424B5 1 file1.htm



                                                Filed pursuant to Rule 424(b)(5)
                                               Registration File No.: 333-134553

AMENDMENT NO. 1 DATED AUGUST 3, 2006 TO
PROSPECTUS SUPPLEMENT DATED JULY 31, 2006
(TO PROSPECTUS DATED MAY 30, 2006)

                                   $1,200,000
                          LEHMAN BROTHERS HOLDINGS INC.
                    ABSOLUTE BUFFER NOTES DUE AUGUST 3, 2010
                    LINKED TO A BASKET OF FOUR STOCK INDICES

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

General:

o    Senior unsecured debt securities of Lehman Brothers Holdings.

o    Linked to a basket of four stock indices: the Dow Jones EURO STOXX 50(SM)
     Index, the FTSE 100 Index (TM) , the Nikkei 225(SM) Index and the
     S&P(R)/ASX 200 Index. These indices will initially
     represent 33.3%, 30.5%, 27.1% and 9.1%, respectively, of the basket.

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

o    Minimum initial investment: $10,000.

o    Stated maturity date: August 3, 2010, subject to postponement if the
     valuation date with respect to any component index is postponed.

o    Valuation date: July 29, 2010, subject to postponement with respect to any
     component index if such day is not a measurement day or if a market
     disruption event occurs, in each case with respect to such component index.

o    Upside participation rate: 157%.

o    Threshold level: 800, which is 80% of the initial basket 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 basket return is zero or positive, $1,000 + ($1,000 x the
          upside participation rate x the final basket return).

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

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

The final basket return will equal:

               final basket level - initial basket level
               ------------------------------------------
                        initial basket level

The initial basket level is 1000. The final basket level will generally be the
closing basket level on the valuation date. The closing basket level on any
particular day will generally be based on the closing levels of the component
indices on such day. It will generally equal the sum of the closing level of
the Dow Jones EURO STOXX 50 Index on such date multiplied by .090198, the
closing level of the FTSE 100 Index multiplied by .051448, the closing level of
the Nikkei 225 Index multiplied by .017533 and the closing level of the S&P/ASX
200 Index multiplied by .018251.

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

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

                                                   PER NOTE        TOTAL
                                                  ----------   -------------
Public offering price .........................       100%      $1,200,000
Underwriting discount .........................         0%      $        0
Proceeds to Lehman Brothers Holdings ..........       100%      $1,200,000

Lehman Brothers Holdings has granted the underwriter an option to purchase,
within 13 days of the original issuance, up to an additional $180,000 aggregate
principal amount of notes on the same terms and conditions as set forth above
solely to cover over-allotments, if any.

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

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY RELEVANT FREE
WRITING PROSPECTUS. ANY FREE WRITING PROSPECTUS SHOULD BE READ IN CONNECTION
WITH THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY OTHER
PROSPECTUS SUPPLEMENT REFERRED TO THEREIN. WE HAVE NOT, AND THE AGENT HAS NOT,
AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE
PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON
IT. WE ARE NOT MAKING AN OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION
WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION
APPEARING IN THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY
RELEVANT FREE WRITING PROSPECTUS, AS WELL AS INFORMATION WE HAVE FILED OR WILL
FILE WITH THE SECURITIES AND EXCHANGE COMMISSION AND INCORPORATED BY REFERENCE,
IS ACCURATE AS OF THE DATE OF THE APPLICABLE DOCUMENT OR OTHER DATE REFERRED TO
IN THE DOCUMENT. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.

----------

TABLE OF CONTENTS

PAGE
----
PROSPECTUS SUPPLEMENT
SUMMARY INFORMATION - Q&A ............................................... S-3
RISK FACTORS ............................................................ S-7
USE OF PROCEEDS AND HEDGING ............................................. S-12
RATIO OF EARNINGS TO FIXED CHARGES ...................................... S-12
DESCRIPTION OF THE NOTES ................................................ S-13
THE BASKET .............................................................. S-18
THE DOW JONES EURO STOXX 50 INDEX ....................................... S-19
THE FTSE 100 INDEX ...................................................... S-23
THE NIKKEI 225 INDEX .................................................... S-26
THE S&P/ASX 200 INDEX ................................................... S-29
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES ........................... S-32
CERTAIN ERISA CONSIDERATIONS ............................................ S-35
BOOK-ENTRY ISSUANCE ..................................................... S-36
UNDERWRITING ............................................................ S-38
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-7 to determine whether an investment in the notes is appropriate for
you.

WHAT ARE THE NOTES?

The notes are a series of senior debt of Lehman Brothers Holdings Inc. ("Lehman
Brothers Holdings") whose trading price is linked to the performance of a basket
of four stock indices. The component indices are the Dow Jones EURO STOXX 50
Index, the FTSE 100 Index, the Nikkei 225 Index and the S&P/ASX 200 Index. These
indices will initially represent 33.3%, 30.5%, 27.1% and 9.1%, respectively, of
the basket. See "The Basket", "The Dow Jones EURO STOXX 50 Index," "The FTSE 100
Index," "The Nikkei 225 Index" and "The S&P/ASX 200 Index." The notes will rank
equally with all other unsecured debt of Lehman Brothers Holdings, except
subordinated debt, and will mature on August 3, 2010, subject to postponement if
the valuation date with respect to any component index is postponed.

WHO PUBLISHES THE COMPONENT INDICES AND WHAT DO THEY MEASURE?

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

FTSE 100 Index. The FTSE 100 Index is a stock index published by FTSE
International Limited ("FTSE") that measures the composite price performance of
stocks of the largest 100 companies (determined on the basis of market
capitalization) traded on the London Stock Exchange Plc (the "LSE"). The 100
stocks included in the FTSE 100 are selected from a reference group of stocks
trading on the LSE which are in turn selected by excluding certain stocks that
have low liquidity based on public float, accuracy and reliability of prices,
size and number of trading days. The underlying stocks are selected from this
reference group by selecting 100 stocks with the largest market value. The FTSE
100 Index is a free float capitalization weighted index, which means an
underlying stock's weight in the FTSE 100 Index is based on free float adjusted
market capitalization of the issuer of the underlying stock.

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

S&P/ASX 200 Index. The S&P/ASX 200 Index is a stock index published by the
Standard & Poor's Australian Index Committee (the "ASX Committee") that measures
the composite price performance of stocks of the top 200 companies ranked by
market size on the Australian Stock Exchange (the "ASX"). The S&P/ASX 200 Index
is comprised of the S&P/ASX 100 Index plus an additional 100 stocks selected by
the ASX Committee. The weighting of constituents in the S&P/ASX 200 Index is
determined by the free float assigned to each stock by the ASX Committee.

