-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EEEMAEGrKgNkKnNncn4I9eLVEZrIcgYW+cLWC9CjTk6Qrx6cZlUDMGLx68HWtjIs Qj7Oo9QwW+3wIy6qXHhc4w== 0000950136-06-001710.txt : 20060308 0000950136-06-001710.hdr.sgml : 20060308 20060308103228 ACCESSION NUMBER: 0000950136-06-001710 CONFORMED SUBMISSION TYPE: 424B5 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20060308 DATE AS OF CHANGE: 20060308 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEHMAN BROTHERS HOLDINGS INC CENTRAL INDEX KEY: 0000806085 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 133216325 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 424B5 SEC ACT: 1933 Act SEC FILE NUMBER: 333-121067 FILM NUMBER: 06671881 BUSINESS ADDRESS: STREET 1: LEHMAN BROTHERS STREET 2: 745 SEVENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125267000 MAIL ADDRESS: STREET 1: LEHMAN BROTHERS STREET 2: 745 SEVENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: SHEARSON LEHMAN HUTTON HOLDINGS INC DATE OF NAME CHANGE: 19901017 424B5 1 file001.htm FORM 424B5

Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-121067

The information in this prospectus supplement is not complete and may be
changed. This prospectus supplement and the accompanying prospectus are not an
offer to sell these securities and we are not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED MARCH 7, 2006

PRELIMINARY PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 18, 2005)

$
LEHMAN BROTHERS HOLDINGS INC.
ABSOLUTE BUFFER NOTES DUE MARCH , 2009
LINKED TO THE NIKKEI 225SM INDEX (NKY)

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

General:

o Senior unsecured debt securities of Lehman Brothers Holdings.

o Linked to the Nikkei 225SM Index, as published by Nihon Keizai Shimbun,
Inc.

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

o Minimum initial investment: $10,000.

o Stated maturity date: March , 2009, subject to postponement if the
valuation date is postponed.

o Valuation date: March , 2009, subject to postponement if such day is not
a scheduled trading day or if a market disruption event occurs.

o Upside participation rate: A fixed rate that Lehman Brothers Holdings
currently estimates will range from 150% to 160%.

o Threshold level: A fixed level that will be 90% of the initial index level.

o The notes will not be listed on any 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 index return is zero or positive, $1,000 + ($1,000 x
the upside participation rate x the final index return).

-- If the final index return is negative and the final index level is
equal to or greater than the threshold level, $1,000 + ($1,000 x the
absolute value of the final index return).

-- If the final index return is negative and the final index level is
less than the threshold level, $1,000 + ($1,000 x the final index
return).

The final index return will equal:

final index level - initial index level
---------------------------------------
initial index level

The initial index level will be the closing index level on the date of this
prospectus supplement. The final index level will be the closing index level on
the valuation date, which will be the third business day before the stated
maturity date. The closing index level on any particular day will generally be
the closing level of the Nikkei 225 Index on such day.

Investing in the notes involves risks. Risk Factors begin on page S-6.

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 ......................... % $
Underwriting discount ......................... % $
Proceeds to Lehman Brothers Holdings .......... % $

Lehman Brothers Holdings has granted the underwriter an option to purchase,
within 13 days of the original issuance, up to an additional $ 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 March , 2006.

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

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 supplement and the accompanying 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.

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

LEHMAN BROTHERS
March , 2006

"Nikkei" and "Nikkei 225" are the service marks of Nihon Keizai Shimbun, Inc.
("NKS") and will be licensed for use by Lehman Brothers Holdings Inc. The
notes, linked to the performance of the Nikkei 225 Index, are not sponsored,
endorsed, sold or promoted by NKS, and NKS makes 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.

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

TABLE OF CONTENTS

PAGE
----
PROSPECTUS SUPPLEMENT

SUMMARY INFORMATION -- Q&A.................................................. S-3
RISK FACTORS................................................................ S-6
USE OF PROCEEDS AND HEDGING.................................................S-11
RATIO OF EARNINGS TO FIXED CHARGES..........................................S-11
DESCRIPTION OF THE NOTES....................................................S-12
THE NIKKEI 225 INDEX........................................................S-17
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES...............................S-20
CERTAIN ERISA CONSIDERATIONS................................................S-23
BOOK-ENTRY ISSUANCE.........................................................S-24
UNDERWRITING................................................................S-26

PROSPECTUS

PROSPECTUS SUMMARY.......................................................... 1
GENERAL INFORMATION......................................................... 6
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS................... 6
USE OF PROCEEDS............................................................. 7
RATIO OF EARNINGS TO FIXED CHARGES AND OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS.................................. 7
DESCRIPTION OF DEBT SECURITIES.............................................. 8
DESCRIPTION OF WARRANTS..................................................... 19
DESCRIPTION OF PURCHASE CONTRACTS........................................... 23
DESCRIPTION OF PREFERRED STOCK.............................................. 27
DESCRIPTION OF DEPOSITARY SHARES............................................ 30
DESCRIPTION OF COMMON STOCK................................................. 32
DESCRIPTION OF UNITS........................................................ 34
FORM, EXCHANGE AND TRANSFER................................................. 37
BOOK-ENTRY PROCEDURES AND SETTLEMENT........................................ 38
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES............................... 40
PLAN OF DISTRIBUTION........................................................ 54
CERTAIN ERISA CONSIDERATIONS................................................ 58
WHERE YOU CAN FIND MORE INFORMATION......................................... 58
LEGAL MATTERS............................................................... 59
EXPERTS..................................................................... 59

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-6 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 the Nikkei 225
Index. See "The Nikkei 225 Index." The notes will rank equally with all other
unsecured debt of Lehman Brothers Holdings, except subordinated debt, and will
mature on March , 2009, subject to postponement if the valuation date is
postponed.

