Filed Pursuant to Rule 424(b)(5)
                                          Registration Statement No.: 333-134553


THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE NOT AN
OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

                SUBJECT TO COMPLETION, DATED SEPTEMBER 29, 2006

PRELIMINARY PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 30, 2006)
                                    $
                         LEHMAN BROTHERS HOLDINGS INC.
                   Outperformance Notes Due November   , 2007
             Linked to the performance of the S&P 100(R) Index (OEX)
         relative to the performance of the Russell 2000(R) Index (RTY)

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

General:
 o  Senior unsecured debt securities of Lehman Brothers Holdings.

 o  Linked to the S&P 100 Index, as calculated by Standard & Poor's, a division
    of McGraw-Hill, Inc., and the Russell 2000 Index, as calculated by the
    Frank Russell Company.

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

 o  Minimum initial investment: $10,000.

 o  Stated maturity date: November   , 2007, subject to postponement if the
    valuation date is postponed.

 o  Valuation date: November   , 2007, subject to postponement if such day is
    not a scheduled trading day or if a market disruption event occurs.

 o  Early redemption: Lehman Brothers Holdings will redeem early all of the
    notes if, on any scheduled trading day prior to the valuation date, the
    relative performance is less than -70% (for example, -71%).

 o  The notes will not be listed on any exchange.

Payments:

 o  No interest payments will be made on the notes.

 o  On the stated maturity date, unless the notes have been earlier redeemed,
    Lehman Brothers Holdings will pay to you, per $1,000 note, an amount equal
    to:

    --  If the final relative performance is positive or zero, the lesser of:
        (a)        A fixed amount that Lehman Brothers Holdings currently
                   expects will range from $1,130 to $1,150; and

        (b)        $1,000 + ($1,000 x final relative performance x
                   participation rate).

    --  If the final relative performance is negative:

        $1,000 + ($1,000 x final relative performance)


    The participation rate is a fixed percentage which Lehman Brothers
    Holdings currently expects to be 200%.


    The relative performance on any scheduled trading day will equal:

    closing index level       closing index level of
     of S&P 100 Index           Russell 2000 Index
    -------------------   -   ----------------------    +  1.3%
    initial index level       initial index level of
     of S&P 100 Index           Russell 2000 Index

    The initial index levels of the S&P 100 Index and the Russell 2000 Index
    will be the respective closing levels of such indices on the date of the
    prospectus supplement. The closing index levels of the S&P 100 Index and
    the Russell 2000 Index on any scheduled trading day will be the respective
    closing levels of such indices on such scheduled trading day. The final
    relative performance will be the relative performance on the valuation
    date, which will be the third business day before the stated maturity
    date.

 o  Upon early redemption, Lehman Brothers Holdings will pay you, per $1,000
    note, an amount equal to: present value of $1,000 + (1,000 x redemption
    relative performance). See "Description of the Notes-- Payment upon early
    redemption, if applicable."

     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 preliminary prospectus supplement or the accompanying prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
                               ----------------
                                               Per Note    Total
                                               --------    -----
Public offering price ........................       %    $
Underwriting discount ........................       %    $
Proceeds to Lehman Brothers Holdings .........       %    $

                               ----------------
Lehman Brothers Holdings has granted the underwriter an option to purchase,
within 13 days of the original issuance, up to an additional $     aggregate
principal amount of notes on the same terms and conditions as set forth above
solely to cover over-allotments, if any.
                               ----------------
The notes are expected to be ready for delivery in book-entry form only through
The Depository Trust Company on or about    , 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 preliminary 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

      , 2006

"Standard & Poor's," "S&P," "S&P 100," "Standard & Poor's 100" and "100" are
trademarks of McGraw-Hill, Inc. and have been licensed for use by Lehman
Brothers Holdings Inc. "Russell 2000 Index" is a trademark of the Frank Russell
Company and has been licensed for use by Lehman Brothers Holdings Inc. The
notes, linked to the performance of the S&P 100 Index relative to the
performance of the Russell 2000 Index, are not sponsored, endorsed, sold or
promoted by Standard & Poor's or the Frank Russell Company and neither Standard
& Poor's nor the Frank Russell Company makes any 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-13
DESCRIPTION OF THE NOTES.................................................   S-14
THE S&P 100 INDEX........................................................   S-20
THE RUSSELL 2000 INDEX...................................................   S-25
HISTORICAL RELATIVE PERFORMANCE..........................................   S-30
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES............................   S-31
CERTAIN ERISA CONSIDERATIONS.............................................   S-34
BOOK-ENTRY ISSUANCE......................................................   S-35
UNDERWRITING.............................................................   S-37

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

WHAT ARE THE NOTES?

The notes are a series of senior debt of Lehman Brothers Holdings Inc. ("Lehman
Brothers Holdings") whose value is linked to the performance of the S&P 100
Index relative to the performance of the Russell 2000 Index. See "The S&P 100
Index" and "The Russell 2000 Index." The notes will rank equally with all other
unsecured debt of Lehman Brothers Holdings, except subordinated debt, and will
mature on November    , 2007, subject to postponement if the valuation date is
postponed.