----------

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

S-3

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

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

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

The final basket return will equal:

final basket level - initial basket level
-----------------------------------------
initial basket level

The upside participation rate is 157%. The threshold level is 800, which is 80%
of the initial basket level (subject to appropriate adjustment by the
calculation agent to reflect adjustments in one or more of the component
indices, if applicable).

The initial basket level is 1000. The final basket level will generally be the
closing basket level on the valuation date, which, except as described below,
will be the third business day before the stated maturity date. The closing
basket level on any particular day will generally be based on the closing levels
of the component indices on such day. It will generally equal the sum of the
closing level of the Dow Jones EURO STOXX 50 Index on such date multiplied by
.090198, the closing level of the FTSE 100 Index multiplied by .051448, the
closing level of the Nikkei 225 Index multiplied by .017533 and the closing
level of the S&P/ASX 200 Index multiplied by .018251. The multipliers have been
fixed on the date of this prospectus supplement so that the component indices
constitute the initial percentages of the basket set forth below under "The
Basket." The multipliers are subject to adjustment under certain circumstances.

If the third business day before the stated maturity date is not a measurement
day with respect to a component index or if the calculation agent determines
that one or more market disruption events have occurred with respect to a
component index on that day, the calculation agent will, subject to certain
limitations, calculate the final basket level using the closing level of any
such affected component index on the next measurement day for which there is no
market disruption event for that component index. With respect to each component
index for which the third business day before the stated maturity date is a
measurement day and for which a market disruption event has not occurred, the
calculation agent will determine the closing level of such component index for
use in calculating the final basket level by reference to the closing index
level of such component index on that measurement day. Postponement of the date
that would otherwise be the valuation date with respect to any component index
will cause the stated maturity date to be postponed until three business days
after the date that the final basket level is determined. In limited
circumstances, the closing level of a component index may be adjusted. See
"Description of the Notes-Payment on the stated maturity date" and
"Description of the Notes-Discontinuance of one or more of the component
indices; 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 basket level on the valuation date is
equal to or greater than the threshold level. If the final basket 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 ON THE STATED MATURITY DATE -- EXAMPLES

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

EXAMPLE 1. ASSUMING THE FINAL BASKET LEVEL ON THE VALUATION DATE IS 1200,
RESULTING IN A FINAL BASKET RETURN OF 20%:

Because the final basket 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 157% x 20%) = $1,314

S-4

As a result, on the stated maturity date, you would receive $1,314 per $1,000
note.

EXAMPLE 2. ASSUMING THE FINAL BASKET LEVEL ON THE VALUATION DATE IS 1000,
RESULTING IN A FINAL BASKET RETURN OF 0%:

Because the final basket 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 157% 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 BASKET LEVEL ON THE VALUATION DATE IS 900,
RESULTING IN A FINAL BASKET RETURN OF -10%:

Because the final basket return is negative and the final basket 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 10%) = $1,100

As a result, on the stated maturity date, you would receive $1,100 per $1,000
note.

EXAMPLE 4. ASSUMING THE FINAL BASKET LEVEL ON THE VALUATION DATE IS 700,
RESULTING IN A FINAL BASKET RETURN OF -30%:

Because the final basket return is negative and the final basket 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 (-30%)) = $700

As a result, on the stated maturity date, you would receive $700 per $1,000
note.

----------

To the extent the final basket level differs from those assumed above, the
results indicated above would be different.

HOW HAVE THE COMPONENT INDICES PERFORMED HISTORICALLY?

Lehman Brothers Holdings has provided tables, in the descriptions of the
component indices, showing the performance of each of the component indices from
January 1, 2001 through July 31, 2006. Lehman Brothers Holdings has provided
this historical information to help you evaluate the behavior of the component
indices so that you can make an informed decision with respect to an investment
in the notes. You should realize, however, that past performance is not
necessarily indicative of how the component indices or the notes will perform in
the future.

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

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

FTSE 100 Index. You can obtain the level of the FTSE 100 Index at any time from
the Bloomberg(R) service under the symbol "UKX," or from the FTSE website, at
www.ftse.com.

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

S&P/ASX 200 Index. You can obtain the level of the S&P/ASX 200 Index at any time
from the Bloomberg(R) service under the symbol "AS51," or from the Standard &
Poor's website, at www.spglobal.com.

ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?

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

WHAT ABOUT TAXES?

No statutory, judicial or administrative authority directly addresses the
characterization of the notes or instruments similar to the notes for United
States federal income tax purposes. Although the issue is not free from doubt,
Lehman Brothers Holdings intends to treat, and by purchasing the notes, for all
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

S-5

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, 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. See
"Prospectus Summary-Lehman Brothers Holdings Inc." and "Where You Can Find More
Information" on pages 1 to 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, 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, whether adjustments should be made to the multipliers, the
basket level or threshold level and whether a market disruption event has
occurred. 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-6

RISK FACTORS

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

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

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

o THE PAYMENT YOU RECEIVE ON THE STATED MATURITY DATE MAY BE LESS THAN THE
PRICE AT WHICH THE NOTES ARE INITIALLY BEING SOLD TO THE PUBLIC. If the
final basket level 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
basket level is zero.

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

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

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

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

o YOUR RETURN WILL NOT BE ADJUSTED FOR CHANGES IN CURRENCY EXCHANGE RATES.
Although the securities underlying the component indices are traded in
foreign currencies and the notes are denominated in U.S. dollars, the
amount payable 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 or equal
to 20% or a percentage increase, as the case may be, in the basket level.
Changes in exchange rates, however, may reflect changes in various non-U.S.
economies, which in turn may affect the levels of the component indices and
the trading price of the notes.

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

The trading prices of the securities underlying the component indices will
determine the basket level. You should realize, however, that past performance
is not necessarily indicative of how the component indices or the notes will
perform in the future. Trading prices of the securities underlying the component
indices will be influenced by complex and interrelated political, economic,
financial and other factors that can affect the markets in which those
securities are traded and the values of the underlying securities themselves.