WHO PUBLISHES THE NIKKEI 225 INDEX AND WHAT DOES THE NIKKEI 225 INDEX MEASURE?

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.

Please note that an investment in the notes does not entitle you to any
ownership or other interest in the securities underlying the Nikkei 225 Index.

WHAT PAYMENTS WILL I RECEIVE ON THE NOTES BEFORE MATURITY?

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

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 index return is zero or positive, $1,000 + ($1,000 x the
upside participation rate x the final index return).

o If the final index return is negative and the final index level is equal to
or greater than the threshold level, $1,000 + ($1,000 x the absolute value
of the final index return).

o If the final index return is negative and the final index level is less
than the threshold level, $1,000 + ($1,000 x the final index return).

The final index return will equal:

final index level - initial index level
---------------------------------------
initial index level

The upside participation rate will be a fixed rate that Lehman Brothers Holdings
currently estimates will range from 150% to 160%. The threshold level will be a
fixed level that will be 90% of the initial index level (subject to appropriate
adjustment by the calculation agent to reflect adjustments in the Nikkei 225
Index, if applicable).

The initial index level will be the closing index level on the date of this
prospectus supplement. The final index level will be the closing index level on
the valuation date, which will be the third business day before the stated
maturity date. The closing index level on any particular day will generally be
the closing level of the Nikkei 225 Index on such day.

If the third business day before the stated maturity date is not a scheduled
trading day or the calculation agent determines that one or more market
disruption events have occurred on that day, the calculation agent will, subject
to certain limitations, determine the final index level by reference to the
closing index level on the next scheduled trading 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 index level is determined. In
limited circumstances, the closing index level may be adjusted. See "Description
of the Notes--Discontinuance of the

S-3

Nikkei 225 Index; Alteration of method of calculation."

As a result, on the stated maturity date you will only receive $1,000 or more
than $1,000 per $1,000 note if the final index level on the valuation date is
equal to or greater than the threshold level. If the final index level on the
valuation date is less than the threshold level, you will receive less than
$1,000 per $1,000 note on the stated maturity date.

AMOUNT PAYABLE AT MATURITY -- EXAMPLES

Here are four examples of hypothetical calculations of the amount payable per
$1,000 note on the stated maturity date. In each of these examples, it is
assumed that the initial index level is 16000, the upside participation rate is
155% and the threshold level is 14400.

EXAMPLE 1. ASSUMING THE FINAL INDEX LEVEL OF THE NIKKEI 225 INDEX ON THE
VALUATION DATE IS 19200, RESULTING IN A FINAL INDEX RETURN OF 20%:

Because the final index return is positive, the appropriate formula for
calculating the amount payable on the stated maturity date per $1,000 note is:

$1,000 + ($1,000 x 155% x 20%) = $1,310

As a result, on the stated maturity date, you would receive $1,310 per $1,000
note.

EXAMPLE 2. ASSUMING THE FINAL INDEX LEVEL OF THE NIKKEI 225 INDEX ON THE
VALUATION DATE IS 16000, RESULTING IN A FINAL INDEX RETURN OF 0%:

Because the final index return is zero, the appropriate formula for calculating
the amount payable on the stated maturity date per $1,000 note is:

$1,000 + ($1,000 x 155% x 0%) = $1,000

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

EXAMPLE 3. ASSUMING THE FINAL INDEX LEVEL OF THE NIKKEI 225 INDEX ON THE
VALUATION DATE IS 15200, RESULTING IN A FINAL INDEX RETURN OF -5%:

Because the final index return is negative and the final index level is greater
than the threshold level, the appropriate formula for calculating the amount
payable on the stated maturity date per $1,000 note is:

$1,000 + ($1,000 x 5%) = $1,050

As a result, on the stated maturity date, you would receive $1,050 per $1,000
note.

EXAMPLE 4. ASSUMING THE FINAL INDEX LEVEL OF THE NIKKEI 225 INDEX ON THE
VALUATION DATE IS 12800, RESULTING IN A FINAL INDEX RETURN OF -20%:

Because the final index return is negative and the final index level is less
than the threshold level, the appropriate formula for calculating the amount
payable on the stated maturity date per $1,000 note is:

$1,000 + ($1,000 x (-20%)) = $800

As a result, on the stated maturity date, you would receive $800 per $1,000
note.