WHO PUBLISHES THE S&P 100 INDEX AND WHAT DOES THE S&P 100 INDEX MEASURE?

The S&P 100 Index is published by Standard & Poor's, a division of McGraw-Hill,
Inc. ("S&P"). The S&P 100 Index, a subset of the S&P 500 Index, is comprised of
100 leading U.S. stocks with exchange-listed options. Constituents of the S&P
100 Index are selected for sector balance and currently represent about 57% of
the market capitalization of the S&P 500 Index and almost 45% of the market
capitalization of the U.S. equity market. The stocks in the S&P 100 Index are
generally among the largest and most established companies in the S&P 500 Index.

WHO PUBLISHES THE RUSSELL 2000 INDEX AND WHAT DOES THE RUSSELL 2000 INDEX
MEASURE?

The Russell 2000 Index is published by Frank Russell Company ("Russell"), and is
designed to measure performance of the small capitalization segment of the U.S.
equity market through changes in the aggregate market value of stock of 2000
companies domiciled in the United States and its territories. The Russell 2000
Index consists of the smallest 2,000 companies included in the Russell 3000
Index and represents approximately 10% of the capitalization of the Russell 3000
Index. The Russell 3000 Index is composed of the 3,000 largest U.S. companies as
determined by market capitalization and currently represents approximately 98%
of the U.S. equity market.

                                   ----------

Please note that an investment in the notes does not entitle you to any
ownership or other interest in the securities underlying the S&P 100 Index or
the Russell 2000 Index.

WHAT PAYMENTS WILL I RECEIVE ON THE NOTES BEFORE THE STATED MATURITY DATE?

No interest payments will be made on the notes. Except in the case of early
redemption, no payments will be made on the notes before the stated maturity
date.

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

On the stated maturity date, unless the notes have been earlier redeemed, Lehman
Brothers Holdings will pay to you, per $1,000 note, an amount equal to:

o    If the final relative performance is positive or zero, the lesser of:

     (a)  A fixed amount that Lehman Brothers Holdings currently expects will
          range from $1,130 to $1,150; and

     (b)  $1,000 + ($1,000 x final relative performance x participation rate).

o    If the final relative performance is negative:

     $1,000 + ($1,000 x final relative performance)

The participation rate is a fixed percentage which Lehman Brothers Holdings
currently expects to be 200%.

The relative performance on any scheduled trading day will equal:

closing index         closing index
 level of S&P       level of Russell
  100 Index            2000 Index
- -------------   -   ----------------   + 1.3%
initial index         initial index
 level of S&P       level of Russell
  100 Index            2000 Index


                                      S-3



The initial index levels of the S&P 100 Index and the Russell 2000 Index will be
the respective closing levels of such indices on the date of the prospectus
supplement. The closing index levels of the S&P 100 Index and the Russell 2000
Index on any scheduled trading day will be the respective closing levels of such
indices on such scheduled trading day. The final relative performance will be
the relative performance on the valuation date, which will be the third business
day before the stated maturity date.

If the third business day before the stated maturity date is not a scheduled
trading day or the calculation agent determines that one or more market
disruption events have occurred on that day, the calculation agent will, subject
to certain limitations, determine the final relative performance by reference to
the relative performance on the next scheduled trading day on which there is not
a market disruption event. Any such postponement of the date that would
otherwise be the valuation date will cause the stated maturity date to be
postponed until three business days after the date that the final relative
performance is determined. In limited circumstances, the relative performance
may be adjusted. See "Description of the Notes - Discontinuance of the S&P 100
Index; Alteration of method of calculation" and "Description of the
Notes - Discontinuance of the Russell 2000 Index; Alteration of method of
calculation."

As a result, unless the notes have been earlier redeemed, on the stated maturity
date you will only receive $1,000 or more than $1,000 per $1,000 note if the
final relative performance on the valuation date is positive or zero. If the
final relative performance on the valuation date is negative, you will receive
less than $1,000 per $1,000 note on the stated maturity date. The maximum amount
you may receive on the stated maturity date per $1,000 note will be a fixed
amount that Lehman Brothers Holdings currently expects will range from $1,130 to
$1,150.

AMOUNT PAYABLE ON THE STATED MATURITY DATE - EXAMPLES

Here are three examples of hypothetical calculations of the amount payable per
$1,000 note on the stated maturity date. In each of the examples, it is assumed
that the notes will not be redeemed prior to the stated maturity date, the
initial index level of the S&P 100 Index is 620.00, the initial index level of
the Russell 2000 Index is 730.00, the participation rate is 200% and the maximum
amount you will receive on the stated maturity date, per $1,000 note, will be
$1,140.