S-7

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

Price movements in the component indices may not correlate with each other. At a
time when the level of one or more of the component indices increases, the level
of one or more of the other component indices may not increase as much or may
even decline. Therefore, in calculating the final basket level, increases in the
level of one or more of the component indices may be moderated, or wholly
offset, by lesser increases or declines in the level of one or more of the other
component indices, particularly if such indices represent a greater percentage
of the basket at that time. You can review the historical prices of each of the
component indices for each fiscal quarter in the period from January 1, 2001
through July 31, 2006 below in the descriptions of the component indices. You
should realize, however, that past performance is not necessarily indicative of
how the component indices or the notes will perform in the future. In addition,
the final basket level may not be higher than the threshold level, which must be
so for you to receive on the stated maturity date an amount in excess of the
price at which the notes are initially being sold to the public.

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

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

THE NOTES MAY NOT BE ACTIVELY TRADED.

There may be little or no secondary market for the notes. The notes will not be
listed on 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 TRADING PRICE OF THE NOTES WILL BE AFFECTED BY NUMEROUS FACTORS, SOME OF
WHICH ARE RELATED IN COMPLEX WAYS.

The trading price of the notes in the secondary market will be affected by
supply and demand of the notes, the basket 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 basket level and where it is in relationship to the initial basket
level and the threshold level. A change in a specific factor could have the
following impacts on the trading price of the notes, assuming all other
conditions remain constant.

o BASKET PERFORMANCE. Lehman Brothers Holdings expects that the trading price
of the notes will depend substantially on the performance of the basket at
any given point in time. If you decide to sell your notes prior to the
stated maturity date when the basket 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
basket level on the date you sell your notes because of expectations that
the basket 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 basket 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 component indices are likely to directly
affect the levels of those component indices and could indirectly affect
the trading price of the notes.

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

o VOLATILITY OF THE COMPONENT INDICES. Volatility is the term used to
describe the size and frequency of market fluctuations. If the volatility
of the levels of the component

S-8

indices changes, the trading price of the notes may be adversely affected.
Lehman Brothers Holdings is unable to predict the effect of these events on the
future levels or volatility of the component indices.

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

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

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

o TIME REMAINING TO MATURITY. The trading price 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 price of the notes.

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

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

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

o LEVEL OF THE BASKET FROM THE DATE OF THE PROSPECTUS SUPPLEMENT. If the
closing level of the basket falls below the threshold level during the term
of the notes, the trading price 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 price of the notes attributable to another factor, such as an
increase in the basket level. In general, assuming all relevant factors are held
constant, the effect on the trading price of the notes of a given change in most
of the factors listed above will be less if it occurs later than if it occurs
earlier in the term of the notes.

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

The indices included in the basket are comprised of securities issued by foreign
companies and are denominated in foreign currencies. You should be aware that
investments in securities linked to the price of foreign equity securities
involve particular

S-9

risks. Foreign securities markets may be more volatile than U.S. securities
markets, and market developments may affect a foreign market differently from
U.S. or other securities markets. Direct or indirect government intervention to
stabilize the foreign securities markets, as well as cross-shareholdings in
foreign companies, may affect trading prices and volume in those markets. Also,
there is generally less publicly available information about foreign companies
that are not subject to the reporting requirements of the SEC, and foreign
companies are subject to accounting, auditing and financial reporting standards
and requirements that differ from those applicable to U.S. reporting companies.

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

TIME DIFFERENCES BETWEEN THE CITIES WHERE THE COMPONENT INDICES TRADE AND NEW
YORK CITY MAY CREATE DISCREPANCIES IN TRADING LEVELS.

As a result of the time difference between the cities where the securities
underlying the component indices trade and New York City (where the notes may
trade), there may be discrepancies between the levels of the component indices
and the trading prices of the notes. In addition, there may be periods when the
foreign securities markets are closed for trading (for example during holidays
in a foreign country), as a result of which the levels of the component indices
remain unchanged for multiple trading days in New York City.

ADJUSTMENTS TO THE COMPONENT INDICES COULD ADVERSELY AFFECT THE TRADING PRICE OF
THE NOTES.

The policies of a publisher of a component index concerning additions, deletions
and substitutions of the securities underlying such component index and the
manner in which such publisher takes account of certain changes affecting such
underlying securities may affect the level of the basket. The policies of the
publisher of a component index with respect to the calculation of such component
index could also affect the level of the basket. The publisher of a component
index may discontinue or suspend calculation or dissemination of such component
index or materially alter the methodology by which it calculates such component
index. Any such actions could affect the trading price of the notes. See
"Description of the Notes-Discontinuance of one or more of the component
indices; Alteration of method of calculation" and "The Dow Jones EURO STOXX 50
Index," "The FTSE 100 Index," "The Nikkei 225 Index" and "The S&P/ASX 200
Index."

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

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

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

Each publisher of a component index provides and services such component index.
Lehman Brothers Holdings and its affiliates are not affiliated with the
publishers of the component indices in any way (except for licensing
arrangements discussed below in "The Dow Jones EURO STOXX 50 Index," "The FTSE
100 Index," "The Nikkei 225 Index" and "The S&P/ASX 200 Index") and have no
ability to control or predict their actions, including any errors in or
discontinuation of disclosure regarding their methods or policies relating to
the calculation of the component indices. See "Description of the Notes-Market
disruption events" and "Description of the Notes-Discontinuance of one or more
of the component indices; Alteration of method of calculation." The publishers
of the component indices are not involved in this offering of notes in any way
and have no obligation to consider your interests as

S-10

an owner of the notes in taking any actions that might affect the trading price
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
component indices or the publishers of such component indices contained in this
prospectus supplement or any public disclosure of information by such
publishers. You, as an investor in the notes, should make your own investigation
into the component indices and the publishers of such component indices.

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

Lehman Brothers Inc. will act as the calculation agent, which determines the
amount you will receive on the notes on the stated maturity date, whether
adjustments should be made to the multipliers, the basket 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 one or more of the component indices; Alteration of
method of calculation" and "Description of the Notes-Market disruption events."

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

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

YOU HAVE NO SHAREHOLDER RIGHTS.

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

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

Investors should consider the tax consequences of investing in the notes. No
statutory, judicial or administrative authority directly addresses the
characterization of the notes or instruments similar to the notes for United
States federal income tax purposes. As a result, significant aspects of the
United States federal income tax consequences of an investment in the notes are
not certain. Lehman Brothers Holdings is not requesting any ruling from the
Internal Revenue Service with respect to the notes and cannot assure you that
the Internal Revenue Service will agree with the treatment described in this
document. 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-11

USE OF PROCEEDS AND HEDGING

All or 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 component indices 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 component indices or those
securities underlying the component indices, to hedge Lehman Brothers Holdings'
obligations under the notes. The balance of the proceeds will be used for
general corporate purposes. These hedging techniques will result in nominal
transaction costs to Lehman Brothers Holdings. See "Use of Proceeds" on page 7
of the accompanying prospectus.