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

To the extent the initial index level, the upside participation rate, the
threshold level or the final index level differ from those assumed above, the
results indicated above would be different.

HOW HAS THE NIKKEI 225 INDEX PERFORMED HISTORICALLY?

Lehman Brothers Holdings has provided a table, on page S-19, showing the
performance of the Nikkei 225 Index from January 1, 2001 through March 6, 2006.
Lehman Brothers Holdings has provided this historical information to help you
evaluate the behavior of the Nikkei 225 Index 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 Nikkei
225 Index or the notes will perform in the future.

HOW WILL I BE ABLE TO FIND THE INDEX LEVEL OF THE NIKKEI 225 INDEX AT ANY POINT
IN TIME?

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

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-6.

S-4

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
tax purposes you will agree to treat a note as a cash-settled financial contract
giving rise to capital gain or loss, 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 capital gain or loss equal to the
difference between the amount of cash received and your basis in the note. See
"United States Federal Income Tax Consequences." 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. There can be no assurance that the Internal Revenue
Service will agree with the foregoing treatment of the notes, and it could
assert other characterizations that could affect the timing, amount and
character of income or deductions.

WHO IS LEHMAN BROTHERS HOLDINGS?

Lehman Brothers Holdings and subsidiaries, an innovator in global finance,
serves the financial needs of corporations, governments and municipalities,
institutional clients and individuals worldwide. Lehman Brothers Holdings
provides a full array of equities and fixed income sales, trading and research,
investment banking services and investment management and advisory services.
Lehman Brothers Holdings' global headquarters in New York and regional
headquarters in London and Tokyo are complemented by offices in additional
locations in North America, Europe, the Middle East, Latin America and the Asia
Pacific region. Lehman Brothers Holdings, through predecessor entities, was
founded in 1850. See "Lehman Brothers Holdings Inc." and "Where You Can Find
More Information" on page 2 and pages 58 to 59, respectively, of the
accompanying prospectus.

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, as amended, at no cost, by writing or telephoning Lehman
Brothers Holdings at the address provided in the accompanying prospectus.

Lehman Brothers Holdings' principal executive offices are located at the address
provided in the accompanying prospectus.

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 any exchange.

S-5

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 Nikkei 225 Index 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 index level of
the Nikkei 225 Index is less than the threshold level on the valuation
date, 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 index level 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 NIKKEI 225 INDEX.

o YOUR RETURN WILL NOT REFLECT DIVIDENDS ON SECURITIES UNDERLYING THE NIKKEI
225 INDEX. Your return on the notes will not reflect the return you would
realize if you actually owned the securities underlying the Nikkei 225
Index 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 closing level of the Nikkei 225 Index 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 Nikkei 225 Index are traded in
Japanese yen and the notes are denominated in U.S. dollars, the amount
payable on the stated maturity date will not be adjusted for the currency
exchange rates in effect on the stated maturity date. Any amount in
addition to the principal amount of each note payable to you on the stated
maturity date is based solely upon a decrease of less than 10% or a
percentage increase, as the case may be, in the Nikkei 225 Index. Changes
in exchange rates, however, may reflect changes in the Japanese economy,
which in turn may affect the level of the Nikkei 225 Index and the value of
the notes.

HISTORICAL LEVELS OF THE NIKKEI 225 INDEX SHOULD NOT BE TAKEN AS AN INDICATION
OF THE FUTURE PERFORMANCE OF THE NIKKEI 225 INDEX DURING THE TERM OF THE NOTES.

The trading prices of the securities underlying the Nikkei 225 Index will
determine the index level. You should realize, however, that past performance is
not necessarily indicative of how the Nikkei 225 Index or the notes will perform
in the future. Trading prices of the securities underlying the Nikkei 225 Index
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.

S-6

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 any exchange. 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 index level 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, depending, at that time, on the index
level and where it is in relationship to the initial index level and the
threshold level. 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 INDEX. Lehman Brothers Holdings expects that the market value of the notes
will depend substantially on the performance of the index at any given
point in time. If you decide to sell your notes prior to the stated
maturity date when the index level is equal to or greater than the
threshold level, you may nonetheless receive substantially less than the
amount that would be payable on the stated maturity date based on the index
level on the date you sell your notes because of expectations that the
index level will continue to fluctuate until the amount payable on the
stated maturity date is determined. If you decide to sell your notes when
the index level is below the threshold level, 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 Nikkei 225 Index are likely to directly
affect the index level of the Nikkei 225 Index and could indirectly affect
the value of the notes.