EXAMPLE 1. ASSUMING THAT THE CLOSING INDEX LEVEL OF THE S&P 100 INDEX ON THE
VALUATION DATE IS 704.94 AND THE CLOSING INDEX LEVEL OF THE RUSSELL 2000 INDEX
ON THE VALUATION DATE IS 620.50, RESULTING IN A FINAL RELATIVE PERFORMANCE OF
30%:

Because the final relative performance 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 30% x 200%) = $1,600

As a result, on the stated maturity date, you would receive $1,140 per $1,000
note, because the final relative performance is positive and $1,140 is less than
$1,600.

EXAMPLE 2. ASSUMING THAT THE CLOSING INDEX LEVEL OF THE S&P 100 INDEX ON THE
VALUATION DATE IS 627.44 AND THE CLOSING INDEX LEVEL OF THE RUSSELL 2000 INDEX
ON THE VALUATION DATE IS 711.75, RESULTING IN A FINAL RELATIVE PERFORMANCE OF
5%:

Because the final relative performance 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 5% x 200%) = $1,100

As a result, on the stated maturity date, you would receive $1,100 per $1,000
note, because the final relative performance is positive and $1,100 is less than
$1,140.

EXAMPLE 3. ASSUMING THAT THE CLOSING INDEX LEVEL OF THE S&P 100 INDEX ON THE
VALUATION DATE IS 596.44 AND THE CLOSING INDEX LEVEL OF THE RUSSELL 2000 INDEX
ON THE VALUATION DATE IS 748.25, RESULTING IN A FINAL RELATIVE PERFORMANCE OF
- -5%:

Because the final relative performance is negative, the appropriate formula for
calculating the amount payable on the stated maturity date per $1,000 note is:

                        $1,000 + ($1,000 x (-5%)) = $950

As a result, on the stated maturity date, you would receive $950 per $1,000
note.

                                   ----------

To the extent the initial and closing index levels, final relative performance,
the participation rate or maximum amount you will receive on the stated maturity
date differ from those assumed above, the results indicated above would be
different.

WHEN WILL THE NOTES BE SUBJECT TO EARLY REDEMPTION?


                                      S-4



If, on any scheduled trading day from, but excluding, the date of the prospectus
supplement to, but excluding, the valuation date, the relative performance is
less than -70% (for example, -71%), the notes will be subject to early
redemption. In this preliminary prospectus supplement, the first such scheduled
trading day is referred to as the early redemption determination date. Lehman
Brothers Holdings will redeem all of the notes on the fifth business day after
the early redemption determination date.

WHAT WILL I RECEIVE UPON EARLY REDEMPTION, IF APPLICABLE?

Upon early redemption, Lehman Brothers Holdings will pay you, per $1,000 note,
an amount equal to:

     present value of $1,000 + ($1,000 x redemption relative performance)

; provided, however, that in no event shall the holder of a note owe any amount
to Lehman Brothers Holdings.

The present value of $1,000, as determined by the calculation agent, will be the
present value of $1,000 on the valuation date calculated as of the first
scheduled trading day after the early redemption determination date, computed
using a discount rate equal to the USD LIBOR in effect on the first scheduled
trading day after the early redemption determination date with a designated
maturity that corresponds most closely to the period from, and including, such
scheduled trading day to, but excluding, the valuation date.


The redemption relative performance will equal:

  redemption         redemption index
index level of       level of Russell
 S&P 100 Index          2000 Index
- --------------   -   ----------------   + 1.3%
 initial index         initial index
 level of S&P        level of Russell
   100 Index            2000 Index

The initial index levels of the S&P 100 Index and the Russell 2000 Index will be
the respective closing levels of such indices on the date of the prospectus
supplement. The redemption index levels of the S&P 100 Index and the Russell
2000 Index will be the respective closing levels of such indices on the first
scheduled trading day after the early redemption determination date.

AMOUNT PAYABLE UPON EARLY REDEMPTION - EXAMPLE

Here is an example of a hypothetical calculation of the amount payable per
$1,000 note upon early redemption. It is assumed that (a) the relative
performance on the first scheduled trading day on which the relative performance
is less than -70% is -71%, triggering an early redemption, (b) the initial index
level of the S&P 100 Index is 620.00, (c) the closing index level of the S&P 100
Index on the first scheduled trading day after the early redemption
determination date is 385.64, (d) the initial index level of the Russell 2000
Index is 730.00, (e) the closing index level of the Russell 2000 Index on the
first scheduled trading day after the early redemption determination date is
996.45, and (f) the present value of $1,000 on the valuation date, calculated as
of the first scheduled trading day after the early redemption determination
date, is $960:

                        $960 + ($1,000 x (-73%)) = $230

As a result, upon early redemption, you would receive $230 per $1,000 note.

HOW HAS THE S&P 100 INDEX PERFORMED HISTORICALLY?

Lehman Brothers Holdings has provided a table, on page S-23, showing the
performance of the S&P 100 Index from January 1, 2001 through September 29,
2006. Lehman Brothers Holdings has provided this historical information to help
you evaluate the behavior of the S&P 100 Index so that you can make an informed
decision with respect to an investment in the notes. You should realize,
however, that past performance is not necessarily indicative of how the S&P 100
Index will perform in the future.

