices for each fiscal quarter in
the period from January 1, 2000 through January 31, 2005 below, beginning on
page S-21. You cannot predict the future performance of any of the component
indices or of the basket as a whole, or whether increases in the prices of any
of the component indices will be offset by decreases in the prices of other
component indices, based on historical performance. In addition, the final
basket value may not be higher than the initial basket value, which must be so
for you to receive at maturity an amount in excess of the price at which the
notes are initially being sold to the public.

THE INCLUSION OF COMMISSIONS AND PROJECTED PROFIT FROM HEDGING IN THE PUBLIC
OFFERING PRICE IS LIKELY TO ADVERSELY AFFECT SECONDARY MARKET PRICES.

Assuming no change in market conditions or any other relevant factors, the
price, if any, at which Lehman Brothers Inc. is willing to purchase the notes in
secondary market transactions will likely be lower than the public offering
price, since the public offering price included, and secondary market prices are
likely to exclude, commissions paid with respect to the notes, as well as the
projected profit included in the cost of hedging our obligations under the
notes. In addition, any such prices may differ from values determined by pricing
models used by Lehman Brothers Inc., as a result of dealer discounts, mark-ups
or other transaction costs.

THE NOTES MAY NOT BE ACTIVELY TRADED.

There may be little or no secondary market for the notes. The notes will not be
listed on a stock exchange and it is not possible to predict whether the notes
will trade in the secondary market. Even if there is a secondary market, it may
not provide significant liquidity. Lehman Brothers Inc. currently intends to act
as a market maker for the notes, but it is not required to do so.

THE VALUE OF THE NOTES WILL BE AFFECTED BY NUMEROUS FACTORS, SOME OF WHICH ARE
RELATED IN COMPLEX WAYS.

The value of the notes in the secondary market will be affected by supply and
demand of the notes, the level of the component indices at that time and a
number of other factors, some of which are interrelated in complex ways. As a
result, the effect of any one factor may be offset or magnified by the effect of
another factor. The price at which you will be able to sell the notes before the
stated maturity date may be at a discount, which could be substantial, from the
price at which the notes are initially being sold to the public, if, at that
time, the basket value is less than, equal to or not sufficiently above the
initial basket value. A change in a specific factor could have the following
impacts on the market value of the notes, assuming all other conditions remain
constant.

o BASKET PERFORMANCE. Lehman Brothers Holdings expects that the market value
of the notes will depend substantially on the performance of the basket at
any given point in time. If you decide to sell your notes prior to the
stated maturity date, you may nonetheless receive substantially less than
the amount that would be payable on the stated maturity date based on the
basket value on the date you sell your notes because of expectations that
the basket value will continue to fluctuate until the amount payable on the
stated maturity date is determined. If you decide to sell your notes when
the basket value is below the initial basket value or if the closing basket
value falls below the threshold level on any exchange business day during
the measurement period, you can expect to receive less than the price at
which the notes are initially being sold to the public. Political, economic
and other developments that affect the outlook for securities underlying the
component indices are likely to directly affect the level of those component
indices and could indirectly affect the value of the notes.

S-8

o INTEREST RATES. The trading value of the notes may be affected by changes in
interest rates. In general, if U.S. or foreign interest rates change, the
trading value of the notes may be adversely affected.

o VOLATILITY OF THE COMPONENT INDICES. Volatility is the term used to describe
the size and frequency of market fluctuations. If the volatility of the
levels of the component indices change, the trading value of the notes may
be adversely affected. Lehman Brothers Holdings is unable to predict the
effect of these events on the future value or volatility of the component
indices.

o VOLATILITY OF CURRENCY EXCHANGE RATES. The exchange rate between the U.S.
dollar and each of the foreign currencies in which the securities underlying
the component indices are denominated is a foreign exchange spot rate that
measures the relative values of two currencies, the particular currency in
which the securities underlying a particular component index are denominated
and the U.S. dollar. This exchange rate increases when the U.S. dollar
appreciates relative to the particular currency in which the securities
underlying a particular component index are denominated. This exchange rate
is expressed as a rate that reflects the amount of the particular currency
in which the securities underlying a particular component index are
denominated that can be purchased for one U.S. dollar. Volatility is the
term used to describe the size and frequency of price and/or market
fluctuations. If the volatility of the exchange rate between the U.S. dollar
and each of the foreign currencies in which the securities underlying the
component indices are denominated changes, the trading value of the notes
may be adversely affected.

o CORRELATION BETWEEN CURRENCY EXCHANGE RATES AND THE COMPONENT INDICES.
Correlation is the term used to describe the relationship between the
percentage changes in the exchange rate between the U.S. dollar and each of
the foreign currencies in which the securities underlying the component
indices are denominated and the percentage changes in the component indices.
If the correlation between the exchange rate between the U.S. dollar and any
of the foreign currencies in which the securities underlying a particular
component index are denominated changes, the trading value of the notes may
be adversely affected.

o MERGER AND ACQUISITION TRANSACTIONS. Some of the securities underlying the
component indices may be affected by mergers and acquisitions, which can
contribute to volatility of such component indices. Additionally, as a
result of a merger or acquisition, one or more securities in a component
index may be replaced with a surviving or acquiring entity's securities. The
surviving or acquiring entity's securities may not have the same
characteristics as the securities originally underlying such component
index.

o TIME REMAINING TO MATURITY. The value of the notes may be affected by the
time remaining to maturity. As the time remaining to the maturity of the
notes decreases, this time value may decrease, adversely affecting the
trading value of the notes.

o DIVIDEND YIELDS. If dividend yields on the securities underlying the
component indices increase, the value of the notes may be adversely affected
because the component indices do not incorporate the value of those
payments.

o LEHMAN BROTHERS HOLDINGS' CREDIT RATINGS, FINANCIAL CONDITION AND RESULTS.
Actual or anticipated changes in Lehman Brothers Holdings' credit ratings,
financial condition or results may affect the market value of the notes.

o ECONOMIC CONDITIONS AND EARNINGS PERFORMANCE OF THE UNDERLYING COMPANIES.
General economic conditions and earnings results of the companies whose
securities underlie the component indices and real or anticipated changes in
those conditions or results may affect the market value of the notes.

o LEVEL OF THE BASKET FROM THE DATE OF THIS PROSPECTUS SUPPLEMENT. If the
closing level of the basket falls below the threshold level on any exchange
business day during the measurement period, the trading value of the notes
may be adversely affected.

You should understand that the impact of one of the factors specified above,
such as an increase in interest rates, may offset some or all of any change in
the trading value of the notes attributable to another factor, such as an
increase in the basket performance.

S-9

In general, assuming all relevant factors are held constant, the effect on the
trading value of the notes of a given change in most of the factors listed above
will be less if it occurs later than if it occurs earlier in the term of the
notes.

AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH FOREIGN
SECURITIES MARKETS.

The indices included in the basket are comprised of securities issued by foreign
companies and are denominated in foreign currencies. You should be aware that
investments in securities linked to the value of foreign equity securities
involve particular risks. The foreign securities markets may be more volatile
than U.S. securities markets, and market developments may affect foreign markets
differently from U.S. or other securities markets. Direct or indirect government
intervention to stabilize the foreign securities markets, as well as
cross-shareholdings in foreign companies, may affect trading prices and volumes
in those markets. Also, there is generally less publicly available information
about foreign companies that are not subject to the reporting requirements of
the SEC, and foreign companies are subject to accounting, auditing and financial
reporting standards and requirements that differ from those applicable to U.S.
reporting companies.

Securities prices outside the United States are subject to political, economic,
financial and social factors that apply in foreign countries. These factors,
which could negatively affect foreign securities markets, include the
possibility of changes in a foreign government's economic and fiscal policies,
the possible imposition of, or changes in, currency exchange laws or other laws
or restrictions applicable to foreign companies or investments in foreign equity
securities and the possibility of fluctuations in the rate of exchange between
currencies. Moreover, foreign economies may differ favorably or unfavorably from
the U.S. economy in important respects, such as growth of gross national
product, rate of inflation, capital reinvestment, resources and
self-sufficiency.

ADJUSTMENTS TO THE COMPONENT INDICES COULD ADVERSELY AFFECT THE VALUE OF THE
NOTES.

The policies of a publisher of a component index concerning additions, deletions
and substitutions of the securities underlying such component index and the
manner in which such publisher takes account of certain changes affecting such
underlying securities may affect the value of the basket. The policies of the
publisher of a component index with respect to the calculation of such component
index could also affect the value of the basket. The publisher of a component
index may discontinue or suspend calculation or dissemination of such component
index or materially alter the methodology by which it calculates such component
index. Any such actions could affect the value of the notes. See "Description of
the Notes--Discontinuance of one or more of the component indices; Alteration of
method of calculation" and "The Nikkei 225 Index," "The Dow Jones EURO STOXX 50
Index," "The MSCI Taiwan Index" and "The AMEX Hong Kong 30 Index."

LEHMAN BROTHERS HOLDINGS CANNOT CONTROL ACTIONS BY THE COMPANIES WHOSE
SECURITIES UNDERLIE THE COMPONENT INDICES.

Actions by these companies may have an adverse effect on the price of the
securities underlying the component indices and the notes. In addition, these
companies are not involved in this offering of notes and have no obligations
with respect to the notes, including any obligation to take Lehman Brothers
Holdings' or your interests into consideration for any reason. These companies
will not receive any of the proceeds of this offering of notes and are not
responsible for, and have not participated in, the determination of the timing
of, prices for, or quantities of, the notes to be issued. These companies are
not involved with the administration, marketing or trading of the notes and have
no obligations with respect to the amount to be paid to you on the stated
maturity date.

LEHMAN BROTHERS HOLDINGS AND ITS AFFILIATES HAVE NO AFFILIATION WITH THE
PUBLISHERS OF THE COMPONENT INDICES AND ARE NOT RESPONSIBLE FOR THEIR PUBLIC
DISCLOSURE OF INFORMATION.

Each publisher of a component index provides and services such component index.
Lehman Brothers Holdings and its affiliates are not affiliated with the
publishers of the component indices in any way (except for licensing
arrangements discussed below in "The Nikkei 225 Index," "The Dow Jones EURO
STOXX 50 Index," "The MSCI Taiwan Index" and "The AMEX Hong Kong 30 Index") and
have no ability to control or predict their actions, including any errors in or
discontinuation of disclosure regarding their methods or policies relating to
the calculation of the component indices. See "Description of the Notes--Market
disruption events" and "Description of the Notes--Discontinuance of one or more
of the component indices; Alteration of method of calculation." The publishers
of the component indices are not involved in this offering of notes in any way
and have no obligation to consider your interest as an owner of the notes in
taking any actions that might affect the value of your notes.

S-10

Neither we nor any of our affiliates assumes any responsibility for the adequacy
or accuracy of the information about the component indices or the publishers of
such component indices contained in this prospectus supplement or any public
disclosure of information by such publishers. You, as an investor in the notes,
should make your own investigation into the component indices and the publishers
of such component indices.

POTENTIAL CONFLICTS OF INTEREST EXIST BECAUSE LEHMAN BROTHERS HOLDINGS CONTROLS
LEHMAN BROTHERS INC., WHICH WILL ACT AS THE CALCULATION AGENT.

Lehman Brothers Inc. will act as the calculation agent, which determines the
amount you will receive on the notes at maturity, whether adjustments should be
made to the basket value and whether a market disruption event has occurred. As
a result, potential conflicts of interest may exist between Lehman Brothers Inc.
and you. See "Description of the Notes--Payment on the stated maturity date,"
"Description of the Notes--Discontinuance of one or more of the component
indices; Alteration of method of calculation" and "Description of the
Notes--Market disruption events."

PURCHASES AND SALES OF SECURITIES UNDERLYING THE COMPONENT INDICES BY LEHMAN
BROTHERS HOLDINGS AND ITS AFFILIATES COULD AFFECT THE PRICES OF THOSE SECURITIES
OR THE LEVEL OF THE COMPONENT INDICES.

Lehman Brothers Holdings and its affiliates, including Lehman Brothers Inc., may
from time to time buy or sell securities underlying the component indices or
derivative instruments related to those securities for their own accounts in
connection with their normal business practices or in connection with hedging of
Lehman Brothers Holdings' obligations under the notes. These transactions could
affect the prices of those securities or the level of the component indices. See
"Use of Proceeds and Hedging."

YOU HAVE NO SHAREHOLDER RIGHTS.

Investing in the notes is not equivalent to investing in the securities
underlying the indices comprising the basket. As an investor in the notes, you
will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the securities that underlie
the component indices.

THE TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES ARE UNCERTAIN.

Investors should consider the tax consequences of investing in the notes. No
statutory, judicial or administrative authority directly addresses the
characterization of the notes or instruments similar to the notes for United
States federal income tax purposes. As a result, significant aspects of the
United States federal income tax consequences of an investment in the notes are
not certain. Lehman Brothers Holdings is not requesting any ruling from the
Internal Revenue Service with respect to the notes and cannot assure you that
the Internal Revenue Service will agree with the treatment described in this
document. Although the issue is not free from doubt, Lehman Brothers Holdings
intends to treat, and by purchasing a note, for all purposes you agree to treat
a note as a financial contract with cash settlement, rather than as a debt
instrument. See "United States Federal Income Tax Consequences."