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

o VOLATILITY OF THE NIKKEI 225 INDEX. Volatility is the term used to describe
the size and frequency of market fluctuations. If the volatility of the
level of the Nikkei 225 Index changes, 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 level or volatility of the Nikkei 225
Index.

o VOLATILITY OF THE JAPANESE YEN/U.S. DOLLAR EXCHANGE RATE. The Japanese
yen/U.S. dollar rate is a foreign exchange spot rate that measures the
relative values of two currencies, the Japanese yen and the U.S. dollar
(the "JPY/USD Rate"). The JPY/USD Rate is expressed as a rate that reflects
the amount of Japanese yen that can be purchased for one U.S. dollar. The
JPY/USD Rate increases when the U.S. dollar appreciates relative to the
Japanese yen and decreases when the U.S. dollar depreciates relative to the
Japanese yen. Volatility is the term used to describe the size and
frequency of price and/or market fluctuations. If the volatility of the
JPY/USD Rate changes, the trading value of the notes may be adversely
affected.

o CORRELATION BETWEEN THE JPY/USD RATE AND THE NIKKEI 225 INDEX. Correlation
is the term used to describe the relationship between the percentage
changes in the JPY/USD Rate and the percentage changes in the Nikkei 225
Index. If the correlation between the JPY/USD Rate and the Nikkei 225 Index
changes, the trading value of the notes may be adversely affected.

o MERGER AND ACQUISITION TRANSACTIONS. Some of the securities underlying the
Nikkei 225

S-7

Index may be affected by mergers and acquisitions, which can contribute to
volatility of the Nikkei 225 Index. Additionally, as a result of a merger
or acquisition, one or more securities underlying the Nikkei 225 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 the Nikkei 225
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 Nikkei
225 Index increase, the value of the notes may be adversely affected
because the Nikkei 225 Index does 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 Nikkei 225 Index and real or anticipated changes in
those conditions or results may affect the market value of the notes.

o LEVEL OF THE NIKKEI 225 INDEX FROM THE DATE OF THIS PROSPECTUS SUPPLEMENT.
If the closing level of the Nikkei 225 Index falls below the threshold
level during the term of the notes, 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 index level. 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 THE JAPANESE
SECURITIES MARKETS.

The securities included in the Nikkei 225 Index are issued by Japanese companies
and are denominated in Japanese yen. You should be aware that investments in
securities linked to the value of Japanese equity securities involve particular
risks. The Japanese securities markets may be more volatile than U.S. securities
markets, and market developments may affect Japanese markets differently from
U.S. or other securities markets. Direct or indirect government intervention to
stabilize the Japanese securities markets, as well as cross-shareholdings in
Japanese companies, may affect trading prices and volume in those markets. Also,
there is generally less publicly available information about Japanese companies
that are not subject to the reporting requirements of the SEC, and Japanese
companies are subject to accounting, auditing and financial reporting standards
and requirements that differ from those applicable to U.S. reporting companies.

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

TIME DIFFERENCE BETWEEN TOKYO AND NEW YORK CITY MAY CREATE DISCREPANCIES IN
TRADING LEVELS.

As a result of the time difference between Tokyo (where the securities
underlying the Nikkei 225 Index trade) and New York City (where the notes may
trade), there may be discrepancies between the level of the Nikkei 225 Index and
the trading prices of the notes. In addition, there may be periods when the
Japanese securities markets are closed for trading (for example during holidays
in Japan), as a result of which the level of the Nikkei 225 Index remains
unchanged for multiple trading days in New York City.

ADJUSTMENTS TO THE NIKKEI 225 INDEX COULD ADVERSELY AFFECT THE VALUE OF THE
NOTES.

The policies of NKS concerning additions, deletions and substitutions of the
securities underlying the Nikkei 225 Index and the manner in which NKS takes
account of certain changes affecting such underlying securities may affect the
level of the

S-8

Nikkei 225 Index. The policies of NKS with respect to the calculation of the
Nikkei 225 Index could also affect the level of the Nikkei 225 Index. NKS may
discontinue or suspend calculation or dissemination of the Nikkei 225 Index or
materially alter the methodology by which it calculates the Nikkei 225 Index.
Any such actions could affect the value of the notes. See "Description of the
Notes--Discontinuance of the Nikkei 225 Index; Alteration of method of
calculation" and "The Nikkei 225 Index."

LEHMAN BROTHERS HOLDINGS CANNOT CONTROL ACTIONS BY THE COMPANIES WHOSE
SECURITIES UNDERLIE THE NIKKEI 225 INDEX.

Actions by these companies may have an adverse effect on the price of the
securities underlying the Nikkei 225 Index, the Nikkei 225 Index 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 NKS AND ARE
NOT RESPONSIBLE FOR ITS PUBLIC DISCLOSURE OF INFORMATION.

NKS provides and services the Nikkei 225 Index. Lehman Brothers Holdings and its
affiliates are not affiliated with NKS in any way (except for licensing
arrangements discussed below in "The Nikkei 225 Index") and have no ability to
control or predict its actions, including any errors in or discontinuation of
disclosure regarding its methods or policies relating to the calculation of the
Nikkei 225 Index. See "Description of the Notes--Market disruption events" and
"Description of the Notes--Discontinuance of the Nikkei 225 Index; Alteration of
method of calculation." NKS is not involved in this offering of notes in any way
and has no obligation to consider your interests as an owner of the notes in
taking any actions that might affect the value of your notes.

Neither Lehman Brothers Holdings nor any of its affiliates assumes any
responsibility for the adequacy or accuracy of the information about the Nikkei
225 Index or NKS contained in this prospectus supplement or any public
disclosure of information by NKS. You, as an investor in the notes, should make
your own investigation into the Nikkei 225 Index and NKS.