HOW WILL I BE ABLE TO FIND THE INDEX LEVEL OF THE S&P 100 INDEX AT ANY POINT IN
TIME?

You can obtain the level of the S&P 100 Index at any time from the Bloomberg(R)
service under the symbol "OEX", from Reuters service under the symbol "OEX" or
from the Standard & Poors website, at http://www.standardandpoors.com.

HOW HAS THE RUSSELL 2000 INDEX PERFORMED HISTORICALLY?

Lehman Brothers Holdings has provided a table, on page S-28, showing the
performance of the Russell 2000 Index from January 1, 2001 through September 29,
2006. Lehman Brothers Holdings has provided this historical information to help
you evaluate the behavior of the Russell 2000 Index so that you can make an
informed decision with respect to an investment in the notes. You should
realize, however, that past performance is not necessarily indicative of how the
Russell 2000 Index will perform in the future.

HOW WILL I BE ABLE TO FIND THE INDEX LEVEL OF THE RUSSELL 2000 INDEX AT ANY
POINT IN TIME?

You can obtain the level of the Russell 2000 Index at any time from the
Bloomberg(R) service under the


                                      S-5



symbol "RTY". You may also obtain the index level of the Russell 2000 Index at
any time from the Frank Russell Company' website, at http://www.russell.com.

WHAT HAS THE RELATIVE PERFORMANCE BEEN HISTORICALLY?

Lehman Brothers Holdings has provided a table, on page S-30, showing the high
and low relative performance, as well as the end-of quarter relative
performance, of the S&P 100 Index and the Russell 2000 Index for each quarter in
the period from January 1, 2001 through September 29, 2006, calculated on a
rolling basis using the respective closing index levels on the date that is 13
months before the respective scheduled trading day (or, if such a date was not a
scheduled trading day, the previous scheduled trading day) with respect to which
relative performance is measured as the respective initial index levels. Lehman
Brothers Holdings has provided this historical information to help you evaluate
the relative performance of the two indices so that you can make an informed
decision with respect to an investment in the notes. You should realize,
however, that past relative performance is not necessarily indicative of how the
two indices will perform relatively in the future.

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. As a result, upon a sale, exchange or other
disposition of a note or upon cash settlement at maturity or upon early
redemption, 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."

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 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 on the stated maturity date or upon early redemption. 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 preliminary 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 S&P 100 Index or the
Russell 2000 Index and other events that are difficult to predict and beyond
Lehman Brothers Holdings' control.

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

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

o    THE PAYMENT YOU RECEIVE ON THE STATED MATURITY DATE, IF THE NOTES WERE NOT
     EARLIER REDEEMED, MAY BE LESS THAN THE PRICE AT WHICH THE NOTES ARE
     INITIALLY BEING SOLD TO THE PUBLIC. If the final relative performance is
     negative, Lehman Brothers Holdings will pay you less than $1,000 per $1,000
     note. The final relative performance will be negative if on the valuation
     date:

     -    the closing index level of the S&P 100 Index increases from the
          initial index level of the S&P 100 Index, but the closing index level
          of the Russell 2000 Index increases from the initial index level of
          the Russell 2000 Index by a greater percentage;

     -    the closing index level of the S&P 100 Index is unchanged from the
          initial index level of the S&P 100 Index, but the closing index level
          of the Russell 2000 Index increases from the initial index level of
          the Russell 2000 Index; or

     -    the closing index level of the S&P 100 Index decreases from the
          initial index level of the S&P 100 Index, but the closing index level
          of the Russell 2000 Index (i) increases or is unchanged from the
          initial index level of the Russell 2000 Index or (ii) decreases from
          the initial index level of the Russell 2000 Index by a lesser
          percentage than the S&P 100 Index decreased from its initial index
          level.

     You will not receive any payment on the stated maturity date if the final
     relative performance is -100%.

o    THE PAYMENT YOU RECEIVE ON THE STATED MATURITY DATE, IF THE NOTES WERE NOT
     EARLIER REDEEMED, 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, if the notes were not earlier redeemed,
     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 PAYMENTS WILL BE MADE ON THE NOTES.

IN THE EVENT OF AN EARLY REDEMPTION, YOU WILL LOSE ALL OR PART OF YOUR ORIGINAL
INVESTMENT.

The amount payable by Lehman Brothers Holdings upon an early redemption of the
notes, as determined by Lehman Brothers Inc. in its capacity as the calculation
agent, will be based upon the present value of the principal amount on the
valuation date, calculated as of the first scheduled trading day after the early
redemption determination date, and the relative performance on the first
scheduled trading day after the early redemption determination date. Assuming
the relative performance on such scheduled trading day is still negative (that
is, the relative performance did not fluctuate from, for example, -71% to a
positive percentage within one scheduled trading day), you will lose all or part
of your original investment.