S-11

USE OF PROCEEDS AND HEDGING

An amount equal to approximately 85% of the proceeds to be received by Lehman
Brothers Holdings from the sale of the notes may be used by Lehman Brothers
Holdings or one or more of its subsidiaries before and immediately following the
initial offering of the notes to acquire securities underlying the component
indices. From time to time, Lehman Brothers Holdings or one or more of its
subsidiaries may also acquire futures contracts or listed or over-the-counter
options contracts in, or other derivative or synthetic instruments related to,
the component indices or those securities underlying the component indices, to
hedge Lehman Brothers Holdings' obligations under the notes. The balance of the
proceeds will be used for general corporate purposes. These hedging techniques
will result in nominal transaction costs to Lehman Brothers Holdings. See "Use
of Proceeds and Hedging" on page 7 of the accompanying prospectus.

From time to time after the initial offering and before the maturity of the
notes, depending on market conditions, including the market price of the
securities underlying the component indices, Lehman Brothers Holdings expects
that it or one or more of its subsidiaries will increase or decrease their
initial hedging positions using dynamic hedging techniques. Lehman Brothers
Holdings or one or more of its subsidiaries may take long or short positions in
those securities or in the futures contracts or in listed or over-the-counter
options contracts or other derivative or synthetic instruments related to those
securities. In addition, Lehman Brothers Holdings or one or more of its
subsidiaries may purchase or otherwise acquire a long or short position in notes
from time to time and may, in their sole discretion, hold or resell those notes.
Lehman Brothers Holdings or one or more of its subsidiaries may also take
positions in other types of appropriate financial instruments that may become
available in the future.

To the extent that Lehman Brothers Holdings or one or more of its subsidiaries
has a long hedge position in any of the securities underlying the component
indices, or futures or options contracts or other derivative or synthetic
instruments related to those securities, Lehman Brothers Holdings or one or more
of its subsidiaries may liquidate a portion of their holdings at or about the
time of the maturity of the notes or at or about the time of a change in the
securities underlying the component indices. Depending, among other things, on
future market conditions, the aggregate amount and the composition of the
positions are likely to vary over time. Profits or losses from any of those
positions cannot be ascertained until the position is closed out and any
offsetting position or positions are taken into account. Certain activity by
Lehman Brothers Holdings or one or more of its subsidiaries described above can
potentially increase or decrease the prices of the securities underlying the
component indices and, accordingly, increase or decrease the performance of the
basket. Although Lehman Brothers Holdings has no reason to believe that any of
those activities will have a material impact on the price of the securities
underlying the component indices, these activities could have such an effect.

RATIO OF EARNINGS TO FIXED CHARGES

NINE MONTHS
YEAR ENDED NOVEMBER 30, ENDED
----------------------------------------------------------- AUGUST 31,
1999 2000 2001 2002 2003 2004
---------- ------- ------- -------- --------- -----------
1.12 1.14 1.11 1.13 1.29 1.39

S-12

DESCRIPTION OF THE NOTES

GENERAL

You will find information about the notes in two separate documents that
progressively provide more detail:

o the accompanying prospectus; and

o this prospectus supplement.

Because the terms of the notes may differ from the general information Lehman
Brothers Holdings has provided in the prospectus, in all cases you should rely
on information in this prospectus supplement over different information in the
prospectus. The notes are to be issued as a series of debt securities under the
senior indenture, which is more fully described in the prospectus. For a
description of the rights attaching to different series of debt securities under
the senior indenture, you should refer to the section "Description of Debt
Securities" beginning on page 8 of the accompanying prospectus. The notes are
Senior Debt as described in the accompanying prospectus. Citibank, N.A. is
trustee under the senior indenture.

Lehman Brothers Holdings may initially issue up to $17,000,000 ($19,550,000 if
the underwriter's over-allotment option is exercised in full) aggregate
principal amount of notes. Lehman Brothers Holdings may, without the consent of
the holders of the notes, create and issue additional notes ranking equally with
the notes and otherwise similar in all respects so that such further notes shall
be consolidated and form a single series with the notes. No additional notes can
be issued if an event of default has occurred with respect to the notes.

The notes will be issued in denominations of $1,000 and whole multiples of
$1,000. The minimum initial investment will be $10,000.

INTEREST

None. No interest or other payments will be made on the notes before maturity.

PAYMENT ON THE STATED MATURITY DATE

The notes will mature on August 3, 2010, subject to postponement if a market
disruption event occurs on the valuation date.

On the stated maturity date, Lehman Brothers Holdings will pay to you, per
$1,000 note, an amount equal to:

o If the final basket value is greater than or equal to the initial basket
value, the sum of:

(1) $1,000 and
final initial
upside basket value - basket value
(2) $1,000 x participation x -----------------------------
rate initial basket value

o If the final basket value is less than the initial basket value and the
closing basket value is at or above the threshold level on all exchange
business days during the measurement period, $1,000.

(1) $1,000 and

final basket value
(2) --------------------
initial basket value

The measurement period will begin on the date of this prospectus supplement and
end on the valuation date. The upside participation rate is 105%. The threshold
level is 600, 60% of the initial basket value (subject to appropriate adjustment
by the calculation agent to reflect adjustments in one or more of the component
indices).

The initial basket value is 1,000. The final basket value will be the closing
basket value on the valuation date, which will be the third business day before
the stated maturity date. The closing basket value on any particular day will
generally be based on the closing levels of the component indices on such day.
The closing basket value on any particular day will generally equal the sum of
the closing level of the Nikkei 225 Index on such date multiplied by 0.030735,
the Dow Jones EURO STOXX 50 Index multiplied by 0.100518, the MSCI Taiwan Index
multiplied by 0.996532 and the AMEX Hong Kong 30 Index multiplied by 0.146342.
The multipliers have been fixed on the date of this prospectus supplement so
that the component indices constitute the initial percentages of the basket set
forth below under "The Basket." The multipliers are subject to adjustment under
certain circumstances.

If the third business day before the stated maturity date is not an exchange
business day or the

S-13

calculation agent determines that one or more market disruption events have
occurred with respect to one or more of the component indices on that day, the
calculation agent will determine the final basket value by reference to the
closing basket value on the next exchange business day on which there is not a
market disruption event; provided, however, if a market disruption event occurs
on each of the eight exchange business days following the originally scheduled
valuation date, then (a) that eighth exchange business day shall be deemed the
valuation date and (b) the calculation agent shall determine the final basket
value based upon its good faith estimate of the value of the basket on that
eighth exchange business day. Any such postponement of the date that would
otherwise be the valuation date will cause the stated maturity date to be
postponed until three business days after the date that the final basket value
is determined.

On the stated maturity date you will only receive more than $1,000 per $1,000
note if the final basket value on the valuation date is greater than the initial
basket value. If the final basket value on the valuation date is less than the
initial basket value and the closing basket value has fallen below the threshold
level on any exchange business day during the measurement period, you will
receive less than $1,000 per $1,000 note on the stated maturity date.

The "closing level" of any component index (or any successor index) on any
particular day means the closing level of such component index as reported by
the publisher of such component index (or of any successor index, as reported by
the publisher of such successor index) on such day or as determined by the
calculation agent as described in the following section.

An "exchange business day" means any day on which all of the component indices
(and any successor indices) are published by their respective publisher or are
otherwise determined by the calculation agent as described in the following
section.

DISCONTINUANCE OF ONE OR MORE OF THE COMPONENT INDICES; ALTERATION OF METHOD OF
CALCULATION

If a publisher of one of the component indices discontinues publication of such
component index and such publisher or another entity publishes a successor or
substitute index that the calculation agent determines, in its sole discretion
exercised in good faith, to be comparable to the discontinued component index,
then the calculation agent shall determine each subsequent closing basket value
to be used in (a) determining whether the closing basket value has fallen below
the threshold level on any exchange business day during the measurement period
and (b) computing the amount payable on the stated maturity date by reference to
the closing level of such successor index on the applicable date.

Upon any selection by the calculation agent of any successor index, Lehman
Brothers Holdings will promptly give notice to the holders of the notes.

If a publisher of one of the component indices discontinues publication of such
component index and the calculation agent determines that no successor index is
available at such time or if such publisher (or the publisher of any successor
index) fails to calculate and publish a closing level for such component index
(or a successor index) on any date when it would ordinarily do so in accordance
with its customary practice, the component index (or successor index) will be
removed from the basket as of the close of business on the last day on which its
closing level was published by its publisher and the weight of each remaining
component index (or successor index) will simultaneously be increased by an
amount determined by the calculation agent such as to result in both (a) the
relative weights of remaining component indices on such day and (b) the closing
basket value on such day remaining unchanged. In addition, the calculation agent
will make such other adjustments to the terms of the notes as may be required to
account for such discontinued component index. Notwithstanding these alternative
arrangements, discontinuance of the publication of any component index may
adversely affect the value of the notes.

If at any time the method of calculating a component index, any successor index
or the closing level thereof on any particular day, is changed in a material
respect, or if a component index or any successor index is in any other way
modified so that such index does not, in the opinion of the calculation agent,
fairly represent the level of such component index or such successor index had
such changes or modifications not been made, then, from and after such time, the
calculation agent will, at the close of trading of the relevant exchanges on
which the securities comprising such component index or such successor index
traded on any date the closing level of a component index is to be determined,
make such calculations and adjustments as, in its good faith judgment, may be
necessary in order to arrive at a level of a stock index comparable to such
component index or such successor index, as the case may be, as if such changes
or modifications had not been made. The calculation agent will calculate the
closing level of a component index on any particular day and the amount payable
on the stated maturity date with reference to such component index or such
successor

S-14

index, as adjusted. The "relevant exchange" for any security (or any combination
thereof then underlying any component index or any successor index) means the
primary exchange, quotation system (which includes bulletin board services) or
other market of trading for such security.

Accordingly, if the method of calculating a component index or a successor index
is modified so that the level of such index is a fraction of what it would have
been if it had not been modified, then the calculation agent will adjust such
index in order to arrive at a level of such component index or such successor
index as if it had not been modified.

MARKET DISRUPTION EVENTS

A market disruption event with respect to a component index (or any successor
index) will occur on any day if the calculation agent determines in its sole
discretion that any of the following events has occurred:

o A material suspension of or limitation imposed on trading relating to the
securities that then comprise 20% or more of such component index or any
successor index, by the relevant exchanges on which those securities are
traded, at any time during the one-hour period that ends at the close of
trading on such day, whether by reason of movements in price exceeding
limits permitted by that relevant exchange or otherwise.

o A material suspension of, or limitation imposed on, trading in futures or
options contracts relating to such component index or any successor index by
the primary exchange on which those futures or options contracts are traded,
at any time during the one-hour period that ends at the close of trading on
such day, whether by reason of movements in price exceeding limits permitted
by the exchanges or otherwise.

o Any event, other than an early closure, that disrupts or impairs the ability
of market participants in general to effect transactions in, or obtain
market values, for the securities that then comprise 20% or more of such
component index or any successor index on the relevant exchanges on which
those securities are traded, at any time during the one-hour period that
ends at the close of trading on that day.

o Any event, other than an early closure, that disrupts or impairs the ability
of market participants in general to effect transactions in, or obtain
market values for, the futures or options contracts relating to such
component index or any successor index on the primary exchange or quotation
system on which those futures or options contracts are traded, at any time
during the one-hour period that ends at the close of trading on that day.

o The closure of the relevant exchanges on which the securities that then
comprise 20% or more of such component index or any successor index are
traded or on which futures or options contracts relating to such component
index or any successor index are traded prior to its scheduled closing time
unless the earlier closing time is announced by the relevant exchanges at
least one hour prior to the earlier of (1) the actual closing time for the
regular trading session on the relevant exchanges and (2) the submission
deadline for orders to be entered into the relevant exchanges for execution
at the close of trading on that day.

For purposes of determining whether a market disruption event has occurred:

o the relevant percentage contribution of a security to the level of a
component index or any successor index will be based on a comparison of (x)
the portion of the level of such component index attributable to that
security and (y) the overall level of such component index, in each case
immediately before the occurrence of the market disruption event; and

o "close of trading" means in respect of any relevant exchange, the scheduled
weekday closing time on a day on which the relevant exchange is scheduled to
be open for trading for its respective regular trading session, without
regard to after hours or any other trading outside of the regular trading
session hours.

Under certain circumstances, the duties of Lehman Brothers Inc. as the
calculation agent in determining the existence of market disruption events could
conflict with the interests of Lehman Brothers Inc. as an affiliate of the
issuer of the notes.

Lehman Brothers Holdings cannot predict the likelihood of a market disruption
event in the future.

S-15

HYPOTHETICAL RETURNS

The tables below illustrate, for a range of hypothetical final basket values
calculated on the valuation date:

o the hypothetical percentage change from the initial basket value;

o the hypothetical total amount payable on the stated maturity date per $1,000
note;

o the hypothetical pre-tax total rate of return; and

o the hypothetical annualized pre-tax rate of return.