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 on the stated maturity date, whether
adjustments should be made to the index level or threshold level 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 the Nikkei 225 Index; Alteration of method of
calculation" and "Description of the Notes--Market disruption events."

PURCHASES AND SALES OF SECURITIES UNDERLYING THE NIKKEI 225 INDEX BY LEHMAN
BROTHERS HOLDINGS AND ITS AFFILIATES COULD AFFECT THE PRICES OF THOSE SECURITIES
OR THE LEVEL OF THE NIKKEI 225 INDEX.

Lehman Brothers Holdings and its affiliates, including Lehman Brothers Inc., may
from time to time buy or sell securities underlying the Nikkei 225 Index 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 Nikkei 225 Index. 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 Nikkei 225 Index. 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 Nikkei 225 Index.

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

S-9

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. The Internal Revenue Service could
assert other characterizations that could affect the timing, amount and
character of income or deductions. Although the issue is not free from doubt,
Lehman Brothers Holdings intends to treat, and by purchasing a note, for all tax
purposes you agree to treat a note as a cash-settled financial contract giving
rise to capital gain or loss, rather than as a debt instrument. See "United
States Federal Income Tax Consequences."

S-10

USE OF PROCEEDS AND HEDGING

A portion 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 following the initial offering of the notes to acquire
securities underlying the Nikkei 225 Index as well as to acquire futures
contracts or listed or over-the-counter options contracts in, or other
derivative or synthetic instruments related to, the Nikkei 225 Index or those
securities underlying the Nikkei 225 Index, 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" 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 Nikkei 225 Index, 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 Nikkei 225
Index, 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 Nikkei 225 Index. 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
Nikkei 225 Index and, accordingly, increase or decrease the level of the Nikkei
225 Index. 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 Nikkei 225 Index, these activities could have such an effect.

RATIO OF EARNINGS TO FIXED CHARGES

YEAR ENDED NOVEMBER 30,

2001 2002 2003 2004 2005
------ ------ ------ ------ -------
1.11 1.13 1.29 1.36 1.27

S-11

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 $ ($ 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 March , 2009 subject to postponement if the valuation
date is postponed.

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

o If the final index return is zero or positive, $1,000 + ($1,000 x the
upside participation rate x the final index return).

o If the final index return is negative and the final index level is equal to
or greater than the threshold level, $1,000 + ($1,000 x the absolute value
of the final index return).

o If the final index return is negative and the final index level is less
than the threshold level, $1,000 + ($1,000 x the final index return).

The final index return will equal:

final index level - initial index level
---------------------------------------
initial index level

The initial index level will be the closing index level on the date of this
prospectus supplement. The final index level will be the closing index level on
the valuation date, which will be the third business day before the stated
maturity date. However, if that day is not a scheduled trading day or the
calculation agent determines that one or more market disruption events have
occurred on that day, the calculation agent will determine the final index level
by reference to the closing index level on the next scheduled trading day on
which there is not a market disruption event; provided, however, if a market
disruption event occurs on each of the eight scheduled trading days following
the originally scheduled valuation date, then (a) that eighth scheduled trading
day shall be deemed the valuation date and (b) the calculation agent shall
determine the final index level based upon its good faith estimate of the level
of the index on that eighth scheduled trading day. Any 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 index
level is determined.

S-12

The "closing index level" of the Nikkei 225 Index (or any successor index) on
any particular day means the closing level of the Nikkei 225 Index as reported
by NKS (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.

A "scheduled trading day" means any day on which both the TSE and the Osaka
Securities Exchange are scheduled to be open for trading for their respective
regular trading sessions.

DISCONTINUANCE OF THE NIKKEI 225 INDEX; ALTERATION OF METHOD OF CALCULATION

If NKS discontinues publication of the Nikkei 225 Index and NKS 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 Nikkei 225 Index, then the calculation agent shall determine
each subsequent closing index level to be used in computing the amount payable
on the stated maturity date by reference to the closing index level of such
successor index on the applicable date.

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

If NKS discontinues publication of the Nikkei 225 Index and the calculation
agent determines that no successor index is available at such time or if NKS (or
the publisher of any successor index) fails to calculate and publish a closing
index level for the Nikkei 225 Index (or a successor index) on any date when it
would ordinarily do so in accordance with its customary practice, the
calculation agent will determine the closing index level to be used for purposes
of computing the amount payable on the stated maturity date. In such
circumstances, the closing index level will be computed by the calculation agent
in accordance with the formula for and method of calculating the Nikkei 225
Index (or any successor index) last in effect prior to such discontinuance or
failure to publish, using the closing price (or, if trading in any of the
relevant securities has been materially suspended or materially limited, its
good faith estimate of the closing price that would have prevailed but for such
suspension or limitation) on such date of each security most recently comprising
the Nikkei 225 Index (or any successor index) on the relevant exchange on which
such security trades. Notwithstanding these alternative arrangements,
discontinuance of the publication of the Nikkei 225 Index may adversely affect
the value of the notes. As used herein, "closing price" of a security, on any
particular day, means the last reported sales price for that security on the
relevant exchange at the scheduled weekday closing time of the regular trading
session of the relevant exchange. If, however, the security is not listed or
traded on a bulletin board, then the closing price of the security will be
determined using the average execution price per share that an affiliate of
Lehman Brothers Holdings pays or receives upon the purchase or sale of the
security used to hedge Lehman Brothers Holdings' obligations under the notes.
The "relevant exchange" for any security (or any combination thereof then
underlying the Nikkei 225 Index or any successor index) means the primary
exchange, quotation system (which includes bulletin board services) or other
market of trading for such security.