YOU MAY NOT REALIZE A RETURN ON THE NOTES EVEN IF THE LEVEL OF THE S&P 100 INDEX
INCREASES.

Because of the formula for the calculation of the payment that you may receive
on the stated maturity date,


                                      S-7



you may not realize a return on the notes even if the level of the S&P 100 Index
increases. In addition, if the Russell 2000 Index outperforms the S&P 100 Index
by more than 1.3%, you will lose all or part of your original investment.

HISTORICAL LEVELS OF THE S&P 100 INDEX AND THE RUSSELL 2000 INDEX SHOULD NOT BE
TAKEN AS AN INDICATION OF THE FUTURE PERFORMANCE OF THE S&P 100 INDEX OR THE
RUSSELL 2000 INDEX DURING THE TERM OF THE NOTES.

The trading prices of the securities underlying the S&P 100 Index and the
Russell 2000 Index will determine the relative performance. You should realize,
however, that past performance is not necessarily indicative of how the S&P 100
Index, the Russell 2000 Index or the notes will perform in the future. Trading
prices of the securities underlying the S&P 100 Index or the Russell 2000 Index
will be influenced by complex and interrelated political, economic, financial
and other factors that can affect the markets in which those securities are
traded and the values of the underlying securities themselves.

YOUR RETURN ON THE NOTES COULD BE LESS THAN IF YOU BOUGHT AND/OR SOLD THE
SECURITIES UNDERLYING THE S&P 100 INDEX AND/OR THE RUSSELL 2000 INDEX.

o    YOUR POTENTIAL RETURN ON YOUR PRINCIPAL INVESTMENT IS LIMITED. The notes
     provide less opportunity for equity appreciation than a direct investment
     in each of the securities underlying the S&P 100 Index or the Russell 2000
     Index because the return you realize on the stated maturity date, if the
     notes were not earlier redeemed, will be limited to a fixed percentage of
     the principal amount, which Lehman Brothers Holdings currently expects will
     range from 13% to 15%. If the level of the S&P 100 Index relative to the
     level of the Russell 2000 Index increases such that the final relative
     performance exceeds this fixed percentage during the term of the notes,
     your return on the notes will be less than your return had you bought
     and/or sold the securities underlying the S&P 100 Index and/or the Russell
     2000 Index.

o    YOUR RETURN WILL NOT REFLECT DIVIDENDS ON SECURITIES UNDERLYING THE S&P 100
     INDEX OR THE RUSSELL 2000 INDEX. Your return on the notes will not reflect
     the return you would realize if you actually owned the securities
     underlying the S&P 100 Index or the Russell 2000 Index and received the
     dividends paid on those securities. This is because the calculation agent
     will calculate the amount payable to you at maturity or upon early
     redemption by reference to the closing level of the S&P 100 Index and the
     closing level of the Russell 2000 Index, without taking into consideration
     the value of dividends paid on those securities.

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 index levels at that time and a number of
other factors, some of which are interrelated in complex ways. As a result, the
effect of any one factor may be offset or magnified by the effect of another
factor. The price at which you will be able to sell the notes before the stated
maturity date may be at a discount, which could be substantial, from the price
at which the notes are initially being sold to the public, depending, at that
time, on the index levels and where each is in relationship to its initial index
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.


                                      S-8



o    INDICES. Lehman Brothers Holdings expects that the trading price of the
     notes will depend substantially on the performance of the indices at any
     given point in time. If you decide to sell your notes prior to the stated
     maturity date when the relative performance is positive, you may
     nonetheless receive substantially less than the amount that would be
     payable on the stated maturity date based on the relative performance on
     the date you sell your notes because of expectations that the index levels
     will continue to fluctuate until the amount payable on the stated maturity
     date, unless earlier redeemed, is determined. If you decide to sell your
     notes when the relative performance is zero or negative, 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 S&P 100 Index or the Russell 2000
     Index are likely to directly affect the index level of the S&P 100 Index or
     the Russell 2000 Index 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. interest rates change, the trading
     price of the notes may be adversely affected.

o    VOLATILITY OF THE S&P 100 INDEX AND THE RUSSELL 2000 INDEX. Volatility is
     the term used to describe the size and frequency of market fluctuations. If
     the volatility of the level of the S&P 100 Index or the Russell 2000 Index
     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 level or volatility of the S&P 100 Index or the Russell 2000 Index.

o    MERGER AND ACQUISITION TRANSACTIONS. Some of the securities underlying the
     S&P 100 Index or the Russell 2000 Index may be affected by mergers and
     acquisitions, which can contribute to volatility of the S&P 100 Index or
     the Russell 2000 Index. Additionally, as a result of a merger or
     acquisition, one or more securities underlying the S&P 100 Index or the
     Russell 2000 Index may be replaced with a surviving or acquiring entity's
     securities. The surviving or acquiring entity's securities may not have the
     same characteristics as the securities originally underlying the S&P 100 or
     the Russell 2000 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 S&P
     100 Index or the Russell 2000 Index increase, the trading price of the
     notes may be adversely affected because the S&P 100 Index and the Russell
     2000 Index 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 S&P 100 Index or the Russell 2000 Index and real or
     anticipated changes in those conditions or results may affect the trading
     price of the notes.