The hypothetical results illustrated in the first table assume that the closing
basket value is at or above the threshold level on all exchange business days
during the measurement period. Those in the second table assume that the closing
basket value has fallen below the threshold level on any exchange business day
during the measurement period.

TABLE 1: CLOSING BASKET VALUE IS AT OR ABOVE THE THRESHOLD LEVEL ON ALL EXCHANGE
BUSINESS DAYS DURING THE MEASUREMENT PERIOD.

HYPOTHETICAL
HYPOTHETICAL TOTAL AMOUNT
PERCENTAGE PAYABLE HYPOTHETICAL
HYPOTHETICAL CHANGE FROM ON THE STATED PRE-TAX HYPOTHETICAL
FINAL BASKET INITIAL BASKET MATURITY DATE TOTAL RATE OF ANNUALIZED PRE-TAX
VALUE VALUE PER $1,000 NOTE RETURN RATE OF RETURN
------------ -------------- --------------- ------------- ------------------

0.00 NA NA NA NA
200.00 NA NA NA NA
400.00 NA NA NA NA
700.00 -30% $1,000.00 0.00% 0.00%
900.00 -10 1,000.00 0.00 0.00
1,000.00 0 1,000.00 0.00 0.00
1,200.00 20 1,210.00 21.00 3.53
1,400.00 40 1,420.00 42.00 6.58
1,600.00 60 1,630.00 63.00 9.29
1,800.00 80 1,840.00 84.00 11.72
2,000.00 100 2,050.00 105.00 13.94

TABLE 2: CLOSING BASKET VALUE HAS FALLEN BELOW THE THRESHOLD LEVEL ON ANY
EXCHANGE BUSINESS DAY DURING THE MEASUREMENT PERIOD.

0.00 -100% $ 0.00 -100.00% -100.00%
200.00 -80 200.00 -80.00 -25.37
400.00 -60 400.00 -60.00 -15.35
700.00 -30 700.00 -30.00 -6.28
900.00 -10 900.00 -10.00 -1.90
1,000.00 0 1,000.00 0.00 0.00
1,200.00 20 1,210.00 21.00 3.53
1,400.00 40 1,420.00 42.00 6.58
1,600.00 60 1,630.00 63.00 9.29
1,800.00 80 1,840.00 84.00 11.72
2,000.00 100 2,050.00 105.00 13.94

S-16

The above figures are for purposes of illustration only. The actual amount
received by investors and the resulting total and annualized pre-tax rate of
return will depend entirely on the actual final basket value and the amount
payable on the stated maturity date determined by the calculation agent. In
particular, the actual final basket value could be lower or higher than those
reflected in the tables.

You should compare the features of the notes to other available investments
before deciding to purchase the notes. Due to the uncertainty concerning the
amount payable on the stated maturity date, the return on investment with
respect to the notes may be higher or lower than the return available on other
securities issued by Lehman Brothers Holdings or by others and available through
Lehman Brothers Inc. You should reach an investment decision only after
carefully considering the suitability of the notes in light of your particular
circumstances.

CALCULATION AGENT

Lehman Brothers Inc., a subsidiary of Lehman Brothers Holdings, will act as
initial calculation agent for the notes. Pursuant to the calculation agency
agreement, Lehman Brothers Holdings may appoint a different calculation agent
from time to time after the date of this prospectus supplement without your
consent and without notifying you.

The calculation agent will determine the amount you receive on the stated
maturity date of the notes.

In addition, the calculation agent will determine, among other things:

o the successor index if publication of a component index is discontinued;

o the weight of each remaining component index if no successor index is
available or if the publisher of such component index or the publisher of
any successor index, as the case may be, fails to calculate and publish a
closing level on any date;

o adjustments to a component index, the successor index or the closing level
thereof if the method of calculating any of these items changes in a
material respect or if a component index or successor index is in any other
way modified so that it does not, in the opinion of the calculation agent,
fairly represent the value of such component index, or successor index, as
the case may be, had such changes or modifications not been made;

o adjustments to the threshold level, if required in order to reflect
adjustments made in a component index or successor index; and

o whether a market disruption event has occurred.

All determinations made by the calculation agent will be at the sole discretion
of the calculation agent and, in the absence of manifest error, will be
conclusive for all purposes and binding on Lehman Brothers Holdings and you. The
calculation agent will have no liability for its determinations, except as
provided in the calculation agency agreement.

EVENTS OF DEFAULT AND ACCELERATION

If an event of default with respect to any notes has occurred and is continuing,
the amount payable to you upon any acceleration permitted under the senior
indenture will be equal to, per $1,000 note, the amount that would have been
payable at maturity, calculated as though the date of acceleration was the
stated maturity date, the date three business days before that date was the
valuation date and marked the end of the measurement period. If a bankruptcy
proceeding is commenced in respect of Lehman Brothers Holdings, the claims of
the holder of a note may be limited, under Section 502(b)(2) of Title 11 of the
United States Code, as though the commencement of the proceeding was on the
stated maturity date and the date three business days before that date was the
valuation date and marked the end of the measurement period. See "Description of
Debt Securities--Defaults" beginning on page 13 of the accompanying prospectus.

S-17

THE BASKET

The basket will represent a weighted portfolio of the four selected indices in
the basket. The value of the basket will increase or decrease depending upon the
performance of the component indices.

The four component indices, their Bloomberg ticker symbol, the initial component
index level used to determine the multiplier for such index, the initial
multiplier for such index, the initial weight in the basket for each component
index and the initial percentage of the basket represented by each component
index are as follows:

INITIAL INITIAL
BLOOMBERG COMPONENT INITIAL INITIAL WEIGHT PERCENTAGE
COMPONENT INDEX TICKER INDEX LEVEL MULTIPLIER IN THE BASKET OF THE BASKET
---------------------- --------- ----------- ---------- -------------- --------------
The Nikkei 225 Index.. NKY 11,387.59 0.030735 350 35.0%
The Dow Jones
EURO STOXX 50
Index............... SX5E 2,984.59 0.100518 300 30.0%
The MSCI Taiwan
Index............... TWY 250.87 0.996532 250 25.0%
The AMEX Hong
Kong 30 Index....... HKX 683.33 0.146342 100 10.0%
----- ------
1,000 100.0%
===== ======

-------------

Information in the table above as to the initial index level was obtained from
Bloomberg L.P.

S-18

THE NIKKEI 225 INDEX

GENERAL

Lehman Brothers Holdings obtained all information contained in this prospectus
supplement regarding the Nikkei 225 Index, including, without limitation, its
make-up, method of calculation and changes in its components, from publicly
available information. That information reflects the policies of, and is subject
to change by, NKS. NKS has no obligation to continue to publish, and may
discontinue publication of, the Nikkei 225 Index. The consequences of NKS
discontinuing publication of the Nikkei 225 Index are described in the section
entitled "Description of the Notes--Discontinuance of one or more of the
component indices; Alteration of method of calculation." Lehman Brothers
Holdings makes no representation or warranty as to the accuracy or completeness
of any information relating to the Nikkei 225 Index.

The Nikkei 225 Index is a stock index calculated, published and disseminated by
NKS that measures the composite price performance of selected Japanese stocks.
The Nikkei 225 Index is currently based on 225 underlying stocks trading on the
TSE and represents a broad cross-section of Japanese industry. All 225 of the
stocks underlying the Nikkei 225 Index are stocks listed in the First Section of
the TSE. Stocks listed in the First Section are among the most actively traded
stocks on the TSE. Nikkei rules require that the 75 most liquid issues
(one-third of the component count of the Nikkei 225 Index) be included in the
Nikkei 225 Index. Futures and options contracts on the Nikkei 225 Index are
traded on the Singapore Monetary Exchange, Ltd., the Osaka Securities Exchange
and the Chicago Mercantile Exchange.

As of January 31, 2005 the 225 companies included in the Nikkei 225 Index were
divided into six sector categories: Technology, Financials, Consumer Goods,
Materials, Capital Goods/Others and Transportation/Utilities. These sector
categories are further divided into 36 Nikkei industrial classifications (with
the number of companies currently included in each industrial classification
indicated in parentheses):

Technology -- Pharmaceuticals (9), Electrical Machinery (28), Automotive (9),
Precision Instruments (4) Communications (4)

Financials -- Banking (11), Other Financial Services (2), Securities (4),
Insurance (3)

Consumer Goods -- Fishery (1), Food (15), Retail (8), Services (7)

Materials - Mining (1), Textiles & Apparel (9), Pulp & Paper (4), Chemicals 17),
Oil & Coal Products (3), Rubber Products (2), Glass & Ceramics (7),
Steel Products (4), Nonferrous Metals (11), Trading Companies (9)

Capital Goods/Others -- Construction (9), Machinery (13), Shipbuilding (3),
Other Transportation Equipment (1), Other Manufacturing (3), Real Estate (4)

Transportation and Utilities -- Railway/Bus (7), Other Land Transport (2),
Marine Transport (3), Air Transport (2), Warehousing (1), Electric Power
(3), Gas (2)

COMPUTATION OF THE NIKKEI 225 INDEX

While NKS currently employs the following methodology to calculate the Nikkei
225 Index, the NKS may modify or change such methodology in the future.

The Nikkei 225 Index is a modified, price-weighted index. Each stock's weight in
the Nikkei 225 Index is based on its price per share rather than the total
market capitalization of the issuer. NKS calculates the Nikkei 225 Index by
multiplying the per share price of each underlying stock by the corresponding
weighting factor for that underlying stock (a "Weight Factor"), calculating the
sum of all these products and dividing that sum by a divisor. The divisor,
initially set on May 16, 1949 at 225, was 23.947 as of January 17, 2005, and is
subject to periodic adjustments as set forth below. Each Weight Factor is
computed by dividing (Y)50 by the par value of the relevant underlying stock, so
that the share price of each underlying stock when multiplied by its Weight
Factor corresponds to a share price based on a uniform par value of (Y)50. Each
Weight Factor represents the number of shares of the related underlying stock,
which are included in one trading unit of the Nikkei 225 Index. The stock prices
used in the calculation of the Nikkei 225 Index are those reported by a primary
market for the underlying stocks, which is currently the TSE. The level of the
Nikkei 225 Index is calculated once per minute during TSE trading hours.

In order to maintain continuity in the level of the Nikkei 225 Index in the
event of certain changes due to non-market factors affecting the underlying
stocks,

S-19

such as the addition or deletion of stocks, substitution of stocks, stock
dividends, stock splits or distributions of assets to stockholders, the divisor
used in calculating the Nikkei 225 Index is adjusted in a manner designed to
prevent any instantaneous change or discontinuity in the level of the Nikkei 225
Index. The divisor remains at the new value until a further adjustment is
necessary as the result of another change. As a result of each change affecting
any underlying stock, the divisor is adjusted in such a way that the sum of all
share prices immediately after the change multiplied by the applicable Weight
Factor and divided by the new divisor, i.e., the level of the Nikkei 225 Index
immediately after the change, will equal the level of the Nikkei 225 Index
immediately prior to the change

Underlying stocks may be deleted or added by NKS. However, to maintain
continuity in the Nikkei 225 Index, the policy of NKS is generally not to alter
the composition of the underlying stocks except when an underlying stock is
deleted in accordance with the following criteria. Any stock becoming ineligible
for listing in the First Section of the TSE due to any of the following reasons
will be deleted from the underlying stocks: bankruptcy of the issuer; merger of
the issuer into, or acquisition of the issuer by, another company; delisting of
the stock or transfer of the stock to the "Seiri-Post" because of excess debt of
the issuer or because of any other reason; or transfer of the stock to the
Second Section of the TSE. In addition, a component stock transferred to the
"Kanri-Post" (post for stock under supervision) is in principle a candidate for
deletion. Underlying stocks with relatively low liquidity, based on trading
value and rate of price fluctuation over the past five years, may be deleted by
Nikkei. Upon deletion of a stock from the Nikkei 225 Index, NKS will select, in
accordance with certain criteria established by it, a replacement for the
deleted underlying stock. In an exceptional case, a newly listed stock in the
First Section of the TSE that is recognized by NKS to be representative of a
market may be added to the underlying stocks. As a result, an existing
underlying stock with low trading volume and not representative of a market will
be deleted.

THE TOKYO STOCK EXCHANGE

The TSE is one of the world's largest securities exchanges in terms of market
capitalization. Trading hours are currently from 9:00 a.m. to 11:00 a.m. and
from 12:30 p.m. to 3:00 p.m., Tokyo time, Monday through Friday.

Due to the time zone difference, on any normal trading day the TSE will close
prior to the opening of business in New York City on the same calendar day.
Therefore, the closing level of the Nikkei 225 Index on a trading day will
generally be available in the United States by the opening of business on the
same calendar day.