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

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

RATIO OF EARNINGS TO FIXED CHARGES

YEAR ENDED NOVEMBER 30, SIX
-------------------------------- MONTHS ENDED
2001 2002 2003 2004 2005 JUNE 30, 2006
---- ---- ---- ---- ---- -------------
1.11 1.13 1.29 1.36 1.28 1.23

S-12

DESCRIPTION OF THE NOTES

GENERAL

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

o the accompanying prospectus; and

o this prospectus supplement.

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

Lehman Brothers Holdings may initially issue up to $1,200,000 ($1,380,000 if the
underwriter's over-allotment option is exercised in full) aggregate principal
amount of notes. Lehman Brothers Holdings may, without the consent of the
holders of the notes, create and issue additional notes ranking equally with the
notes and otherwise similar in all respects so that such further notes shall be
consolidated and form a single series with the notes. No additional notes can be
issued if an event of default has occurred with respect to the notes.

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

INTEREST

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

PAYMENT ON THE STATED MATURITY DATE

The notes will mature on August 3, 2010, subject to postponement if the
valuation date with respect to any component index 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 basket return is zero or positive, $1,000 + ($1,000 x the
upside participation rate x the final basket return).

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

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

The final basket return will equal:

final basket level - initial basket level
-----------------------------------------
initial basket level

o with respect to each component index for which such day is a
measurement day and for which a market disruption event has not

S-13

occurred, determine the closing level of the component index for use
in calculating the final basket level by reference to the closing
level of the component index on that measurement day; and

o with respect to each component index for which such day is not a
measurement day or for which a market disruption event has occurred,
determine the closing level of the component index for use in
calculating the final basket level by reference to the closing level
of the component index on the next measurement day for the component
index on which there is not a market disruption event; provided,
however, if a market disruption event with respect to the component
index occurs on each of the eight measurement days following the
originally scheduled valuation date, then the calculation agent shall
determine the closing level of that component index for use in
calculating the final basket level based upon its good faith estimate
of the closing level of the component index on that eighth measurement
day.

In the event of any such delay in the determination of the final basket level,
the day on which the closing level of the last remaining component index is
determined for purposes of calculating the final basket level shall be deemed
the valuation date. Any such postponement of the date that would otherwise be
the valuation date with respect to any component index will cause the stated
maturity date to be postponed until three business days after the date that the
final basket level is determined.

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

A "measurement day" means (a) with respect to each of the Dow Jones EURO STOXX
50 Index, the FTSE 100 Index and the S&P/ASX 200 Index (and any successor
indices), any day on which such index (or any successor index) is published by
its publisher or is otherwise determined by the calculation agent as described
in the following section and (b) with respect to the Nikkei 225 Index, 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 ONE OR MORE OF THE COMPONENT INDICES; ALTERATION OF METHOD OF
CALCULATION

If a publisher of one or more of the component indices discontinues publication
of such component index and such publisher or another entity publishes a
successor or substitute index that the calculation agent determines, in its sole
discretion exercised in good faith, to be comparable to the discontinued
component index, then the calculation agent shall determine each subsequent
closing basket level to be used in computing the amount payable on the stated
maturity date by reference to the closing level of such successor index on the
applicable date.

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

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

If at any time the method of calculating a component index, any successor index
or the closing level thereof on any particular day is changed in a material

S-14

respect, or if a component index or any successor index is in any other way
modified so that such index does not, in the opinion of the calculation agent,
fairly represent the level of such component index or such successor index had
such changes or modifications not been made, then, from and after such time, the
calculation agent will, at the close of trading of the relevant exchanges on
which the securities comprising such component index or such successor index
traded on any date the closing level thereof is to be determined, make such
calculations and adjustments as, in its good faith judgment, may be necessary in
order to arrive at a level of a stock index comparable to such component index
or such successor index, as the case may be, as if such changes or modifications
had not been made. The calculation agent will calculate the closing level of a
component index on any particular day and the amount payable on the stated
maturity date with reference to such component index or such successor index, as
adjusted. The "relevant exchange" for any security (or any combination thereof
then underlying any component index or any successor index) means the primary
exchange, quotation system (which includes bulletin board services) or other
market of trading for such security.

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

MARKET DISRUPTION EVENTS

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

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

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

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

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

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

o the relevant percentage contribution of a security to the level of a
component index or any successor index will be based on a comparison of (x)
the portion of the level of such component index or successor index
attributable to that security and (y) the overall level of such component
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

S-15

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.

HYPOTHETICAL RETURNS

The table below illustrates, for a range of hypothetical final basket levels
calculated on the valuation:

o the hypothetical percentage change from the initial basket level (which is
the hypothetical final basket 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 BASKET LEVEL INITIAL BASKET LEVEL PER $1,000 NOTE RETURN RATE OF RETURN
------------------ -------------------- -------------------- ------------- ------------------

0.00 -100% $ 0 -100.00% -100.00%
200.00 -80 200 -80.00 -33.13
400.00 -60 400 -60.00 -20.47
600.00 -40 600 -40.00 -11.99
700.00 -30 700 -30.00 -8.53
800.00(1) -20 1,200 20.00 4.66
900.00 -10 1,100 10.00 2.41
1000.00 0 1,000 0.00 0.00
1200.00 20 1,314 31.40 7.07
1400.00 40 1,628 62.80 12.96
1600.00 60 1,942 94.20 18.05
1800.00 80 2,256 125.60 22.56
2000.00 100 2,570 157.00 26.61

----------
(1) This figure reflects the 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 basket level and the amount
payable on the stated maturity date determined by the calculation agent. In
particular, the actual final basket 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.

S-16

CALCULATION AGENT

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

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

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

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

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

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

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

o whether a market disruption event has occurred.