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 positive
relative performance. In general, assuming all relevant factors are held
constant and the notes are not earlier redeemed, 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.

ADJUSTMENTS TO THE S&P 100 INDEX COULD ADVERSELY AFFECT THE TRADING PRICE OF THE
NOTES.

The policies of S&P concerning additions, deletions and substitutions of the
securities underlying the S&P 100 Index and the manner in which S&P takes
account of certain changes affecting such underlying securities may affect the
level of the S&P 100 Index. The policies of S&P with respect to the calculation
of the S&P 100 Index could also affect the level of the S&P 100 Index. S&P may
discontinue or suspend calculation or dissemination of the S&P 100 Index or
materially alter the methodology by which it calculates the S&P 100 Index. Any
such actions could affect the trading price of the notes. See "Description of
the Notes - Discontinuance of the S&P 100 Index; Alteration of method of
calculation" and "The S&P 100 Index."


                                      S-9



ADJUSTMENTS TO THE RUSSELL 2000 INDEX COULD ADVERSELY AFFECT THE TRADING PRICE
OF THE NOTES.

The policies of Russell concerning additions, deletions and substitutions of the
securities underlying the Russell 2000 Index and the manner in which Russell
takes account of certain changes affecting such underlying securities may affect
the level of the Russell 2000 Index. The policies of Russell with respect to the
calculation of the Russell 2000 Index could also affect the level of the Russell
2000 Index. Russell may discontinue or suspend calculation or dissemination of
the Russell 2000 Index or materially alter the methodology by which it
calculates the Russell 2000 Index. Any such actions could affect the trading
price of the notes. See "Description of the Notes - Discontinuance of the
Russell 2000 Index; Alteration of method of calculation" and "The Russell 2000
Index."

LEHMAN BROTHERS HOLDINGS CANNOT CONTROL ACTIONS BY THE COMPANIES WHOSE
SECURITIES UNDERLIE THE S&P 100 INDEX OR THE RUSSELL 2000 INDEX.

Actions by these companies may have an adverse effect on the price of the
securities underlying the S&P 100 Index or the Russell 2000 Index, the S&P 100
Index, the Russell 2000 Index and the notes. In addition, these companies are
not involved in this offering of notes and have no obligations with respect to
the notes, including any obligation to take Lehman Brothers Holdings' or your
interests into consideration for any reason. These companies will not receive
any of the proceeds of this offering of notes and are not responsible for, and
have not participated in, the determination of the timing of, prices for, or
quantities of, the notes to be issued. These companies are not involved with the
administration, marketing or trading of the notes and have no obligations with
respect to the amount to be paid to you on the stated maturity date.

LEHMAN BROTHERS HOLDINGS AND ITS AFFILIATES HAVE NO AFFILIATION WITH S&P OR
RUSSELL AND ARE NOT RESPONSIBLE FOR THEIR PUBLIC DISCLOSURE OF INFORMATION.

S&P provides and services the S&P 100 Index, and Russell provides and services
the Russell 2000 Index. Lehman Brothers Holdings and its affiliates are not
affiliated with S&P or Russell in any way (except for licensing arrangements
discussed below in "The S&P 100 Index" and "The Russell 2000 Index") and have no
ability to control or predict its actions, including any errors in or
discontinuation of disclosure regarding its methods or policies relating to the
calculation of the S&P 100 Index or the Russell 2000 index. See "Description of
the Notes - Market disruption events," "Description of the Notes -
Discontinuance of the S&P 100 Index; Alteration of method of calculation" and
"Description of the Notes - Discontinuance of the Russell 2000 Index; Alteration
of method of calculation." S&P and Russell are not involved in this offering of
notes in any way and have no obligation to consider your interests as an owner
of the notes in taking any actions that might affect the value of your notes.

Neither Lehman Brothers Holdings nor any of its affiliates assumes any
responsibility for the adequacy or accuracy of the information about the S&P 100
Index or S&P or the Russell 2000 Index or Russell contained in this prospectus
supplement or any public disclosure of information by S&P or Russell. You, as an
investor in the notes, should make your own investigation into the S&P 100
Index, S&P, the Russell 2000 Index and Russell.

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 or upon earlier
redemption, whether adjustments should be made to the index levels and whether a
market disruption event has occurred. As a result, potential conflicts of
interest may exist between Lehman Brothers Inc. and you. See "Description of the
Notes - Payment on the stated maturity date," "Description of the Notes -
Discontinuance of the S&P 100 Index; Alteration of method of calculation,"
"Description of the Notes - Discontinuance of the Russell 2000 Index; Alteration
of method of calculation" and "Description of the Notes - Market disruption
events."