The TSE has adopted certain measures, including daily price floors and ceilings
on individual stocks, intended to prevent any extreme short-term price
fluctuations resulting from order imbalances. In general, any stock listed on
the TSE cannot be traded at a price lower than the applicable price floor or
higher than the applicable price ceiling. These price floors and ceilings are
expressed in absolute Japanese yen, rather than percentage limits based on the
closing price of the stock on the previous trading day. In addition, when there
is a major order imbalance in a listed stock, the TSE posts a "special bid
quote" or a "special asked quote" for that stock at a specified higher or lower
price level than the stock's last sale price in order to solicit counter-orders
and balance supply and demand for the stock. Prospective investors should also
be aware that the TSE may suspend the trading of individual stocks in certain
limited and extraordinary circumstances, including, for example, unusual trading
activity in that stock. As a result, changes in the Nikkei 225 Index may be
limited by price limitations or special quotes, or by suspension of trading, on
individual stocks which comprise the Nikkei 225 Index, and these limitations
may, in turn, adversely affect the value of the notes.

HISTORICAL INFORMATION

The following table sets forth the high and low level, as well as the
end-of-quarter closing levels, of the Nikkei 225 Index for each quarter in the
period from January 1, 2000 through January 31, 2005. The closing level on
January 31, 2005 was 11,387.59. The results shown should not be considered as a
representation of the income, yield or capital gain or loss that may be
generated by the Nikkei 225 Index in the future. It is impossible to predict
whether the level of the Nikkei 225 Index will rise or fall. The historical
levels of the Nikkei 225 Index are not indications of future performance.

All information in the table that follows was obtained from Bloomberg L.P.,
without independent verification.

S-20

HIGH LOW PERIOD-END
--------- --------- ----------
2000
First Quarter ...................... 20,706.65 18,168.27 20,337.32
Second Quarter ..................... 20,833.21 16,008.14 17,411.05
Third Quarter ...................... 17,614.66 15,626.96 15,747.26
Fourth Quarter ..................... 16,149.08 13,423.21 13,785.69
2001
First Quarter ...................... 14,032.42 11,819.70 12,999.70
Second Quarter ..................... 14,529.41 12,574.26 12,969.05
Third Quarter ...................... 12,817.41 9,504.41 9,774.68
Fourth Quarter ..................... 11,064.30 9,924.23 10,542.62
2002
First Quarter ...................... 11,919.30 9,420.85 11,024.94
Second Quarter ..................... 11,979.85 10,074.56 10,621.84
Third Quarter ...................... 10,960.25 9,075.09 9,383.29
Fourth Quarter ..................... 9,215.56 8,303.39 8,578.95
2003
First Quarter ...................... 8,790.92 7,862.43 7,972.71
Second Quarter ..................... 9,137.14 7,607.88 9,083.11
Third Quarter ...................... 11,033.32 9,265.56 10,219.05
Fourth Quarter ..................... 11,161.71 9,614.60 10,676.64
2004
First Quarter ...................... 11,770.65 10,365.40 11,715.39
Second Quarter ..................... 12,163.89 10,505.05 11,858.87
Third Quarter ...................... 11,896.01 10,687.81 10,823.57
Fourth Quarter...................... 11,488.76 10,659.15 11,488.76
2005
First Quarter (through January 31) . 11,539.99 11,238.37 11,387.59

LICENSE AGREEMENT BETWEEN NKS AND LEHMAN BROTHERS HOLDINGS

Lehman Brothers Holdings has entered into a non-exclusive license agreement with
NKS providing for the license to Lehman Brothers Holdings and certain of its
affiliated or subsidiary companies, in exchange for a fee, of the right to use
the Nikkei Index in connection with the notes.

The license agreement between NKS and Lehman Brothers Holdings provides that the
following language must be stated in this prospectus supplement.

The notes are not in any way sponsored, endorsed or promoted by NKS. NKS does
not make any warranty or representation whatsoever, express or implied, either
as to the results to be obtained from the use of the Nikkei 225 Index or the
level of the Nikkei 225 Index on any particular day or otherwise. The Nikkei 225
Index is compiled and calculated solely by NKS. However, NKS shall not be liable
to any person for any error in the Nikkei 225 Index, and NKS shall not be under
any obligation to advise any person, including any purchaser or vendor of the
notes, of any error therein.

In addition, NKS gives no assurance regarding any modification or change in any
methodology used in calculating the Nikkei 225 Index and is under no obligation
to continue the calculation, publication and dissemination of the Nikkei 225
Index.

"Nikkei," "Nikkei Stock Average" and "Nikkei 225" are the service marks of NKS.
NKS reserves all the rights, including copyright, to the Nikkei 225 Index.

S-21

THE DOW JONES EURO STOXX 50 INDEX

GENERAL

Lehman Brothers Holdings obtained all information contained in this prospectus
supplement regarding the Dow Jones EURO STOXX 50 Index, including, without
limitation, its make-up, method of calculation and changes in its components,
from publicly available information. That information reflects the policies of,
and is subject to change by, STOXX. STOXX has no obligation to continue to
publish, and may discontinue publication of, the Dow Jones EURO STOXX 50 Index.
The consequences of STOXX discontinuing publication of the Dow Jones EURO STOXX
50 Index are described in the section entitled "Description of the
Notes--Discontinuance of one or more of the component indices; Alteration of
method of calculation." Lehman Brothers Holdings makes no representation or
warranty as to the accuracy or completeness of any information relating to the
Dow Jones EURO STOXX 50 Index.

The Dow Jones EURO STOXX 50 Index was created by STOXX, a joint venture between
Deutsche Boerse AG, Dow Jones & Company and SWX Swiss Exchange. Publication of
the Dow Jones EURO STOXX 50 Index began on February 28, 1998, based on an
initial index value of 1,000 at December 31, 1991. The Dow Jones EURO STOXX 50
Index is published in The Wall Street Journal and disseminated on the STOXX
website at www.stoxx.com.

INDEX COMPOSITION AND MAINTENANCE

The Dow Jones EURO STOXX 50 Index is composed of 50 component stocks of market
sector leaders from within the Dow Jones EURO STOXX Supersector indexes, which
includes stocks selected from the Eurozone. The component stocks have a high
degree of liquidity and represent the largest companies across all supersectors
as defined by the Dow Jones Global Classification Standard. Set forth below are
the country weightings and industrial sector weightings of the securities
included in the Dow Jones EURO STOXX 50 Index as of January 31, 2005:

COUNTRY WEIGHTINGS
---------------------------------------
France ........................ 31.55%
Germany........................ 22.04%
The Netherlands................ 17.71%
Spain.......................... 13.67%
Italy.......................... 11.51%
Finland........................ 3.53%

INDUSTRIAL SECTOR WEIGHTINGS
---------------------------------------
Banks.......................... 20.89%
Oil & Gas...................... 16.57%
Telecommunications............. 11.89%
Insurance...................... 10.39%
Utilities...................... 9.14%
Technology..................... 5.99%
Chemicals...................... 3.85%
Personal & Household Goods..... 3.72%
Healthcare..................... 3.66%
Industrial Goods & Services.... 3.28%
Food & Beverages............... 3.00%
Retail......................... 2.17%
Construction & Materials....... 1.91%
Automobiles & Parts............ 1.87%
Media.......................... 1.68%

The composition of the Dow Jones EURO STOXX 50 Index is reviewed annually, based
on the closing stock data on the last trading day in August. The component
stocks are announced the first trading day in September. Changes to the
component stocks are implemented on the third Friday in September and are
effective the following trading day. Changes in the composition of the Dow Jones
EURO STOXX 50 Index are made to ensure that the Dow Jones EURO STOXX 50 Index
includes the 50 market sector leaders from within the Dow Jones EURO STOXX
Index.

The free float factors for each component stock used to calculate the Dow Jones
EURO STOXX 50 Index are reviewed, calculated and implemented on a quarterly
basis and are fixed until the next quarterly review.

The Dow Jones EURO STOXX 50 Index is also reviewed on an ongoing basis.
Corporate actions (including initial public offerings, mergers and takeovers,
spin-offs, delistings and bankruptcy) that affect the Dow Jones EURO STOXX 50
Index composition are immediately reviewed. Any changes are announced,
implemented and effective in line with the type of corporate action and the
magnitude of the effect.

S-22

INDEX CALCULATION

The Dow Jones EURO STOXX 50 Index is calculated with the "Laspeyres formula,"
which measures the aggregate price changes in the component stocks against a
fixed base quantity weight. The formula for calculating the EURO STOXX 50 Index
value can be expressed as follows:

free float market capitalization of the
Dow Jones EURO STOXX 50 Index
Index = ------------------------------------------- x 1,000
adjusted base date market capitalization of
the Dow Jones EURO STOXX 50 Index

The "free float market capitalization of the Dow Jones EURO STOXX 50 Index" is
equal to the sum of the products of the closing price, market capitalization and
free float factor for each component stock as of the time the Dow Jones EURO
STOXX 50 Index is being calculated.

The Dow Jones EURO STOXX 50 Index is also subject to a divisor, which is
adjusted to maintain the continuity of the Dow Jones EURO STOXX 50 Index values
across changes due to corporate actions. The following is a summary of the
adjustments to any component stock made for corporate actions and the effect of
such adjustment on the divisor, where shareholders of the component stock will
receive "B" number of shares for every "A" share held (where applicable).

(1) Split and reverse split:

Adjusted price = closing price * A/B

New number of shares = old number of shares * B / A

Divisor: no change

(2) Rights offering:

Adjusted price = (closing price * A + subscription price * B) /(A + B)

New number of shares = old number of shares * (A + B) / A

Divisor: increases

(3) Stock dividend:

Adjusted price = closing price * A / (A + B)
New number of shares = old number of shares * (A + B) / A

Divisor: no change

(4) Stock dividend of another company:

Adjusted price = (closing price * A - price of other company * B) / A

Divisor: decreases

(5) Return of capital and share consolidation:

Adjusted price = (closing price - dividend announced by company * (1-withholding
tax)) * A / B

New number of shares = old number of shares * B / A

Divisor: decreases

(6) Repurchase shares / self tender:

Adjusted price = ((price before tender * old number of shares ) -
(tender price * number of tendered shares)) / (old number of
shares - number of tendered shares)

New number of shares = old number of shares - number of tendered shares

Divisor: decreases

(7) Spin-off:

Adjusted price = (closing price * A - price of spun-off shares * B) / A

Divisor: decreases

(8) Combination stock distribution (dividend or split) and rights offering:

For this corporate action, the following additional assumptions apply:

o Shareholders receive B new shares from the distribution and C new shares
from the rights offering for every A shares held

o If A is not equal to one share, all the following "new number of shares"
formulae need to be divided by A:

- If rights are applicable after stock distribution (one action applicable to
other):

Adjusted price = (closing price * A + subscription price * C * (1 + B / A)) /
((A + B) * ( 1 + C / A))

S-23

New number of shares = old number of shares * ((A + B) * (1 + C /A)) / A

Divisor: increases

- If stock distribution is applicable after rights (one action applicable to
other):

Adjusted price = (closing price * A + subscription price * C) / ((A + C) * (1 +
B / A))

New number of shares = old number of shares * ((A + C) * (1 + B / A))

Divisor: increases

- Stock distribution and rights (neither action is applicable the other):

Adjusted price = (closing price * A + subscription price * C) / (A + B + C)

New number of shares = old number of shares * (A + B + C) / A

Divisor: increases

HISTORICAL INFORMATION

The following table sets forth the high and low level, as well as the
end-of-quarter closing levels, of the Dow Jones EURO STOXX 50 Index for each
quarter in the period from January 1, 2000 through January 31, 2005. The closing
level on January 31, 2005 was 2,984.59. The results shown should not be
considered as a representation of the income, yield or capital gain or loss that
may be generated by the Dow Jones EURO STOXX 50 Index in the future. It is
impossible to predict whether the level of the Dow Jones EURO STOXX 50 Index
will rise or fall. The historical levels of the Dow Jones EURO STOXX 50 Index
are not indications of future performance.

All information in the table that follows was obtained from Bloomberg L.P.,
without independent verification.

HIGH LOW PERIOD-END
-------- -------- ----------
2000
First Quarter ....................... 5,464.43 4,500.69 5,249.55
Second Quarter ...................... 5,434.81 4,903.92 5,145.35
Third Quarter ....................... 5,392.63 4,915.18 4,915.18
Fourth Quarter ...................... 5,101.40 4,614.24 4,772.39
2001
First Quarter ....................... 4,787.45 3,891.49 4,185.00
Second Quarter ...................... 4,582.07 4,039.16 4,243.91
Third Quarter ....................... 4,304.44 2,877.68 3,296.66
Fourth Quarter ...................... 3,828.76 3,208.31 3,806.13
2002
First Quarter ....................... 3,833.09 3,430.18 3,784.05
Second Quarter ...................... 3,748.44 2,928.72 3,133.39
Third Quarter ....................... 3,165.47 2,187.22 2,204.39
Fourth Quarter ...................... 2,669.89 2,150.27 2,386.41
2003
First Quarter ....................... 2,529.86 1,849.64 2,036.86
Second Quarter ...................... 2,527.44 2,067.23 2,419.51
Third Quarter ....................... 2,641.55 2,366.86 2,395.87
Fourth Quarter ...................... 2,760.66 2,434.63 2,760.66
2004
First Quarter ....................... 2,959.71 2,702.05 2,787.49
Second Quarter ...................... 2,905.88 2,659.85 2,811.08
Third Quarter ....................... 2,806.62 2,580.04 2,726.30
Fourth Quarter....................... 2,955.11 2,734.37 2,951.24
2005
First Quarter (through January 31) .. 2,984.59 2,924.01 2,984.59

S-24

LICENSE AGREEMENT BETWEEN STOXX AND LEHMAN BROTHERS HOLDINGS

Lehman Brothers Holdings has entered into a non-transferable, non-exclusive
license agreement with STOXX, which grants Lehman Brothers Holdings a license in
exchange for a fee to use the Dow Jones EURO STOXX 50 Index in connection with
the issuance of the notes.