If at any time the method of calculating the Nikkei 225 Index, any successor
index or the closing index level on any particular day, is changed in a material
respect, or if the Nikkei 225 Index or a 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 the Nikkei 225 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 the Nikkei 225 Index or such successor index
traded on any date the closing index level 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 the Nikkei 225 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 index level
on any particular day and the amount payable on the stated maturity date with
reference to the Nikkei 225 Index or such successor index, as adjusted.

Accordingly, if the method of calculating the Nikkei 225 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 the Nikkei 225 Index or such
successor index as if it had not been modified.

MARKET DISRUPTION EVENTS

A market disruption event with respect to the Nikkei 225 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:

S-13

o A material suspension of or limitation imposed on trading relating to the
securities that then comprise 20% or more of the Nikkei 225 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 the Nikkei 225 Index or any successor index
by 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 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
the Nikkei 225 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 the
Nikkei 225 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 the Nikkei 225 Index or any successor index are
traded or on which futures or options contracts relating to the Nikkei 225
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 the
Nikkei 225 Index or any successor index will be based on a comparison of
(x) the portion of the level of the Nikkei 225 Index or successor index
attributable to that security and (y) the overall level of the Nikkei 225
Index or successor 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.

Events have occurred in the past that would constitute market disruption events.
The existence or non-existence of such circumstances in the past is, however,
not necessarily indicative of the likelihood of those circumstances arising or
not arising in the future and Lehman Brothers Holdings cannot predict the
likelihood of a market disruption event in the future.

S-14

HYPOTHETICAL RETURNS

The table below illustrates, for a range of hypothetical final index levels of
the Nikkei 225 Index calculated on the valuation date and assuming (a) the
initial index level is 16000, (b) the notes have a term of 3 years, (c) the
upside participation rate is 155% and (d) the threshold level is 14400:

o the hypothetical percentage change from the initial index level (which is
the hypothetical final index return);

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.

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

0 -100% $ 0 -100.00% -100.00%
3200 -80 200 -80.00 -41.52
6400 -60 400 -60.00 -26.32
9600 -40 600 -40.00 -15.66
12800 -20 800 -20.00 -7.17
14400(1) -10 1,100 10.00 3.23
16000 0 1,000 0.00 0.00
19200 20 1,310 31.00 9.42
22400 40 1,620 62.00 17.45
25600 60 1,930 93.00 24.50
28800 80 2,240 124.00 30.84
32000 100 2,550 155.00 36.62

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

(1) This figure reflects the assumed threshold level.

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

You should compare the features of the notes to other available investments
before deciding to purchase 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 the Nikkei 225 Index is discontinued;

o the closing index level if no successor index is available or if NKS or the
publisher of any

S-15

successor index, as the case may be, fails to calculate and publish a
closing index level on any date;

o adjustments to the Nikkei 225 Index, the successor index or the closing
index level thereof if the method of calculating any of these items changes
in a material respect or if the Nikkei 225 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 level of the Nikkei 225 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 the Nikkei 225 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 and the date three business days before that date was the
valuation date. 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. See "Description of
Debt Securities--Defaults" beginning on page 13 of the accompanying prospectus.

S-16

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 the Nikkei 225 Index;
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.

COMPOSITION OF THE NIKKEI 225 INDEX

As of March 6, 2006, 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 (8), Electrical Machinery (28), Automotive (9),
Precision Instruments (4), Communications (4)

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

Consumer Goods -- Fishery (1), Food (14), Retail (7), Services (9)

Materials -- Mining (1), Textiles & Apparel (8), Pulp & Paper (4), Chemicals
(18), 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 24.140 as of October 4, 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

S-17

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, 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, that is, 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, calculated in Japanese yen, of the Nikkei 225
Index for each quarter in the period from January 1, 2001 through March 6, 2006.
The closing level on March 6, 2006 was 15901.16. 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. 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.