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

EVENTS OF DEFAULT AND ACCELERATION

If an event of default with respect to any notes has occurred and is continuing,
the amount payable to you upon any acceleration permitted under the senior
indenture will be equal to, per $1,000 note, the amount that would have been
payable at maturity, calculated as though the date of acceleration was the
stated maturity date 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-17

THE BASKET

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

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

INITIAL
INITIAL COMPONENT INITIAL INITIAL WEIGHT PERCENTAGE OF THE
COMPONENT INDEX BLOOMBERG TICKER INDEX LEVEL MULTIPLIER IN THE BASKET BASKET
----------------------- ---------------- ----------------- ---------- -------------- -----------------

The Dow Jones EURO
STOXX 50 Index...... SX5E 3691.87 .090198 333 33.3%
The FTSE 100 Index..... UKX 5928.30 .051448 305 30.5%
The Nikkei 225 Index... NKY 15456.81 .017533 271 27.1%
The S&P/ASX 200 Index.. AS51 4986.00 .018251 91 9.1%
---- -----
1000 100.0%
==== =====

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

S-18

THE DOW JONES EURO STOXX 50 INDEX

GENERAL

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

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

INDEX COMPOSITION AND MAINTENANCE

The Dow Jones EURO STOXX 50 Index is composed of 50 component stocks of market
sector leaders from within the Dow Jones EURO STOXX Supersector indexes, which
includes stocks selected from the Eurozone. The component stocks have a high
degree of liquidity and represent the largest companies across all supersectors
as defined by the Dow Jones Global Classification Standard. Set forth below are
the country weightings and industrial sector weightings of the securities
included in the Dow Jones EURO STOXX 50 Index as of June 30, 2006:

COUNTRY WEIGHTINGS

France ....................... 34.9%
Germany....................... 23.3%
Spain......................... 13.5%
The Netherlands............... 12.0%
Italy......................... 11.8%
Finland....................... 3.5%
Ireland....................... 0.9%

INDUSTRIAL SECTOR WEIGHTINGS

Banks.......................... 25.5%
Insurance...................... 12.2%
Utilities...................... 11.0%
Oil & Gas...................... 10.7%
Telecommunications............. 7.8%
Technology..................... 6.2%
Healthcare..................... 4.2%
Chemicals...................... 4.1%
Personal & Household Goods..... 3.6%
Industrial Goods & Services.... 3.0%
Automobiles & Parts............ 2.9%
Food & Beverage................ 2.9%
Retail......................... 2.1%
Construction & Materials....... 1.9%
Media.......................... 1.7%

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

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

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

INDEX CALCULATION

The Dow Jones EURO STOXX 50 Index is calculated with the "Laspeyres formula,"
which measures the

S-19

aggregate price changes in the component stocks against a fixed base quantity
weight. The formula for calculating the EURO STOXX 50 Index value can be
expressed as follows:

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

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

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

(1) Split and reverse split:

Adjusted price = closing price * A/B

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

Divisor: no change

(2) Rights offering:

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

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

Divisor: increases

(3) Stock dividend:

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

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

Divisor: no change

(4) Stock dividend of another company:

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

Divisor: decreases

(5) Return of capital and share consolidation:

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

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

Divisor: decreases

(6) Repurchase shares / self tender:

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

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

Divisor: decreases

(7) Spin-off:

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

Divisor: decreases

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

For this corporate action, the following additional assumptions apply:

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

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

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

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

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

Divisor: increases

S-20

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

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

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

Divisor: increases

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

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

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

Divisor: increases

HISTORICAL INFORMATION

The following table sets forth the high and low level, as well as the
end-of-quarter closing levels, of the Dow Jones EURO STOXX 50 Index for each
quarter in the period from January 1, 2001 through July 31, 2006. The closing
level on July 31, 2006 was 3691.87. The results shown should not be considered
as a representation of the income, yield or capital gain or loss that may be
generated by the Dow Jones EURO STOXX 50 Index in the future. The historical
levels of the Dow Jones EURO STOXX 50 Index are not necessarily indicative of
future performance.

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

HIGH LOW PERIOD-END
------- ------- ----------
2001
First Quarter ................................. 4787.45 3891.49 4185.00
Second Quarter ................................ 4582.07 4039.16 4243.91
Third Quarter ................................. 4304.44 2877.68 3296.66
Fourth Quarter ................................ 3828.76 3208.31 3806.13
2002
First Quarter ................................. 3833.09 3430.18 3784.05
Second Quarter ................................ 3748.44 2928.72 3133.39
Third Quarter ................................. 3165.47 2187.22 2204.39
Fourth Quarter ................................ 2669.89 2150.27 2386.41
2003
First Quarter ................................. 2529.86 1849.64 2036.86
Second Quarter ................................ 2527.44 2067.23 2419.51
Third Quarter ................................. 2641.55 2366.86 2395.87
Fourth Quarter ................................ 2760.66 2434.63 2760.66
2004
First Quarter ................................. 2959.71 2702.05 2787.49
Second Quarter ................................ 2905.88 2659.85 2811.08
Third Quarter ................................. 2806.62 2580.04 2726.30
Fourth Quarter................................. 2955.11 2734.37 2951.24
2005
First Quarter ................................. 3114.54 2924.01 3055.73
Second Quarter................................. 3190.80 2930.10 3181.54
Third Quarter.................................. 3429.42 3170.06 3428.51
Fourth Quarter................................. 3616.33 3241.14 3578.93
2006
First Quarter ................................. 3874.61 3532.68 3853.74
Second Quarter................................. 3890.94 3408.02 3648.92
Third Quarter (through July 31)................ 3710.60 3492.11 3691.87

S-21

LICENSE AGREEMENT BETWEEN STOXX AND LEHMAN BROTHERS HOLDINGS

Lehman Brothers Holdings has entered into a non-transferable, non-exclusive
license agreement with

STOXX, which grants Lehman Brothers Holdings a license in exchange for a fee to
use the Dow Jones EURO STOXX 50 Index in connection with the issuance of the
notes.

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

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

STOXX and Dow Jones Company, Inc. do not:

o sponsor, endorse, sell or promote the notes;

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

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

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

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

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

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

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

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

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

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

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

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

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

S-22

THE FTSE 100 INDEX

GENERAL

Lehman Brothers Holdings obtained all information contained in this prospectus
supplement regarding the FTSE 100 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, FTSE. FTSE has no obligation to continue to publish, and may
discontinue publication of, the FTSE 100 Index. The consequences of FTSE
discontinuing publication of the FTSE 100 Index are described in the section
entitled "Description of the Notes-Discontinuance of one or more of the
component indices; Alteration of method of calculation." Lehman Brothers
Holdings makes no representation or warranty as to the accuracy or completeness
of any information relating to the FTSE 100 Index.