STOXX has trade name and trademark rights to EURO STOXX(SM) and EURO STOXX
50(SM). Dow Jones EURO STOXX 50 Index is a service mark of Dow Jones & Company,
Inc.

STOXX and Dow Jones & Company, Inc. have no relationship to Lehman Brothers
Holdings, other than the licensing of the Dow Jones EURO STOXX 50 Index and the
related trademarks for use in connection with the notes.

STOXX and Dow Jones Company, Inc. do not:

o sponsor, endorse, sell or promote the notes;

o recommend that any person invest in the notes or any other securities;

o have any responsibility or liability for or make any decisions about the
timing, amount or pricing of the notes;

o have any responsibility or liability for the administration, management or
marketing of the notes; nor

o consider the needs of the notes or the owners of the notes in determining,
composing or calculating the Dow Jones EURO STOXX 50 Index or have any
obligation to do so.

STOXX and Dow Jones & Company, Inc. will not have any liability in connection
with the notes. Specifically,

o STOXX and Dow Jones & Company, Inc. do not make any warranty, express or
implied and disclaim any and all warranty about:

o the results to be obtained by the notes, the owner of the notes or any
other person in connection with the use of the Dow Jones EURO STOXX 50
Index and the data included in the Dow Jones EURO STOXX 50 Index;

o the accuracy or completeness of the Dow Jones EURO STOXX 50 Index and
its data; and

o the merchantability and the fitness for a particular purpose or use of
the Dow Jones EURO STOXX 50 Index and its data.

o STOXX and Dow Jones & Company, Inc. will have no liability for any errors,
omissions or interruptions in the Dow Jones EURO STOXX 50 Index or its data.

o Under no circumstances will STOXX or Dow Jones & Company, Inc. be liable for
any lost profits or indirect, punitive, special or consequential damages or
losses, even if STOXX or Dow Jones & Company, Inc. know that they might
occur.

The licensing agreement between Lehman Brothers Holdings and STOXX is solely for
their benefit and not for the benefit of the owners of the notes or any other
third parties.

STOXX DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE DOW JONES
EURO STOXX 50 INDEX OR ANY DATA INCLUDED THEREIN AND STOXX SHALL HAVE NO
LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS THEREIN. STOXX MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LEHMAN BROTHERS
HOLDINGS, HOLDERS OF THE NOTES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
DOW JONES EURO STOXX 50 INDEX OR ANY DATA INCLUDED THEREIN. STOXX MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
DOW JONES EURO STOXX 50 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING THE
FOREGOING, IN NO EVENT SHALL STOXX HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.

S-25

THE MSCI TAIWAN INDEX

GENERAL

Lehman Brothers Holdings obtained all information contained in this prospectus
supplement regarding the MSCI Taiwan Index, including, without limitation, its
make-up, method of calculation and changes in its components, from publicly
available information. That information reflects the policies of, and is subject
to change by, MSCI. MSCI has no obligation to continue to publish, and may
discontinue publication of, the MSCI Taiwan Index. The consequences of MSCI
discontinuing publication of the MSCI Taiwan Index are described in the section
entitled "Description of the Notes--Discontinuance of one or more of the
component indices; Alteration of method of calculation." Lehman Brothers
Holdings makes no representation or warranty as to the accuracy or completeness
of any information relating to the MSCI Taiwan Index.

The MSCI Taiwan Index is a free float adjusted market capitalization index of
securities listed on the Taiwan Stock Exchange.

SELECTION CRITERIA

MSCI targets an 85% free float adjusted market representation level within each
industry group in Taiwan. The security selection process within each industry
group is based on analysis of the following:

o Each company's business activities and the diversification that its
securities would bring to the index.

o The size of the securities based on free float adjusted market
capitalization. All other things being equal, MSCI targets for inclusion the
most sizable securities in an industry group. In addition, securities that
do not meet the minimum size guidelines are not considered for inclusion.
Though the following limits are subject to revision, presently, a security
will be eligible for inclusion in the MSCI Taiwan Index if it achieves a
free float adjusted market capitalization of USD 400 million and will be
eligible for deletion if such capitalization falls below USD 200 million as
of the yearly review. If, however, the free float adjusted market
capitalization level falls significantly below the free float adjusted
market capitalization level for deletions prior to a yearly review, for
example during a quarterly review, then the security may be deleted prior to
such yearly review.

o The liquidity of the securities. All other things being equal, MSCI targets
for inclusion the most liquid securities in an industry group. In addition,
securities that have inadequate liquidity are not considered for inclusion.
MSCI does not define absolute minimum or maximum liquidity levels for stock
inclusion or exclusion from the MSCI Taiwan Index but considers each stock's
relative standing within Taiwan and between cycles. A useful measure to
compare liquidity within the same market is the Annualized Traded Value
Ratio ("ATVR"), which screens out extreme daily trading volumes and takes
into account the difference in market capitalization size. The ATVR Ratio of
each security is calculated via the following 3-step process:

- First, monthly median traded values are computed using the daily
median traded value, multiplied by the number of days in the month
that the security traded. The daily traded value of a security is
equal to the number of shares traded during the day, multiplied by
the closing price of that security. The daily median traded value
is the median of the daily traded values in a given month.

- Second, the monthly median traded value ratio is obtained by
dividing the monthly median traded value of a security by its free
float adjusted security market capitalization at the end of the
month.

- Third, the ATVR is obtained by multiplying the average of the
monthly median trade value ratios of the previous 12 months--or the
number of months for which this data is available--by 12.

Only securities of companies with an estimated overall or security free float
greater than 15% are generally considered for inclusion in the MSCI Taiwan Index

For securities not subject to foreign ownership limitations, the free float of a
security is estimated as its total number of shares outstanding less
shareholdings classified as strategic and/or non-free float. For securities
subject to foreign ownership

S-26

limitations, the estimated free float available to foreign investors is equal to
the lesser of (a) the total number of shares outstanding less shareholdings
classified as strategic or non-free float and (b) foreign ownership limitation
adjusted for non-free float stakes held by foreign investors.

MSCI free float adjusts the market capitalization of each security using an
adjustment factor referred to as the Foreign Inclusion Factor ("FIF").
Securities not subject to foreign ownership limitations have a FIF equal to (a)
the estimated free float, rounded up to the closest 5%, if the securities have a
free float greater than 15% or (b) the estimated free float, rounded to the
closest 1%, if the securities have a free float less than 15%. For securities
subject to foreign ownership limitations, the FIF is equal to the lesser of (a)
the estimated free float available to foreign investors (i) rounded up to the
closest 5%, if the free float is greater than 15% or (ii) rounded to the closest
1%, if the free float is less than 15% and (b) foreign ownership limitation
rounded to the closest 1%.

The free float adjusted market capitalization of a security is calculated as the
product of the FIF and the security's full market capitalization.

CALCULATION

The MSCI Taiwan Index is computed generally by multiplying the previous day's
index level by the free float adjusted market capitalization level of each share
in the MSCI Taiwan Index on the prior day divided by the free float adjusted
market capitalization level of each share in the MSCI Taiwan Index on the
current day. The numerator is adjusted market capitalization, but the
denominator is unadjusted, meaning that the price adjustment factor is applied
to the numerator, but not to the denominator.

INDEX MAINTENANCE

There are three broad categories of MSCI Taiwan Index maintenance:

o An annual full country index review that reassesses the various dimensions
of the equity universe in Taiwan;

o Quarterly index reviews, aimed at promptly reflecting other significant
market events; and

o Ongoing event-related changes, such as mergers and acquisitions, which are
generally implemented in the index rapidly as they occur.

During the annual review, additions or deletions of securities are made (i)
following the re-appraisal of the free float adjusted industry group
representation within a country relative to an 85% target, (ii) following an
update of the minimum size guidelines for additions and deletions and (iii)
based on a company's and/or security's free float of less than 15% that has
decreased in size in terms of free float adjusted market capitalization due to
reduction in free float or due to performance and that no longer meet certain
criteria.

During a quarterly index review, securities may be added to or deleted from the
MSCI Taiwan Index for a variety of reasons, including the following:

o Additions or deletions of securities, due to one or more industry groups
having become significantly over- or under-represented as a result of
mergers, acquisitions, restructuring and other major market events affecting
that industry group.

o Additions or deletions resulting from changes in industry classification,
significant increases or decreases in free float and relaxation/removal or
decreases of foreign ownership limits not implemented immediately.

o Additions of large companies that did not meet the minimum size criterion
for early inclusion at the time of their initial public offering or
secondary offering.

o Replacement of companies which are no longer suitable industry
representatives.

o Deletion of securities whose issuing company and/or security free float has
fallen to less than 15% and which do not meet certain criteria.

o Deletion of securities that have become very small or illiquid.

o Replacement of securities (additions or deletions) resulting from the review
of price source for constituents with both domestic and foreign board
quotations.

S-27

HISTORICAL INFORMATION

The following table sets forth the high and low level, as well as the
end-of-quarter closing levels, of the MSCI Taiwan Index for each quarter in the
period from January 1, 2000 through January 31, 2005. The closing level on
January 31, 2005 was 250.87. The results shown should not be considered as a
representation of the income, yield or capital gain or loss that may be
generated by the MSCI Taiwan Index in the future. It is impossible to predict
whether the level of the MSCI Taiwan Index will rise or fall. The historical
levels of the MSCI Taiwan Index are not indications of future performance.

All information in the table that follows was obtained from Bloomberg L.P.,
without independent verification.

HIGH LOW PERIOD-END
------ ------ ----------
2000
First Quarter ......................... 453.78 381.88 432.65
Second Quarter ........................ 444.00 358.00 366.00
Third Quarter ......................... 379.00 285.00 285.00
Fourth Quarter ........................ 287.00 215.00 222.00
2001
First Quarter ......................... 283.00 228.00 260.00
Second Quarter ........................ 253.00 220.00 228.00
Third Quarter ......................... 229.00 158.00 165.00
Fourth Quarter ........................ 258.00 156.00 256.00
2002
First Quarter ......................... 282.99 246.39 277.77
Second Quarter ........................ 289.96 223.34 227.30
Third Quarter ......................... 240.93 178.84 178.86
Fourth Quarter ........................ 210.31 162.81 189.53
2003
First Quarter ......................... 216.15 181.33 184.08
Second Quarter ........................ 219.73 177.59 210.88
Third Quarter ......................... 258.49 217.56 250.04
Fourth Quarter ........................ 273.90 252.97 259.11
2004
First Quarter ......................... 300.55 261.11 277.02
Second Quarter ........................ 292.39 233.12 248.25
Third Quarter ......................... 249.84 224.29 243.79
Fourth Quarter......................... 257.67 234.90 257.67
2005
First Quarter (through January 31) .... 257.35 240.29 250.87

S-28

LICENSE AGREEMENT BETWEEN MSCI AND LEHMAN BROTHERS HOLDINGS

Lehman Brothers Holdings has entered into a non-exclusive license agreement with
MSCI providing for the license to Lehman Brothers Holdings and certain of its
affiliated or subsidiary companies, in exchange for a fee, of the right to use
the MSCI Taiwan Index in connection with certain securities, including the
notes.