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HIGH LOW PERIOD-END
---------- --------- ------------
2001
First Quarter ........................ 14032.42 11819.70 12999.70
Second Quarter ....................... 14529.41 12574.26 12969.05
Third Quarter ........................ 12817.41 9504.41 9774.68
Fourth Quarter ....................... 11064.30 9924.23 10542.62
2002
First Quarter ........................ 11919.30 9420.85 11024.94
Second Quarter ....................... 11979.85 10074.56 10621.84
Third Quarter ........................ 10960.25 9075.09 9383.29
Fourth Quarter ....................... 9215.56 8303.39 8578.95
2003
First Quarter ........................ 8790.92 7862.43 7972.71
Second Quarter ....................... 9137.14 7607.88 9083.11
Third Quarter ........................ 11033.32 9265.56 10219.05
Fourth Quarter ....................... 11161.71 9614.60 10676.64
2004
First Quarter ........................ 11770.65 10365.40 11715.39
Second Quarter ....................... 12163.89 10505.05 11858.87
Third Quarter ........................ 11896.01 10687.81 10823.57
Fourth Quarter........................ 11488.76 10659.15 11488.76
2005
First Quarter......................... 11966.69 11238.37 11668.95
Second Quarter........................ 11874.75 10825.39 11584.01
Third Quarter......................... 13617.24 11565.99 13574.30
Fourth Quarter........................ 16344.20 13106.18 16111.43
2006
First Quarter (through March 6) ...... 16747.76 15341.18 15901.16

LICENSE AGREEMENT BETWEEN NKS AND LEHMAN BROTHERS HOLDINGS

Lehman Brothers Holdings will enter into a non-exclusive license agreement with
NKS providing for a license to Lehman Brothers Holdings and certain of its
affiliates or subsidiary companies, in exchange for a fee, to use the Nikkei 225
Index in connection with the notes.

The license agreement between NKS and Lehman Brothers Holdings will provide 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" and "Nikkei 225" are the service marks of NKS. NKS reserves all the
rights, including copyright, to the Nikkei 225 Index.

S-19

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. If any information in the accompanying prospectus
is inconsistent with this prospectus supplement, you should rely on the
information in 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. This summary does not
represent a detailed description of the United States federal income tax
consequences to you in light of your particular circumstances.

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 United States federal income tax
consequences of the ownership of the notes, as well as the consequences arising
to you 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 (other than a partnership) 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

S-20

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 tax purposes you agree to treat a note as a
cash-settled financial contract giving rise to capital gain or loss as discussed
below, rather than as a debt instrument. However, 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 significantly declines over the
term of the notes. The effect of these Treasury regulations would 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 cash-settled financial contract giving rise to capital gain or
loss.

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 received at maturity in
respect of the note or any sale, exchange or other disposition of the note.
Based on such treatment, any gain or income realized upon the payment at
maturity or any sale, exchange, or other disposition of the 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 payment at maturity or 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-21

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-22

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 and held pursuant to and in accordance with an applicable exemption.
The Department of Labor 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-23

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

S-24

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-25

UNDERWRITING

Lehman Brothers Holdings has agreed to sell to Lehman Brothers Inc., the
underwriter, and Lehman Brothers Inc. has agreed to purchase, the principal
amount 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 % 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.

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 $
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 approximately $ , $ , and
$ , respectively.

Lehman Brothers Holdings has agreed to indemnify the underwriter against some
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute payments that the underwriter may be required to make relating
to these liabilities.

The notes are a new issue of securities with no established trading market.
Lehman Brothers Holdings has been advised by the underwriter that it intends to
make a market in the notes, but it is not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the notes.

An affiliate of Lehman Brothers Holdings will enter into a swap transaction in
connection with the notes and will receive customary compensation for that
transaction.

If the notes are sold in a market-making transaction after their initial sale,
information about the purchase price and the date of the sale will be provided
in a separate confirmation of sale.

CERTAIN SELLING RESTRICTIONS

Argentina

The offering of notes has not been registered with the Comision Nacional de
Valores in order to be publicly offered in Argentina and therefore may not be
offered or sold to the public in Argentina. Investors must consider the risks of
the transaction before making an investment decision.

Brazil

The notes may not be offered or sold to the public in Brazil. Accordingly, the
offering of the notes has not been submitted to the Comissao de Valores
Mobiliarios for approval. Documents relating to this offering, as well as the
information contained herein and therein, may not be supplied or distributed as
a public offering in Brazil or be used in connection with any public offer for
subscription or sale in Brazil.

British Virgin Islands

This prospectus supplement and the notes offered hereby have not been, and will
not be registered under the laws and regulations of the British Virgin Islands,
nor has any regulatory authority in the British Virgin Islands passed comment
upon or approved the accuracy or adequacy of this prospectus supplement.

Colombia

The notes have not been and will not be registered in the National Securities
Registry of Colombia or in the Colombian Stock Exchange. Therefore the notes may
not be publicly offered or negotiated in Colombia.