The FTSE 100 Index is calculated, published and disseminated by FTSE, a company
owned equally by the LSE and The Financial Times Limited (the "FT"), in
association with the Institute and the Faculty of Actuaries. The FTSE 100 was
first calculated on January 3, 1984 with an initial base level index value of
1000 points. Publication of the FTSE 100 Index began in February 1984. Real-time
FTSE indices are calculated on systems managed by Reuters. Prices and foreign
exchange rates used are supplied by Reuters.

INDEX COMPOSITION AND MAINTENANCE

The FTSE 100 Index is a free float weighted index that measures the composite
price performance of stocks of the largest 100 companies (determined on the
basis of market capitalization) traded on the LSE. The 100 stocks included in
the FTSE 100 Index are selected from a reference group of stocks trading on the
LSE which are in turn selected by excluding certain stocks that have low
liquidity based on public float, accuracy and reliability of prices, size and
number of trading days. The underlying stocks are selected from this reference
group by selecting 100 stocks with the largest market value.

FTSE, the publisher of the FTSE 100 Index, is responsible for calculating,
publishing and disseminating the FTSE 100 Index. The FTSE 100 Index is overseen
by the FTSE's EMEA (Europe, Middle East and Africa) Committee, made up of
independent senior industry representatives, which is responsible for the index
review process.

FTSE can add, delete or substitute the stocks underlying the FTSE 100 Index or
make other methodological changes that could change the value of the FTSE 100
Index. FTSE may discontinue or suspend calculation or dissemination of the FTSE
100 Index. Constituents of the FTSE 100 Index are reviewed quarterly in March,
June, September and December, by an index steering committee of the LSE, in
order to maintain continuity in the level of the index. FTSE prepares
information regarding possible companies to be included or excluded from the
FTSE 100 Index using the close of business figures from the Tuesday before a
review. The review is then presented to the index steering committee for
approval. The meetings to review the constituents are held on the Wednesday
after the first Friday in March, June, September and December. Any constituent
changes will be implemented on the next trading day following the expiry of the
London International Financial Futures Exchange futures and options contracts,
which normally takes place on the third Friday of the same month.

Changes to the constituents can be prompted by new listings on the exchange,
corporate actions (e.g., mergers and acquisitions) or an increase or decrease in
a market capitalization. The underlying stocks may be replaced, if necessary, in
accordance with deletion/addition rules which provide generally for the removal
and replacement of a stock from the FTSE 100 Index if such stock is delisted or
its issuer is subject to a takeover offer that has been declared unconditional
or it has ceased, in the opinion of the index steering committee, to be a viable
component of the FTSE 100 Index. To maintain continuity, a stock will be added
at the quarterly review if it has risen to 90th place or above and a stock will
be deleted if at the quarterly review it has fallen to 111th place or below, in
each case ranked on the basis of market capitalization.

INDEX CALCULATION

The FTSE 100 Index is calculated by: (i) multiplying the per share price of each
stock included in the FTSE 100 Index by the number of outstanding shares; (ii)
calculating the sum of all these products (such sum, the "FTSE Aggregate Market
Value") as of the starting date of the FTSE 100 Index; (iii) dividing the FTSE
Aggregate Market Value by a divisor which represents the FTSE Aggregate Market
Value on the base date of the FTSE 100 Index and which can be adjusted to allow
changes in the issued share capital of

S-23

individual underlying stocks including the deletion and addition of stocks, the
substitution of stocks, stock dividends and stock splits to be made without
distorting the FTSE 100 Index; and (iv) multiplying the result by 1000.

HISTORICAL INFORMATION

The following table sets forth the high and low level, as well as the
end-of-quarter closing levels, of the FTSE 100 Index for each quarter in the
period from January 1, 2001 through July 31, 2006. The closing level on July 31,
2006 was 5928.30. 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 FTSE
100 Index in the future. The historical levels of the FTSE 100 Index are not
necessarily indicative of future performance.

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

HIGH LOW PERIOD-END
------- ------- ----------
2001
First Quarter ................................. 6334.50 5314.80 5633.70
Second Quarter ................................ 5976.60 5463.10 5642.50
Third Quarter ................................. 5716.70 4433.70 4903.40
Fourth Quarter ................................ 5369.80 4785.60 5217.40
2002
First Quarter ................................. 5323.80 5024.10 5271.80
Second Quarter ................................ 5263.90 4531.00 4656.40
Third Quarter ................................. 4685.80 3671.10 3721.80
Fourth Quarter ................................ 4190.00 3730.50 3940.40
2003
First Quarter ................................. 4009.50 3287.00 3613.30
Second Quarter ................................ 4207.00 3684.80 4031.20
Third Quarter ................................. 4314.70 3963.90 4091.30
Fourth Quarter ................................ 4476.90 4169.20 4476.90
2004
First Quarter ................................. 4559.10 4309.40 4385.70
Second Quarter ................................ 4575.70 4395.20 4464.10
Third Quarter ................................. 4608.40 4287.00 4570.80
Fourth Quarter................................. 4820.10 4564.50 4814.30
2005
First Quarter ................................. 5060.80 4783.60 4894.40
Second Quarter................................. 5114.40 4789.40 5113.20
Third Quarter.................................. 5494.80 5158.30 5477.70
Fourth Quarter................................. 5638.30 5142.10 5618.80
2006
First Quarter ................................. 6036.30 5633.80 5964.60
Second Quarter ................................ 6132.70 5506.80 5833.40
Third Quarter (through July 31)................ 5974.90 5681.70 5928.30

LICENSE AGREEMENT BETWEEN FTSE AND LEHMAN BROTHERS HOLDINGS

Lehman Brothers Holdings has entered into a non-transferable, non-exclusive
license agreement with FTSE, which grants Lehman Brothers Holdings a license in
exchange for a fee to use the FTSE 100 Index in connection with the issuance of
the notes.

All rights to the FTSE 100 Index are owned by FTSE, the publisher of the FTSE
100 Index. Lehman Brothers Holdings, the calculation agent and the trustee
disclaim all responsibility for the calculation or other maintenance of or any
adjustments to the FTSE 100 Index. In addition, none of the LSE, the FT and FTSE
has any relationship to Lehman Brothers Holdings or the notes. None of the LSE,
the FT and the FTSE sponsors, endorses, authorizes, sells or promotes the notes,
or has any obligation or liability in connection with the administration,
marketing or trading of the notes or with the calculation of the amount payable
on the stated maturity date.