The license agreement between MSCI and Lehman Brothers Holdings provides that
the following language must be stated in this prospectus supplement:

THIS FINANCIAL PRODUCT IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY MORGAN
STANLEY CAPITAL INTERNATIONAL INC. ("MSCI"), ANY OF ITS AFFILIATES, ANY OF ITS
INFORMATION PROVIDERS OR ANY OTHER THIRD PARTY INVOLVED IN, OR RELATED TO,
COMPILING, COMPUTING OR CREATING ANY MSCI INDEX (COLLECTIVELY, THE "MSCI
PARTIES"). THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE
MSCI INDEX NAMES ARE SERVICE MARK(S) OF MSCI OR ITS AFFILIATES AND HAVE BEEN
LICENSED FOR USE FOR CERTAIN PURPOSES BY LEHMAN BROTHERS HOLDINGS. THIS
FINANCIAL PRODUCT HAS NOT BEEN PASSED ON BY ANY OF THE MSCI PARTIES AS TO ITS
LEGALITY OR SUITABILITY WITH RESPECT TO ANY PERSON OR ENTITY AND NONE OF THE
MSCI PARTIES MAKES ANY WARRANTIES OR BEARS ANY LIABILITY WITH RESPECT TO THIS
FINANCIAL PRODUCT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, NONE OF THE
MSCI PARTIES MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE
ISSUER OR OWNERS OF THIS FINANCIAL PRODUCT OR ANY OTHER PERSON OR ENTITY
REGARDING THE ADVISABILITY OF INVESTING IN FINANCIAL PRODUCTS GENERALLY OR IN
THIS FINANCIAL PRODUCT PARTICULARLY OR THE ABILITY OF ANY MSCI INDEX TO TRACK
CORRESPONDING STOCK MARKET PERFORMANCE. MSCI OR ITS AFFILIATES ARE THE LICENSORS
OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND OF THE MSCI INDEXES
WHICH ARE DETERMINED, COMPOSED AND CALCULATED BY MSCI WITHOUT REGARD TO THIS
FINANCIAL PRODUCT OR THE ISSUER OR OWNER OF THIS FINANCIAL PRODUCT OR ANY OTHER
PERSON OR ENTITY. NONE OF THE MSCI PARTIES HAS ANY OBLIGATION TO TAKE THE NEEDS
OF THE ISSUERS OR OWNERS OF THIS FINANCIAL PRODUCT OR ANY OTHER PERSON OR ENTITY
INTO CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE MSCI INDEXES.
NONE OF THE MSCI PARTIES IS RESPONSIBLE FOR OR HAS PARTICIPATED IN THE
DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES OF THIS FINANCIAL
PRODUCT TO BE ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY
OR THE CONSIDERATION INTO WHICH THIS FINANCIAL PRODUCT IS REDEEMABLE. NONE OF
THE MSCI PARTIES HAS ANY OBLIGATION OR LIABILITY TO THE ISSUER OR OWNERS OF THIS
FINANCIAL PRODUCT OR ANY OTHER PERSON OR ENTITY IN CONNECTION WITH THE
ADMINISTRATION, MARKETING OR OFFERING OF THIS FINANCIAL PRODUCT. ALTHOUGH MSCI
SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE
MSCI INDEXES FROM SOURCES THAT MSCI CONSIDERS RELIABLE, NONE OF THE MSCI PARTIES
WARRANTS OR GUARANTEES THE ORIGINALITY, ACCURACY AND/OR COMPLETENESS OF ANY MSCI
INDEX OR ANY DATA INCLUDED THEREIN OR THE RESULTS TO BE OBTAINED BY THE ISSUER
OF THIS FINANCIAL PRODUCT, OWNERS OF THIS FINANCIAL PRODUCT, OR ANY OTHER PERSON
OR ENTITY, FROM THE USE OF ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN AND NONE
OF THE MSCI PARTIES SHALL HAVE ANY LIABILITY TO ANY PERSON OR ENTITY FOR ANY
ERRORS, OMISSIONS OR INTERRUPTIONS OF OR IN CONNECTION WITH ANY MSCI INDEX OR
ANY DATA INCLUDED THEREIN. FURTHER, NONE OF THE MSCI PARTIES MAKES ANY EXPRESS
OR IMPLIED WARRANTIES OF ANY KIND AND THE MSCI PARTIES HEREBY EXPRESSLY DISCLAIM
ALL WARRANTIES (INCLUDING, WITHOUT LIMITATION AND FOR PURPOSES OF EXAMPLE ONLY,
ALL WARRANTIES OF TITLE, SEQUENCE, AVAILABILITY, ORIGINALITY, ACCURACY,
COMPLETENESS, TIMELINESS, NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE AND ALL IMPLIED WARRANTIES ARISING FROM TRADE USAGE, COURSE
OF DEALING

S-29

AND COURSE OF PERFORMANCE) WITH RESPECT TO EACH MSCI INDEX AND ALL DATA INCLUDED
THEREIN. WITHOUT LIMITING THE GENERALITY OF ANY OF THE FOREGOING, IN NO EVENT
SHALL ANY OF THE MSCI PARTIES HAVE ANY LIABILITY TO ANY PERSON OR ENTITY FOR ANY
DAMAGES, WHETHER DIRECT, INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, CONSEQUENTIAL
(INCLUDING, WITHOUT LIMITATION, LOSS OF USE, LOSS OF PROFITS OR REVENUES OR
OTHER ECONOMIC LOSS), AND WHETHER IN TORT (INCLUDING, WITHOUT LIMITATION, STRICT
LIABILITY AND NEGLIGENCE) CONTRACT OR OTHERWISE, EVEN IF IT MIGHT HAVE
ANTICIPATED, OR WAS ADVISED OF, THE POSSIBILITY OF SUCH DAMAGES.

S-30

THE AMEX HONG KONG 30 INDEX

GENERAL

Lehman Brothers Holdings obtained all information contained in this prospectus
supplement regarding the AMEX Hong Kong 30 Index, including, without limitation,
its make-up, method of calculation and changes in its components, from publicly
available information. That information reflects the policies of, and is subject
to change by, the American Stock Exchange. The American Stock Exchange has no
obligation to continue to publish, and may discontinue publication of, the AMEX
Hong Kong 30 Index. The consequences of the American Stock Exchange
discontinuing publication of the AMEX Hong Kong 30 Index are described in the
section entitled "Description of the Notes--Discontinuance of one or more of the
component indices; Alteration of method of calculation." Lehman Brothers
Holdings makes no representation or warranty as to the accuracy or completeness
of any information relating to the AMEX Hong Kong 30 Index.

The AMEX Hong Kong 30 Index is a capitalization weighted stock index designed,
developed, maintained and operated by the American Stock Exchange that measures
the market value performance (share price times the number of shares
outstanding) of selected stocks listed on the HKSE. The AMEX Hong Kong 30 Index
currently is based on the capitalization of 30 stocks actively traded on the
HKSE and is designed to represent a substantial segment of the Hong Kong stock
market. The primary trading market for all of these stocks is either Hong Kong
or London. Sectors comprising the AMEX Hong Kong 30 Index as of January 28,
2005, consist primarily of finance, property development, utilities and
conglomerates, and also includes hotel/leisure, property investment, airlines
and transportation. As of January 28, 2005, the five largest stocks underlying
the AMEX Hong Kong 30 Index accounted for approximately 64.09% of the market
capitalization of the AMEX Hong Kong 30 Index, with the five largest being HSBC
Holdings plc (H.K. S shares) (35.65%), China Mobile (11.75%), Hutchison Whampoa
Ltd. (7.46%), Hang Seng Bank Ltd. (4.97%) and Sun Hung Kai Properties Ltd.
(4.26%). The lowest weighted stock underlying the AMEX Hong Kong 30 Index, as of
January 28, 2005, was Hong Kong & Shanghai Hotels (0.23%).

The AMEX Hong Kong 30 Index will contain at least 30 stocks at all times. In
addition, the stocks must meet certain listing and maintenance standards as
discussed below. The American Stock Exchange may change the composition of the
AMEX Hong Kong 30 Index at any time in order to more accurately reflect the
composition and track the movement of the Hong Kong stock market. Any
replacement stock must also meet the stock listing and maintenance standards as
discussed below. Further, the American Stock Exchange may replace stocks in the
event of certain corporate events, such as takeovers or mergers, that change the
nature of the security. The American Stock Exchange selects stocks comprising
the AMEX Hong Kong 30 Index on the basis of their market weight, trading
liquidity and representation of the business industries reflected on the HKSE.
The American Stock Exchange requires that each stock be one issued by an entity
with major business interests in Hong Kong, be listed for trading on the HKSE
and have its primary trading market located in a country with which the American
Stock Exchange has an effective surveillance sharing agreement. The American
Stock Exchange will remove any stock failing to meet the above listing and
maintenance criteria within 30 days after such failure occurs. Additional
qualification criteria for the inclusion and maintenance of stocks include the
following standards: all stocks selected for inclusion in the AMEX Hong Kong 30
Index must have, and thereafter maintain, (1) an average daily capitalization,
as calculated by the total number of shares outstanding times the latest price
per share (in Hong Kong dollars), measured over the prior 6-month period, of at
least H.K.$3,000,000,000; (2) an average daily closing price, measured over the
prior 6-month period, not lower than H.K.$2.50; (3) an average daily trading
volume, measured over the prior 6-month period, of more than 1,000,000 shares
per day, although up to, but no more than, three stocks may have an average
daily trading volume, measured over the prior 6-month period, of less than
1,000,000 shares per day, but in no event less than 500,000 shares per day; and
(4) a minimum "free float" value (total freely tradable outstanding shares minus
insider holdings), based on a monthly average measured over the prior 3-month
period, of U.S.$238,000,000, although up to, but no more than, three stocks may
have a free float value of less than U.S.$238,000,000 but in no event less than
U.S.$150,000,000, measured over the same period.

The American Stock Exchange reviews and applies the above qualification criteria
relating to the stocks comprising the AMEX Hong Kong 30 Index on a

S-31

quarterly basis, conducted on the last business day in January, April, July and
October. Any stock failing to meet the above listing and maintenance criteria
will be reviewed on the second Friday of the second month following the
quarterly review to again determine compliance with the above criteria. Any
stock failing this second review will be replaced by a "qualified" stock
effective upon the close of business on the following Friday, provided, however,
that if such Friday is not a New York business day, the replacement will be
effective at the close of business on the first preceding New York business day.
The American Stock Exchange will notify its membership immediately after it
determines to replace a stock.

The AMEX Hong Kong 30 Index is a capitalization-weighted index. A company's
market capitalization is calculated by multiplying the number of shares
outstanding by the company's current share price (in Hong Kong dollars). For
valuation purposes, one AMEX Hong Kong 30 Index unit (1.0) is assigned a fixed
value of one U.S. dollar. The AMEX Hong Kong 30 Index measures the average
changes in price of the stocks comprising the AMEX Hong Kong 30 Index, weighted
according to the respective market capitalizations, so that the effect of a
percentage price change in a stock will be greater the larger the stock's market
capitalization. The AMEX Hong Kong 30 Index was established by the American
Stock Exchange on June 25, 1993, on which date the AMEX Hong Kong 30 Index value
was set at 350.00.

The AMEX Hong Kong 30 Index is calculated by (i) aggregating the market
capitalization of each stock comprising the AMEX Hong Kong 30 Index and (ii)
dividing such sum by an adjusted base market capitalization or divisor. On June
25, 1993, the market value of the Underlying Stocks was approximately
H.K.$1,152,829,149,500 and the divisor used to calculate the AMEX Hong Kong 30
Index was 3,293,797,570. The American Stock Exchange selected that particular
divisor number in order, among other things, to ensure that the AMEX Hong Kong
30 Index was set at a general price level consistent with other well recognized
stock market indices. The divisor is subject to periodic adjustments as set
forth below. The AMEX Hong Kong 30 Index is calculated once each day by the
American Stock Exchange based on the most recent official closing prices of each
of the stocks comprising the AMEX Hong Kong 30 Index reported by the HKSE.
Pricing of the AMEX Hong Kong 30 Index is disseminated before the opening of
trading via the Consolidated Tape Authority Network-B and continuously during
each New York business day. The dissemination value, however, will remain the
same throughout the trading day because the trading hours of the HKSE do not
overlap with New York trading hours. Accordingly, updated price information will
be unavailable.

In order to maintain continuity in the level of the AMEX Hong Kong 30 Index in
the event of certain changes due to non-market factors affecting the stocks
comprising the AMEX Hong Kong 30 Index, such as the addition or deletion of
stocks, substitution of stocks, stock dividends, stock splits, distributions of
assets to stockholders or other capitalization events, the divisor used in
calculating the AMEX Hong Kong 30 Index is adjusted in a manner designed to
prevent any instantaneous change or discontinuity in the level of the AMEX Hong
Kong 30 Index and in order that the value of the AMEX Hong Kong 30 Index
immediately after such change will equal the level of the AMEX Hong Kong 30
Index immediately prior to the change. Thereafter, the divisor remains at the
new value until a further adjustment is necessary as the result of another
change. Nevertheless, changes in the identities and characteristics of the
stocks comprising the AMEX Hong Kong 30 Index may significantly affect the
behavior of the AMEX Hong Kong 30 Index over time.

THE STOCK EXCHANGE OF HONG KONG LTD.

Trading on the HKSE is fully electronic through an Automatic Order Matching and
Execution System. The system is an electronic order book in which orders are
matched and executed instantaneously if there are matching orders in the book,
and on the basis of time/price priority. On-line real-time order entry and
execution have eliminated the previous limitations of telephone-based trading.
Trading takes place through trading terminals on the trading floor. There are no
market-makers on the HKSE, but exchange dealers may act as dual capacity
broker-dealers. Trading is undertaken from 10:00 a.m. to 12:30 p.m. and then
from 2:30 p.m. to 3:55 p.m. (Hong Kong time) every Hong Kong day except
Saturdays, Sundays and other days on which the HKSE is closed. Hong Kong time is
12 hours ahead of Eastern Daylight Savings Time and 13 hours ahead of Eastern
Standard Time. Settlement of trade is required within 48 hours and is conducted
by electronic book-entry delivery through the Central Clearing and Settlement
System.