PURCHASES AND SALES OF SECURITIES UNDERLYING THE S&P 100 INDEX OR THE RUSSELL
2000 INDEX BY LEHMAN BROTHERS HOLDINGS AND ITS AFFILIATES COULD AFFECT THE
PRICES OF THOSE SECURITIES OR THE LEVEL OF THE S&P 100 INDEX OR THE LEVEL OF THE
RUSSELL 2000 INDEX.

Lehman Brothers Holdings and its affiliates, including Lehman Brothers Inc., may
from time to time buy or sell securities underlying the S&P 100 Index or the
Russell 2000 Index or derivative instruments related to those securities for
their own accounts in connection with their normal business practices or in
connection with hedging of Lehman Brothers Holdings' obligations under the
notes. These transactions could affect the prices of those securities or the
level of the


                                      S-10



S&P 100 Index or the Russell 2000 Index. See "Use of Proceeds and Hedging."

YOU HAVE NO SHAREHOLDER RIGHTS.

Investing in the notes is not equivalent to investing in the securities
underlying the S&P 100 Index or the Russell 2000 Index. As an investor in the
notes, you will not have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the securities that underlie
the S&P 100 Index or the Russell 2000 Index.

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

Investors should consider the tax consequences of investing in the notes. No
statutory, judicial or administrative authority directly addresses the
characterization of the notes or instruments similar to the notes for United
States federal income tax purposes. As a result, significant aspects of the
United States federal income tax consequences of an 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 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. You should consult your own tax advisor concerning the
alternative characterization. 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 S&P 100 Index or the Russell 2000 Index as
well as to acquire futures contracts or listed or over-the-counter options
contracts in, or other derivative or synthetic instruments related to, the S&P
100 Index or the Russell 2000 Index or those securities underlying the S&P 100
Index or the Russell 2000 Index, to hedge Lehman Brothers Holdings' obligations
under the notes. The balance of the proceeds, if any, 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 or early
redemption, if applicable, of the notes, depending on market conditions,
including the market price of the securities underlying the S&P 100 Index or the
Russell 2000 Index, Lehman Brothers Holdings expects that it or one or more of
its subsidiaries will increase or decrease their initial hedging positions using
dynamic hedging techniques. Lehman Brothers Holdings or one or more of its
subsidiaries may take long or short positions in those securities or in the
futures contracts or in listed or over-the-counter options contracts or other
derivative or synthetic instruments related to those securities. In addition,
Lehman Brothers Holdings or one or more of its subsidiaries may purchase or
otherwise acquire a long or short position in notes from time to time and may,
in their sole discretion, hold or resell those notes. Lehman Brothers Holdings
or one or more of its subsidiaries may also take positions in other types of
appropriate financial instruments that may become available in the future.

To the extent that Lehman Brothers Holdings or one or more of its subsidiaries
has a long hedge position in any of the securities underlying the S&P 100 Index
or the Russell 2000 Index, or futures or options contracts or other derivative
or synthetic instruments related to those securities, Lehman Brothers Holdings
or one or more of its subsidiaries may liquidate a portion of their holdings at
or about the time of the maturity of the notes or at or about the time of a
change in the securities underlying the S&P 100 Index or the Russell 2000 Index.
Depending, among other things, on future market conditions, the aggregate amount
and the composition of the positions are likely to vary over time. Profits or
losses from any of those positions cannot be ascertained until the position is
closed out and any offsetting position or positions are taken into account.
Certain activity by Lehman Brothers Holdings or one or more of its subsidiaries
described above can potentially increase or decrease the prices of the
securities underlying the S&P 100 Index or the Russell 2000 Index and,
accordingly, increase or decrease the level of the S&P 100 Index or the Russell
2000 Index, which will be used to calculate the final relative performance.
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 S&P 100 Index or the Russell 2000 Index, these activities could have such an
effect.


                                      S-12



                       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-13



                            DESCRIPTION OF THE NOTES

GENERAL

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

o    the accompanying prospectus; and

o    this prospectus supplement.

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

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

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

INTEREST

No interest payments will be made on the notes.

PAYMENT ON THE STATED MATURITY DATE

The notes will mature on November   , 2007, subject to postponement if the
valuation date is postponed.

On the stated maturity date, unless the notes have been earlier redeemed, Lehman
Brothers Holdings will pay to you, per $1,000 note, an amount equal to:

o    If the final relative performance is positive or zero, the lesser of:

     (a)  A fixed amount that Lehman Brothers Holdings currently expects will
          range from $1,130 to $1,150; and

     (b)  $1,000 + ($1,000 x final relative performance x participation rate).

If the final relative performance is negative:

     $1,000 + ($1,000 x final relative performance)

The participation rate is a fixed percentage which Lehman Brothers Holdings
currently expects to be 200%.