S-24

THESE NOTES ARE NOT IN ANY WAY SPONSORED, ENDORSED, SOLD OR PROMOTED BY FTSE OR
BY THE LSE OR BY THE FT AND NEITHER FTSE OR THE LSE OR THE FT MAKES ANY WARRANTY
OR REPRESENTATION WHATSOEVER, EXPRESSLY OR IMPLIEDLY, EITHER AS TO THE RESULTS
TO BE OBTAINED FROM THE USE OF THE FTSE 100 INDEX AND/OR THE FIGURE AT WHICH THE
FTSE 100 INDEX STANDS AT ANY PARTICULAR TIME ON ANY PARTICULAR DAY OR OTHERWISE.
THE FTSE 100 INDEX IS COMPILED AND CALCULATED SOLELY BY FTSE. HOWEVER, NEITHER
FTSE OR LSE OR THE FT SHALL BE LIABLE (WHETHER IN NEGLIGENCE OR OTHERWISE) TO
ANY PERSON FOR ANY ERROR IN THE FTSE 100 INDEX AND NEITHER FTSE OR THE LSE OR
THE FT SHALL BE UNDER ANY OBLIGATION TO ADVISE ANY PERSON OF ANY ERROR THEREIN.

"FTSE(TM)" and "FTSE 100 Index(TM)" are trademarks of the LSE and the FT and are
used by FTSE under license.

S-25

THE NIKKEI 225 INDEX

GENERAL

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

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

COMPOSITION OF THE NIKKEI 225 INDEX

As of July 31, 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 (29), Automotive (9),
Precision Instruments (6), 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 (7), Pulp & Paper (4), Chemicals
(16), Oil & Coal Products (3), Rubber Products (2), Glass & Ceramics (8),
Steel Products (4), Nonferrous Metals (11), Trading Companies (8)

Capital Goods/Others -- Construction (9), Machinery (14), Shipbuilding (2),
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 24.290 as of April 4, 2006, 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-26

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 trading price 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 July 31, 2006.
The closing level on July 31, 2006 was 15456.81. 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 necessarily indicative of future performance.

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

S-27

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 ............................... 17059.66 15341.18 17059.66
Second Quarter .............................. 17563.37 14218.60 15505.18
Third Quarter (through July 31) ............. 15638.50 14437.24 15456.81

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-28

THE S&P/ASX 200 INDEX

GENERAL

Lehman Brothers Holdings obtained all information contained in this prospectus
supplement regarding the S&P/ASX 200 Index, including, without limitation, its
make-up, method of calculation and changes in its components, from publicly
available information. That information reflects the policies of, and is subject
to change by, the ASX Committee. The ASX Committee has no obligation to continue
to publish, and may discontinue publication of, the S&P/ASX 200 Index. The
consequences of ASX Committee discontinuing publication of the S&P/ASX 200 Index
are described in the section entitled "Description of the Notes-Discontinuance
of one or more of the component indices; Alteration of method of calculation."
Lehman Brothers Holdings makes no representation or warranty as to the accuracy
or completeness of any information relating to the S&P/ASX 200 Index.

The S&P/ASX 200 Index is Australia's premier large capitalization tradeable
equity index, and is Australia's institutional benchmark. The S&P/ASX 200 Index
was introduced in April 2000 and is maintained by the ASX Committee, a team of
representatives from both Standard and Poor's, a division of McGraw-Hill, Inc.
("S&P"), and the ASX.

INDEX COMPOSITION AND MAINTENANCE

The S&P/ASX 200 is comprised of the S&P/ASX 100 stocks plus an additional 100
stocks selected by the ASX Committee. As of June 30, 2006, the S&P/ASX 200 Index
represented approximately 78% of the total market capitalization of the
Australian market. The index essentially covers large-cap and mid-cap stocks
evaluated for liquidity and size. The S&P/ASX 200 Index weights companies
according to the Global Industry Classification Standard (GICS(R))(SM), which
creates uniform ground rules for replicable, custom-tailored, industry-focused
portfolios. It also enables meaningful comparisons of sectors and industries
across regions. Sector indices are available for the S&P/ASX 200 Index. Global
Industry Classification Standard (GICS) (SM) and GICS(SM) are service marks of
S&P and Morgan Stanley Capital International Inc., and GICS(R) is a trademark of
S&P and Morgan Stanley Capital International Inc.

Set forth below are the sector breakdowns of the securities included in the
S&P/ASX 200 Index as of June 30, 2006:

SECTOR BREAKDOWN
----------------

Financials-x-Property.......... 44.0%
Materials...................... 22.3%
Industrials.................... 8.0%
Consumer Staples............... 6.6%
Consumer Discretionary......... 5.3%
Energy......................... 5.3%
Health Care.................... 3.3%
Telecommunications Services.... 2.6%
Utilities...................... 1.9%
Information Technology......... 0.6%

The ASX Committee reviews constituents quarterly to ensure adequate market
capitalization and liquidity. Both market capitalization and liquidity are
assessed using the previous six months' worth of data. Quarterly review changes
take effect on the third Friday of December, March, June and September. The
weighting of constituents in the S&P/ASX 200 Index is determined by the free
float assigned to each stock by the ASX Committee. Each index constituent's free
float is reviewed as part of the March quarterly review.

Only stocks listed on the ASX are considered for inclusion in the S&P/ASX 200
Index. Stocks are assessed based on the average of their previous six-month
day-end free float adjusted market capitalization. Only stocks that are actively
and regularly traded are considered for inclusion in the S&P/ASX 200 Index. A
stock's liquidity is measured relative to its size peers. A minimum free float
threshold of 30% exists for a stock to warrant inclusion in the S&P/ASX 200
Index.

INDEX CALCULATION

The S&P/ASX 200 Index has a base value of 3000. Calculation for the S&P/ASX 200
Index is based on stock prices taken from the ASX. The official daily index
closing values for price and accumulation indices are calculated after the
market closes and are based on the last traded price for each constituent.

HISTORICAL INFORMATION

The following table sets forth the high and low level, as well as the
end-of-quarter closing levels, of the

S-29

S&P/ASX 200 Index for each quarter in the period from January 1, 2001 through
July 31, 2006. The closing level on July 31, 2006 was 4986.00. 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 S&P/ASX 200 Index in the future. The
historical levels of the S&P/ASX 200 Index are not necessarily indicative of
future performance.