Due to the time differences between New York City and Hong Kong, on any normal
trading day, trading on the HKSE currently will cease at 12:30 a.m. or 3:55
a.m., New York City time. Using the last

S-32

reported closing prices of the stocks underlying the AMEX Hong Kong 30 Index on
the HKSE, the closing level of the AMEX Hong Kong 30 Index on any such trading
day generally will be calculated, published and disseminated by the American
Stock Exchange in the United States shortly before the opening of trading on the
American Stock Exchange in New York on the same calendar day.

The HKSE has adopted certain measures intended to prevent any extreme short-term
price fluctuations resulting from order imbalances or market volatility. Where
the HKSE considers it necessary for the protection of the investor or the
maintenance of an orderly market, it may at any time suspend dealings in any
securities or cancel the listing of any securities in such circumstances and
subject to such conditions as it thinks fit, whether requested by the listed
issuer or not. The HKSE may also do so where: (1) an issuer fails, in a manner
which the HKSE considers material, to comply with the HKSE Listing Rules or its
Listing Agreements; (2) the HKSE considers there are insufficient securities in
the hands of the public; (3) the HKSE considers that the listed issuer does not
have a sufficient level of operations or sufficient assets to warrant the
continued listing of the issuer's securities; or (4) the HKSE considers that the
issuer or its business is no longer suitable for listing. Investors should also
be aware that the HKSE may suspend the trading of individual stocks in certain
limited and extraordinary circumstances, until certain price-sensitive
information has been disclosed to the public. Trading will not be resumed until
a formal announcement has been made. Trading of a company's shares may also be
suspended if there is unusual trading activity in such shares.

An issuer may apply for suspension of its own accord. A suspension request will
normally only be acceded to in the following circumstances: (1) where, for a
reason acceptable to the HKSE, price-sensitive information cannot at that time
be disclosed; (2) where the issuer is subject to an offer, but only where terms
have been agreed in principle and require discussion with, and agreement by, one
or more major shareholders (suspensions will only normally be appropriate where
no previous announcement has been made); (3) to maintain an orderly market; (4)
where there is an occurrence of certain levels of notifiable transactions, such
as substantial changes in the nature, control or structure of the issuer, where
publication of full details is necessary to permit a realistic valuation to be
made of the securities concerned, or the approval of shareholders is required;
(5) where the issuer is no longer suitable for listing, or becomes a "cash"
company; or (6) for issuers going into receivership or liquidation. As a result
of the foregoing, variations in the AMEX Hong Kong 30 Index may be limited by
suspension of trading of individual stocks which comprise the AMEX Hong Kong 30
Index which may, in turn, adversely affect the value of the Notes.

S-33

HISTORICAL INFORMATION

The following table sets forth the high and low level, as well as the
end-of-quarter closing levels, of the AMEX Hong Kong 30 Index for each quarter
in the period from January 1, 2000 through January 31, 2005. The closing level
on January 31, 2005 was 683.33. The results shown should not be considered as a
representation of the income, yield or capital gain or loss that may be
generated by the AMEX Hong Kong 30 Index in the future. It is impossible to
predict whether the level of the AMEX Hong Kong 30 Index will rise or fall. The
historical levels of the AMEX Hong Kong 30 Index are not indications of future
performance.

All information in the table that follows was obtained from Bloomberg L.P.,
without independent verification.

HIGH LOW PERIOD-END
------ ------ ----------
2000
First Quarter ....................... 898.77 741.09 853.13
Second Quarter ...................... 829.79 669.17 788.12
Third Quarter ....................... 876.37 716.61 766.21
Fourth Quarter ...................... 795.58 682.70 745.30
2001
First Quarter ....................... 793.25 618.58 627.68
Second Quarter ...................... 675.08 592.95 634.09
Third Quarter ....................... 641.26 436.45 488.47
Fourth Quarter ...................... 587.96 484.72 565.55
2002
First Quarter ....................... 588.38 513.26 540.66
Second Quarter ...................... 589.04 510.37 522.32
Third Quarter ....................... 534.59 448.52 448.52
Fourth Quarter ...................... 505.87 440.39 460.73
2003
First Quarter ....................... 486.24 424.70 424.70
Second Quarter ...................... 495.07 414.52 471.82
Third Quarter ....................... 559.50 471.82 555.32
Fourth Quarter ...................... 624.90 555.32 624.90
2004
First Quarter ....................... 690.26 617.90 630.17
Second Quarter ...................... 645.77 548.19 610.37
Third Quarter ....................... 660.24 593.43 652.38
Fourth Quarter....................... 713.69 638.11 711.09
2005
First Quarter (through January 31) .. 711.49 666.91 683.33

LICENSE AGREEMENT BETWEEN THE AMERICAN STOCK EXCHANGE AND LEHMAN BROTHERS
HOLDINGS

Lehman Brothers Holdings has entered into a non-exclusive license agreement with
the American Stock Exchange providing for the license to Lehman Brothers
Holdings and certain of its affiliated or subsidiary companies, in exchange for
a fee, of the right to use the AMEX Hong Kong 30 Index in connection with the
notes.

The license agreement between the American Stock Exchange and Lehman Brothers
Holdings provides that the following language must be stated in this prospectus
supplement.

The American Stock Exchange is under no obligation to continue the calculation
and dissemination of the AMEX Hong Kong 30 Index and the method by which the
AMEX Hong Kong 30 Index is calculated and the name "AMEX Hong Kong 30 Index" may
be changed at the discretion of the American Stock Exchange. No inference should
be drawn from the information contained in this prospectus supplement that the
American Stock Exchange makes any representation or warranty, implied or
express, to you or any member

S-34

of the public regarding the advisability of investing in securities generally or
in the notes in particular or the ability of the AMEX Hong Kong 30 Index to
track general stock market performance. The American Stock Exchange has no
obligation to take into account your interest, or that of anyone else having an
interest in determining, composing or calculating the AMEX Hong Kong 30 Index.
The American Stock Exchange is not responsible for, and has not participated in
the determination of the timing of, prices for or quantities of, the notes or in
the determination or calculation of the equation by which the notes are to be
settled in cash. The American Stock Exchange has no obligation or liability in
connection with the administration, marketing or trading of the notes. The use
of and reference to the AMEX Hong Kong 30 Index in connection with the notes
have been consented to by the American Stock Exchange.

The American Stock Exchange disclaims all responsibility for any inaccuracies in
the data on which the AMEX Hong Kong 30 Index is based, or any mistakes or
errors or omissions in the calculation or dissemination of the AMEX Hong Kong 30
Index.

S-35

UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES

The following is a summary of the material United States federal income tax
consequences of the purchase, ownership, and disposition of notes as of the date
of this prospectus supplement. Except where otherwise noted, this summary deals
only with a note held as a capital asset by a United States holder who purchases
the note at its initial offering price at original issue and does not deal with
special situations. For example, except where otherwise noted, this summary does
not address:

o tax consequences to holders who may be subject to special tax treatment,
such as dealers in securities or currencies, traders in securities that
elect to use the mark-to-market method of accounting for their securities,
financial institutions, regulated investment companies, real estate
investment trusts, investors in pass-through entities, tax-exempt entities
or insurance companies;

o tax consequences to persons holding notes as part of a hedging, integrated,
constructive sale or conversion transaction or a straddle;

o tax consequences to holders of notes whose "functional currency" is not the
United States dollar;

o alternative minimum tax consequences, if any; or

o any state, local or foreign tax consequences.

The discussion below is based upon the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations, rulings and judicial
decisions as of the date of this prospectus supplement. Those authorities may be
changed, perhaps retroactively, so as to result in United States federal income
tax consequences different from those discussed below.

The United States federal income tax treatment of securities such as the notes
is not clear. If you are considering the purchase of notes, you should consult
your own tax advisors concerning the federal income tax consequences in light of
your particular situation and any consequences arising under the laws of any
other taxing jurisdiction.

UNITED STATES HOLDERS

The following discussion is a summary of the material United States federal
income tax consequences that will apply to you if you are a United States holder
of notes.

For purposes of this discussion, a United States holder is a beneficial owner of
a note that is for United States federal income tax purposes:

o an individual citizen or resident of the United States;

o a corporation (or any other entity treated as a corporation for United
States federal income tax purposes) created or organized in or under the
laws of the United States, any state thereof or the District of Columbia;

o an estate the income of which is subject to United States federal income
taxation regardless of its source; or

o any trust if it (1) is subject to the primary supervision of a court within
the United States and one or more United States persons have the authority
to control all substantial decisions of the trust or (2) has a valid
election in effect under applicable United States Treasury Regulations to be
treated as a United States person.

A Non-United States holder is a beneficial owner of notes that is not a United
States holder.

If a partnership holds notes, the tax treatment of a partner will generally
depend upon the status of the partner and the activities of the partnership. If
you are a partner of a partnership holding notes, you should consult your tax
advisors.

GENERAL

No statutory, judicial, or administrative authority directly addresses the
characterization of the notes or instruments similar to the notes for United
States federal income tax purposes. As a result, significant aspects of the
United States federal income tax consequences of an investment in the notes are
not certain. No ruling is being requested from the Internal Revenue Service with
respect to the notes and no assurance can be given that the Internal Revenue
Service will agree with the treatment described herein. Although the issue is
not free from doubt, Lehman Brothers Holdings intends to treat, and by
purchasing a note, for all purposes you agree to treat a note as a financial
contract with cash settlement, rather than as a debt instrument. However, no

S-36

assurance can be given in this regard and it is possible that the Internal
Revenue Service could assert another treatment and a court could agree with such
assertion. For instance, it is possible that the Internal Revenue Service could
seek to apply the regulations governing contingent payment debt obligations,
because the notes are in form debt instruments and the notes provide principal
protection unless the index declines more than 40% over the term of the notes.
The effect of these Treasury regulations will be to:

o require you, regardless of your usual method of tax accounting, to use the
accrual method with respect to the notes;

o result in the accrual of original issue discount by you based on the
"comparable yield" of the notes even though no cash payments will be made to
you; and

o generally result in ordinary rather than capital treatment of any gain, and
to some extent loss, on the sale, exchange, or other disposition of the
notes.

The Internal Revenue Service could also assert other characterizations that
could affect the timing, amount and character of income or deductions. Except
where noted, the remainder of this discussion assumes that the notes will be
treated as a financial contract with cash settlement.

SALE, EXCHANGE OR OTHER DISPOSITION, OR SETTLEMENT UPON MATURITY

Upon the sale, exchange, retirement, or other disposition or payment upon
settlement at maturity of a note, you will recognize gain or loss equal to the
difference between the amount of cash received and your basis in the note. The
gain or loss will be treated as capital gain or loss. If you are an individual
and have held the note for more than one year, such capital gain will be subject
to reduced rates of taxation. The deductibility of capital losses is subject to
limitations. Your basis in the note will generally equal your cost of such note.

Lehman Brothers Holdings intends to report the recognition of gain or loss by
you with respect to the notes only at maturity. In such case, when the note is
cash-settled at maturity you will recognize gain or loss, as described above.

NON-UNITED STATES HOLDERS

The following discussion is a summary of the material United States federal tax
consequences that will apply to you if you are a Non-United States holder of
notes.

Special rules may apply to you if you are a controlled foreign corporation,
passive foreign investment company, a corporation that accumulates earnings to
avoid United States federal income tax or an individual who is a United States
expatriate and therefore subject to special treatment under the Code. You should
consult your own tax advisors to determine the United States federal, state,
local and other tax consequences that may be relevant to you.

UNITED STATES FEDERAL INCOME TAX

Based on the treatment of the notes described above, you should not be subject
to United States federal withholding tax for payments on any sale, exchange or
other disposition of the note or payments received at maturity in respect of the
note. Based on such treatment, any gain or income realized upon the sale,
exchange, or other disposition of a note generally will not be subject to United
States federal income tax unless (i) the gain or income is effectively connected
with a trade or business in the United States of a non-United States holder, or
(ii) in the case of a non-United States holder who is an individual, such
individual is present in the United States for 183 days or more in the taxable
year of the sale, exchange, or other disposition, and certain other conditions
are met.

As discussed above, alternative characterizations of a note for United States
federal income tax purposes are possible, which could result in the imposition
of United States federal withholding tax. You should consult your own tax
advisor regarding the United States federal income tax consequences of an
investment in the notes.

UNITED STATES FEDERAL ESTATE TAX

If you are an individual Non-United States holder of notes, notes held by you at
the time of death may be included in your gross estate for United States federal
estate tax purposes, unless an applicable estate tax treaty provides otherwise.
Non-United States holders should consult their own tax advisors regarding the
potential United States federal estate tax consequences of an investment in the
notes in light of their particular circumstances.

S-37

INFORMATION REPORTING AND BACKUP WITHHOLDING

If you are a United States holder of notes, information reporting requirements
will generally apply to all payments received at maturity or upon the sale,
exchange or other disposition of a note, unless you are an exempt recipient such
as a corporation. Backup withholding tax will apply to those payments if you
fail to provide a taxpayer identification number, a certification of exempt
status, or if you fail to comply with applicable certification requirements.