European Economic Area

In relation to each Member State of the European Economic Area which has
implemented the Prospectus Directive (each, a "Relevant Member State"), the
underwriter has represented and agreed that with effect from and including the
date on which the Prospectus Directive is implemented in the Relevant Member
State (the "Relevant Implementation Date") it has not made and will not make an
offer of notes to the public in that Relevant Member State, except that it may,
with effect from

S-26

and including the Relevant Implementation Date, make an offer of notes to the
public in that Relevant Member State:

o in (or in Germany, where the offer starts within) the period beginning on
the date of publication of a prospectus in relation to those notes which
has been approved by the competent authority in that Relevant Member State
or, where appropriate, approved in another Relevant Member State and
notified to the competent authority in that Relevant Member State, all in
accordance with the Prospectus Directive, and ending on the date which 12
months after the date of such publication;

o at any time to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated, whose
corporate purpose is solely to invest in securities;

o at any time to any legal entity which has two or more of (1) an average of
at least 250 employees during the last financial year; (2) a total balance
sheet of more than EUR43,000,000 and (3) an annual net turnover of more
than EUR50,000,000, all as shown in its last annual or consolidated
accounts; or

o at any time in any other circumstances which do not require the publication
by Lehman Brothers Holdings of a prospectus pursuant to Article 3 of the
Prospectus Directive.

For the purposes of this provision, the expression "offer of notes to the
public" in relation to any notes in any Relevant Member State means the
communication in any form and by any means of sufficient information on the
terms of the offer and the notes to be offered so as to enable an investor to
decide to purchase or subscribe the notes, as the same may be varied in that
Member State by any measure implementing the Prospectus Directive in that Member
State and the expression "Prospectus Directive" meant Directive 2003/71/EC and
includes any relevant implementing measure in each Relevant Member State.

Germany

The notes may not be offered or sold in the Federal Republic of Germany other
than in compliance with the provisions of the German Sales Prospectus Act
(Wertpapier-Verkaufsprospektgesetz) of December 13, 1990, as amended, and of any
other laws applicable in the Federal Republic of Germany governing the issue,
offering and sale of securities.

Ireland

The underwriter has represented, warranted and agreed that (a) it has not
offered or sold and will not offer or sell any notes in Ireland, and that it
will not issue any application form for notes in Ireland, other than to persons
whose ordinary business it is to buy or sell shares or debentures, whether as
principal or agent, within the meaning of the Irish Companies Acts, 1963 to 2003
and (b) it has complied with and will comply with all applicable provisions of
the Irish Investment Intermediaries Act, 1995 (as amended) with respect to
anything done by it in relation to the notes.

Panama

The notes have not been and will not be registered with the National Securities
Commission of the Republic of Panama under Decree Law No. 1 of July 8, 1999 (the
"Panamanian Securities Law") and may not be publicly offered or sold within
Panama, except in certain limited transactions exempt from the registration
requirements of the Panamanian Securities Law. The notes do not benefit from the
tax incentives provided by the Panamanian Securities Law and are not subject to
regulation or supervision by the National Securities Commission of the Republic
of Panama.

Switzerland

The underwriter has agreed that it has only offered or sold and will only offer
or sell the notes in Switzerland in compliance with all applicable laws and
regulations in force in Switzerland, and will, to the extent necessary, obtain
any consent, approval, or permission required, if any, by it for the offer or
sale by it of the notes under the laws and regulations in force in Switzerland.

The Netherlands

The underwriter has separately further agreed that it has not, directly or
indirectly, offered or sold and will not, directly or indirectly, offer or sell
in The Netherlands any notes other than to persons who trade or invest in
securities in the conduct of a profession or business (which include banks,
stockbrokers, insurance companies, investment undertakings, pension funds, other
institutional investors and finance companies and treasury departments of large
enterprises).

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United Kingdom

The underwriter has represented and agreed that:

o it and each of its affiliates have only communicated or caused to be
communicated and will only communicate or cause to be communicated any
invitation or inducement to engage in investment activity (within the
meaning of Section 21 of the Financial Services and Markets Act 2000 (the
"FSMA")) received by it in connection with the issue or sale of any notes
in circumstances in which Section 21(1) of the FSMA does not apply to
Lehman Brothers Holdings; and

o it and each of its affiliates have complied and will comply with all
applicable provisions of the FSMA with respect to anything done by it in
relation to the notes in, from or otherwise involving the United Kingdom.

Uruguay

The offering of notes in Uruguay constitutes a private offering and the
underwriter has agreed that the notes and Lehman Brothers Holdings will not be
registered with the Central Bank of Uruguay pursuant to section 2 of Uruguayan
law 16.749.

Venezuela

This offering is extraterritorial (non-Venezuelan), directed exclusively to
clients of the underwriter and as such, no registrations or authorizations will
be required from the Comision Nacional de Valores.

The underwriter has agreed that it will comply with all applicable laws and
regulations in force in any jurisdiction in which it offers or sells the notes
or possesses or distributes this prospectus supplement, the base prospectus or
any other offering material and will obtain any consent, approval or permission
required by it for the offer or sale by it of the notes under the laws and
regulations in force in any jurisdiction to which it is subject or in which it
makes such offers or sales.

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[GRAPHIC OMITTED]

LEHMAN BROTHERS HOLDINGS INC.

ABSOLUTE BUFFER NOTES DUE MARCH , 2009
LINKED TO THE NIKKEI 225SM INDEX (NKY)

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

PROSPECTUS SUPPLEMENT
MARCH , 2006

(INCLUDING PROSPECTUS
DATED MAY 18, 2005)

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

LEHMAN BROTHERS

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