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

HIGH LOW PERIOD-END
------- ------- ----------
2001
First Quarter ................................. 3364.30 3145.30 3147.20
Second Quarter ................................ 3490.30 3192.30 3490.30
Third Quarter ................................. 3450.00 2924.60 3049.50
Fourth Quarter ................................ 3427.10 3098.90 3422.30
2002
First Quarter ................................. 3497.60 3384.40 3414.80
Second Quarter ................................ 3414.10 3179.40 3216.00
Third Quarter ................................. 3258.40 2970.90 2970.90
Fourth Quarter ................................ 3083.80 2896.60 3007.10
2003
First Quarter ................................. 3077.00 2700.40 2885.20
Second Quarter ................................ 3112.30 2882.20 3025.80
Third Quarter ................................. 3235.30 3028.40 3169.50
Fourth Quarter ................................ 3303.70 3159.20 3299.80
2004
First Quarter ................................. 3438.40 3262.00 3415.30
Second Quarter ................................ 3554.50 3345.50 3532.90
Third Quarter ................................. 3665.00 3468.30 3665.00
Fourth Quarter................................. 4054.90 3659.60 4050.60
2005
First Quarter ................................. 4266.40 4029.90 4109.90
Second Quarter ................................ 4312.20 3947.10 4277.50
Third Quarter ................................. 4671.70 4229.20 4641.20
Fourth Quarter ................................ 4772.50 4357.20 4763.40
2006
First Quarter ................................. 5129.70 4776.00 5129.70
Second Quarter ................................ 5364.50 4838.90 5073.90
Third Quarter (through July 31) ............... 5142.80 4900.10 4986.00

LICENSE AGREEMENT BETWEEN S&P AND LEHMAN BROTHERS HOLDINGS

Lehman Brothers Holdings has entered into a non-exclusive license agreement with
S&P, which grants Lehman Brothers Holdings and certain of its affiliated or
subsidiary companies a license in exchange for a fee to use the S&P/ASX 200
Index in connection with certain securities, including the notes.

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

The notes are not sponsored, endorsed, sold or promoted by S&P or ASX. S&P and
ASX make no representation, condition or warranty, express or implied, to the
owners of the notes or any member of the public regarding the advisability of
investing in securities generally or in the notes particularly or the ability of
the S&P/ASX 200 Index to track general stock market performance. S&P's only
relationship to Lehman Brothers Holdings is the licensing of certain trademarks
and trade names of S&P and of the S&P/ASX 200 Index which is determined,
composed and calculated by S&P without regard to Lehman Brothers Holdings or the
notes. S&P has no obligation to take the needs of Lehman Brothers Holdings or
the owners of the notes into consideration in determining, composing or
calculating the S&P/ASX 200 Index. S&P is not responsible for and has not
participated in the

S-30

determination of the timing of, prices at, or quantities of the notes to be
issued or in the determination or calculation of the equation by which the notes
are to be converted into cash. S&P and ASX have no obligation or liability in
connection with the administration, marketing or trading of the notes.

S&P SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF
THE S&P INDEXES FROM SOURCES THAT S&P CONSIDERS RELIABLE, BUT S&P ACCEPTS NO
RESPONSIBILITY FOR, AND SHALL HAVE NO LIABILITY FOR, ANY ERRORS, OMISSIONS OR
INTERRUPTIONS THEREIN. S&P AND ASX DO NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE S&P INDEXES OR ANY DATA INCLUDED THEREIN. S&P AND ASX MAKE
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE RESULTS TO BE OBTAINED BY ANY PERSON
OR ENTITY FROM THE USE OF THE S&P INDEXES OR ANY DATA INCLUDED THEREIN. S&P AND
ASX MAKE NO EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIM ALL CONDITIONS
AND WARRANTIES IMPLIED BY STATUTE, GENERAL LAW OR CUSTOM WITH RESPECT TO THE S&P
INDEXES OR ANY DATA INCLUDED THEREIN EXCEPT ANY IMPLIED CONDITION OR WARRANTY
THE EXCLUSION OF WHICH WOULD CONTRAVENE ANY STATUTE OR CAUSE ANY PART OF THIS
SECTION TO BE VOID.

S-31

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-32

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 basket level 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 WITHHOLDING 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 a note to the
extent an issuer of stock underlying an index in the basket is not a United
States real property holding corporation as defined in Section 897(c)(2) of the
Code.

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 INCOME TAX

Based on the treatment of the notes described above, any gain or income realized
upon payments received at maturity in respect of the note or any sale, exchange
or other disposition of a note generally will not be subject to United States
federal income tax unless (i) the gain or income is effectively connected with a
trade or business in the United States of a non-United States holder, (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
payments received at maturity in respect of the note or any sale, exchange or
other disposition, and certain other conditions are met or (iii) possibly to the
extent the issuer or issuers of stock underlying an index in the basket are
United States real property holding corporations.

S-33

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.

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, Lehman Brothers Holdings must
report annually to the Internal Revenue Service and to you the amount of all
payments paid to you and the amount of tax, if any, withheld with respect to
those payments. Copies of the information returns reporting withholding may also
be made available to the tax authorities in the country in which you reside
under the provisions of an applicable income tax treaty. In general, 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-34

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-35

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-36

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-37

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. 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 $180,000
additional aggregate principal amount of notes solely to cover over-allotments.
To the extent that the option is exercised, the underwriter will be committed,
subject to certain conditions, to purchase the additional notes. If this option
is exercised in full, the total public offering price, underwriting discount and
proceeds to Lehman Brothers Holdings would be $1,380,000, $0 and $1,380,000,
respectively.

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

Lehman Brothers Holdings or an affiliate has entered into swap agreements or
related hedge transactions with one of Lehman Brothers Holdings' other
affiliates or unaffiliated counterparties in connection with the sale of the
notes and Lehman Brothers Inc. and/or an affiliate has earned additional income
as a result of payments pursuant to the swap, or related hedge transactions.

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

S-38

(a) 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;

(b) 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;

(c) 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

(d) 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.

S-39

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).

United Kingdom

The underwriter has represented and agreed that:

(a) 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

(b) 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.

General

The underwriter has agreed that it will, to its best knowledge after due
inquiry, 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.

S-40








                                   $1,200,000




                          LEHMAN BROTHERS HOLDINGS INC.



                    ABSOLUTE BUFFER NOTES DUE AUGUST 3, 2010
                    LINKED TO A BASKET OF FOUR STOCK INDICES



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

                     AMENDMENT NO. 1 DATED AUGUST 3, 2006 TO
                              PROSPECTUS SUPPLEMENT
                               DATED JULY 31, 2006


                              (INCLUDING PROSPECTUS
                               DATED MAY 30, 2006)

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




                                 LEHMAN BROTHERS