If you are a Non-United States holder of notes, you will not be subject to
backup withholding or information reporting regarding payments Lehman Brothers
Holdings makes to you provided that Lehman Brothers Holdings does not have
actual knowledge or reason to know that you are a United States holder and you
provide your name and address on an IRS Form W-8BEN and certify, under penalties
of perjury, that you are not a United States holder. Alternative documentation
may be applicable in some situations. Special certification rules apply to
holders that are pass-through entities. In addition, you will be subject to
information reporting and, depending on the circumstances, backup withholding
regarding the proceeds of the sale of a note made within the United States or
conducted through certain United States-related financial intermediaries, unless
the payor receives the statement described above and does not have actual
knowledge or reason to know that you are a United States holder, or you
otherwise establish an exemption.

Any amounts withheld under the backup withholding rules will be allowed as a
refund or credit against your United States federal income tax liability
provided the required information is furnished to the Internal Revenue Service.

S-38

CERTAIN ERISA CONSIDERATIONS

Each person considering the use of plan assets of a pension, profit-sharing or
other employee benefit plan, individual retirement account, Keogh plan or other
retirement plan, account or arrangement (a "plan") to acquire or hold the notes
should consider whether an investment in the notes would be consistent with the
documents and instruments governing the plan, and whether the investment would
involve a prohibited transaction under Section 406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code.

Section 406 of ERISA and Section 4975 of the Code prohibit plans subject to
Title I of ERISA and/or Section 4975 of the Code ("ERISA plans") from engaging
in certain transactions involving "plan assets" with persons who are "parties in
interest" under ERISA or "disqualified persons" under the Code ("parties in
interest") with respect to the plan. A violation of these prohibited transaction
rules may result in civil penalties or other liabilities under ERISA and/or an
excise tax under Section 4975 of the Code for those persons, unless exemptive
relief is available under an applicable statutory, regulatory or administrative
exemption. Certain plans including those that are governmental plans (as defined
in Section 3(32) of ERISA), certain church plans (as defined in Section 3 (33)
of ERISA) and foreign plans (as described in Section 4(b)(4) of ERISA) are not
subject to the requirements of ERISA or Section 4975 of the Code but may be
subject to similar provisions under applicable federal, state, local, foreign or
other regulations, rules or laws ("similar laws").

The acquisition or holding of the notes by an ERISA plan with respect to which
Lehman Brothers Holdings, Lehman Brothers Inc. or certain of their affiliates is
or becomes a party in interest may constitute or result in prohibited
transactions under ERISA or Section 4975 of the Code, unless those notes are
acquired or held pursuant to and in accordance with an applicable exemption. The
DOL has issued prohibited transaction class exemptions, or "PTCEs", as well as
individual exemptions that may provide exemptive relief if required for direct
or indirect prohibited transactions that may arise from the purchase or holding
of the notes.

Each purchaser and holder of the notes or any interest in the notes will be
deemed to have represented by its purchase or holding of the notes that either
(1) it is not a plan or a plan asset entity and is not purchasing or holding
those notes on behalf of or with "plan assets" of any plan or plan asset entity
or (2) the purchase or holding of the notes will not constitute a non-exempt
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or
violation under any applicable similar laws.

Due to the complexity of these rules and the penalties that may be imposed upon
persons involved in non-exempt prohibited transactions, it is important that
fiduciaries or other persons considering purchasing the notes on behalf of or
with "plan assets" of any plan or plan asset entity consult with their counsel
regarding the availability of exemptive relief under any of the PTCEs listed
above or any other applicable exemption, or the potential consequences of any
purchase or holding under similar laws, as applicable.

S-39

BOOK-ENTRY ISSUANCE

The notes will be represented by one or more global securities that will be
deposited with and registered in the name of DTC or its nominee. This means that
Lehman Brothers Holdings will not issue certificates to you for the notes. Each
global security will be issued to DTC which will keep a computerized record of
its participants (for example, a broker) whose clients have purchased the notes.
Each participant will then keep a record of its clients. Unless it is exchanged
in whole or in part for a certificated security, a global security may not be
transferred. However, DTC, its nominees and their successors may transfer a
global security as a whole to one another.

Beneficial interests in a global security will be shown on, and transfers of the
global security will be made only through, records maintained by DTC and its
participants. DTC holds securities that its direct participants deposit with
DTC. DTC also records the settlements among direct participants of securities
transactions, such as transfers and pledges, in deposited securities through
computerized records for direct participants' accounts. This eliminates the need
to exchange certificates. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC's book-entry system is also used by other organizations such
as securities brokers and dealers, banks and trust companies that work through a
direct participant.

When you purchase notes through the DTC system, the purchases must be made by or
through a direct participant, who will receive credit for the notes on DTC's
records. Since you actually own the notes, you are the beneficial owner. Your
ownership interest will only be recorded on the direct or indirect participants'
records. DTC has no knowledge of your individual ownership of the notes. DTC's
records only show the identity of the direct participants and the amount of the
notes held by or through them. You will not receive a written confirmation of
your purchase or sale or any periodic account statement directly from DTC. You
should instead receive these from your direct or indirect participant. As a
result, the direct or indirect participants are responsible for keeping accurate
account of the holdings of their customers like you.

The trustee for the notes will wire payments on the notes to DTC's nominee.
Lehman Brothers Holdings and the trustee will treat DTC's nominee as the owner
of each global security for all purposes. Accordingly, Lehman Brothers Holdings,
the trustee and any paying agent will have no direct responsibility or liability
to pay amounts due on the global security to you or any other beneficial owners
in the global security. It is DTC's current practice, upon receipt of any
payment, to proportionally credit direct participants' accounts on the payment
date based on their holdings. In addition, it is DTC's current practice to pass
through any consenting or voting rights to the participants by using an omnibus
proxy. Those participants in turn will make payments to and solicit votes from
you, the ultimate owner of notes based on customary practices. Payments to you
will be the responsibility of the participants and not of DTC, the trustee or
Lehman Brothers Holdings.

Notes represented by a global security will be exchangeable for certificated
securities with the same terms in authorized denominations only if:

o DTC is unwilling or unable to continue as depositary or ceases to be a
clearing agency registered under applicable law and a successor is not
appointed by Lehman Brothers Holdings within 90 days; or

o Lehman Brothers Holdings decides to discontinue use of the book-entry
system.

If the global security is exchanged for certificated securities, the trustee
will keep the registration books for the notes at its corporate office and
follow customary practices and procedures.

DTC has provided Lehman Brothers Holdings with the following information: DTC is
a limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the United States Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the provisions of Section 17A of the Securities Exchange Act of
1934. DTC is owned by a number of its direct participants and by The New York
Stock Exchange, the American Stock Exchange and the National Association of
Securities Dealers, Inc. The rules that apply to DTC and its participants are on
file with the SEC.

CLEARSTREAM AND EUROCLEAR

Links have been established among DTC, Clearstream Banking and Euroclear (two
European book-entry depositories similar to DTC), to facilitate

S-40

the initial issuance of the notes and cross-market transfers of the notes
associated with secondary market trading.

Although DTC, Clearstream and Euroclear have agreed to the procedures provided
below in order to facilitate transfers, they are under no obligation to perform
those procedures and those procedures may be modified or discontinued at any
time.

Clearstream and Euroclear will record the ownership interests of their
participants in much the same way as DTC, and DTC will record the aggregate
ownership of each U.S. agent of Clearstream and Euroclear, as participants in
DTC.

When notes are to be transferred from the account of a DTC participant to the
account of a Clearstream participant or a Euroclear participant, the purchaser
must send instructions to Clearstream or Euroclear through a participant at
least one business day prior to settlement. Clearstream or Euroclear, as the
case may be, will instruct its U.S. agent to receive the notes against payment.
After settlement, Clearstream or Euroclear will credit its participant's
account. Credit for the notes will appear on the next day, European time.

Because the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending notes to the relevant
U.S. agent acting for the benefit of Clearstream or Euroclear participants. The
sale proceeds will be available to the DTC seller on the settlement date. Thus,
to the DTC participant, a cross-market transaction will settle no differently
than a trade between two DTC participants.

When a Clearstream or Euroclear participant wishes to transfer notes to a DTC
participant, the seller must send instructions to Clearstream or Euroclear
through a participant at least one business day prior to settlement. In these
cases, Clearstream or Euroclear will instruct its U.S. agent to transfer notes
against payment. The payment will then be reflected in the account of the
Clearstream or Euroclear participant the following day, with the proceeds
back-valued to the value date; which day would be the preceding day, when
settlement occurs in New York. If settlement is not completed on the intended
value date (i.e., the trade fails), proceeds credited to the Clearstream or
Euroclear participant's account would instead be valued as of the actual
settlement date.

S-41

UNDERWRITING

Lehman Brothers Holdings has agreed to sell to Lehman Brothers Inc., the
underwriter, all of the notes.

The underwriter has advised Lehman Brothers Holdings that it proposes to
initially offer the notes to the public at the public offering price indicated
on the cover page of this prospectus supplement; it may also offer notes to
certain dealers at the same price less a concession not in excess of 2.50% of
the principal amount of the notes. After the initial public offering of the
notes is completed, the public offering price and concessions may be changed.

In connection with the offering, the rules of the SEC permit the underwriter to
engage in various transactions that stabilize the price of the notes. These
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the notes. If the underwriter creates a short
position in the notes in connection with the offering (that is, if it sells a
larger number of the notes than is indicated on the cover page of this
prospectus supplement), the underwriter may reduce that short position by
purchasing notes in the open market.

In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of those purchases. Neither
Lehman Brothers Holdings nor the underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the notes. In addition, neither Lehman
Brothers Holdings nor the underwriter makes any representation that the
underwriter will in fact engage in transactions described in this paragraph, or
that those transactions, once begun, will not be discontinued without notice.

Lehman Brothers Holdings has granted to the underwriter an option to purchase,
at any time within 13 days of the original issuance of the notes, up to
$2,550,000 additional aggregate principal amount of notes solely to cover
over-allotments. To the extent that the option is exercised, the underwriter
will be committed, subject to certain conditions, to purchase the additional
notes. If this option is exercised in full, the total public offering price,
underwriting discount and proceeds to Lehman Brothers Holdings would be
$19,550,000, $488,750 and $19,061,250, respectively.

The underwriter may not confirm sales to any account over which it exercises
discretionary authority without the prior written approval of the customer.

Lehman Brothers Holdings will pay certain expenses, expected to be approximately
$70,000, associated with the offer and sale of the notes.

Lehman Brothers Holdings has agreed to indemnify the underwriter against some
liabilities, including liabilities under the Securities Act of 1933.

The underwriting arrangements for this offering comply with the requirements of
Rule 2720 of the National Association of Securities Dealers, Inc. regarding a
National Association of Securities Dealers, Inc. member firm underwriting
securities of its affiliate.

A prospectus supplement and the accompanying prospectus in electronic format may
be made available on the Internet sites or through other online services
maintained by the underwriter and/or selling group members participating in this
offering, or by their affiliates. In those cases, prospective investors may view
offering terms online and, depending upon the particular underwriter or selling
group member, prospective investors may be allowed to place orders online. The
underwriter may agree with Lehman Brothers Holdings to allocate a specific
number of shares for sale to online brokerage account holders. Any such
allocation for online distributions will be made by the underwriter on the same
basis as other allocations.

Other than the prospectus supplement and the accompanying prospectus in
electronic format, the information on the underwriter's or any selling group
member's website and any information contained in any other website maintained
by the underwriter or selling group member is not part of the prospectus
supplement, the accompanying prospectus or the registration statement of which
this prospectus supplement and the accompanying prospectus form a part, has not
been approved and/or endorsed by Lehman Brothers Holdings or the underwriter or
any selling group member in its capacity as underwriter or selling group member
and should not be relied upon by investors.

S-42

EXPERTS

The consolidated financial statements and financial statement schedule of Lehman
Brothers Holdings as of November 30, 2003 and 2002, and for each of the years in
the three-year period ended November 30, 2003, have been audited by Ernst &
Young LLP, independent certified public accountants, as set forth in their
report on the consolidated financial statements. The consolidated financial
statements and accountant's report are incorporated by reference in Lehman
Brothers Holdings' annual report on Form 10-K for the year ended November 30,
2003, and incorporated by reference in this prospectus supplement. The
consolidated financial statements of Lehman Brothers Holdings referred to above
are incorporated by reference in this prospectus supplement in reliance upon the
report given on the authority of Ernst & Young LLP as experts in accounting and
auditing.

S-43

[GRAPHIC OMITTED]

$17,000,000

LEHMAN BROTHERS HOLDINGS INC.

INDEX-PLUS NOTES DUE AUGUST 3, 2010
LINKED TO A BASKET OF FOUR STOCK INDICES

----------------

PROSPECTUS SUPPLEMENT
JANUARY 31, 2005

(INCLUDING PROSPECTUS
DATED JUNE 21, 2001)

----------------

LEHMAN BROTHERS