The relative performance on any scheduled trading day will equal:

  closing index          closing index
level of S&P 100       level of Russell
      Index               2000 Index
- ----------------   -   ----------------   +   1.3%
  initial index          initial index
level of S&P 100       level of Russell
      Index               2000 Index

The initial index levels of the S&P 100 Index and the Russell 2000 Index will be
the respective closing levels of such indices on the date of the prospectus
supplement. The closing index levels of the S&P 100 Index and the Russell 2000
Index on any scheduled trading day will be the respective closing levels of such
indices on such scheduled trading day. The final relative performance will be
the relative performance on the valuation date, which will be the third business
day before the stated maturity date. However, if that day is not a scheduled
trading day or the calculation agent determines that one or more market
disruption events have occurred on that day, the calculation agent will, subject
to certain limitations, determine the final relative performance by reference to
the relative performance on the next scheduled trading day on which there is not
a market disruption event; provided, however, if a market disruption event
occurs on each of the eight scheduled trading days following the originally
scheduled valuation date, then (a) that eighth scheduled trading day shall be
deemed the valuation date and (b) the calculation agent shall determine the
final relative performance based upon its good faith estimate of the levels of
the indices on that eighth scheduled trading day. Any postponement of the date
that would otherwise be the valuation date will cause


                                      S-14



the stated maturity date to be postponed until three business days after the
date that the final relative performance is determined.

As a result, unless the notes have been earlier redeemed, on the stated maturity
date you will only receive $1,000 or more than $1,000 per $1,000 note if the
final relative performance on the valuation date is positive or zero. If the
final relative performance on the valuation date is negative, you will receive
less than $1,000 per $1,000 note on the stated maturity date. The maximum amount
you may receive on the stated maturity date per $1,000 note will be a fixed
amount that Lehman Brothers Holdings currently expects will range from $1,130 to
$1,150.

The "closing index level" of the S&P 100 Index (or any successor index) on any
particular day means the closing level of the S&P 100 Index as reported by S&P
(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. The "closing index level" of the Russell 2000 Index (or
any successor index) on any particular day means the closing level of the
Russell 2000 Index as reported by Russell (or of any successor index, as
reported by the publisher of such successor index), on such day or as determined
by the calculation agent as described in the following section.

A "scheduled trading day" means any day on which the New York Stock Exchange,
the American Stock and Options Exchange, the NASDAQ Global Select Market, the
NASDAQ Global Market, the Chicago Mercantile Exchange and the Chicago Board
Options Exchange are scheduled to be open for trading for their respective
regular trading sessions.

PAYMENT UPON EARLY REDEMPTION, IF APPLICABLE

If, on any scheduled trading day from, but excluding, the date of the prospectus
supplement to, but excluding, the valuation date, the relative performance is
less than -70% (for example, -71%), the notes will be subject to early
redemption. In this preliminary prospectus supplement, the first such scheduled
trading day is referred to as the early redemption determination date. Lehman
Brothers Holdings will notify note holders of an early redemption of the notes
on the first business day following the early redemption determination date and
redeem all of the notes on the fifth business day after the early redemption
determination date.

Upon early redemption, Lehman Brothers Holdings will pay you, per $1,000 note,
an amount equal to:

     present value of $1,000 + ($1,000 x redemption relative performance)

; provided, however, that in no event shall the holder of a note owe any amount
to Lehman Brothers Holdings.

The present value of $1,000, as determined by the calculation agent, will be the
present value of $1,000 on the valuation date calculated as of the first
scheduled trading day after the early redemption determination date, computed
using a discount rate equal to the USD LIBOR in effect on the first
scheduled trading day after the early redemption determination date with a
designated maturity that corresponds most closely to the period from, and
including, such scheduled trading day to, but excluding, the valuation date.

The redemption relative performance will equal:

  redemption index        redemption index
  level of S&P 100        level of Russell
       Index                 2000 Index
- -------------------   -   ----------------   +   1.3%
initial index level         initial index
  of S&P 100 Index        level of Russell
                              2000 Index

The initial index levels of the S&P 100 Index and the Russell 2000 Index will be
the respective closing levels of such indices on the date of the prospectus
supplement. The redemption index levels of the S&P 100 Index and the Russell
2000 Index will be the respective closing levels of such indices on the first
scheduled trading day after the early redemption determination date.

DISCONTINUANCE OF THE S&P 100 INDEX; ALTERATION OF METHOD OF CALCULATION

If S&P discontinues publication of the S&P 100 Index and S&P 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 S&P 100 Index, then the calculation agent shall determine each
subsequent closing index level to be used in computing the amount payable on the
stated maturity date by reference to the closing index level of such successor
index on the applicable date.

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

If S&P discontinues publication of the S&P 100 Index and the calculation agent
determines that no successor index is available at such time or if S&P (or the
publisher of any successor index) fails to calculate and publish a closing index
level for the S&P 100 Index (or a successor index) on any date when it would


                                      S-15



ordinarily do so in accordance with its customary practice, the calculation
agent will determine the closing index level to be used for purposes of
computing the amount payable on the stated maturity date. In such circumstances,
the closing index level will be computed by the calculation agent in accordance
with the formula for and method of calculating the S&P 100 Index (or any
successor index) last in effect prior to such discontinuance or failure to
publish, using the closing price (or, if trading in any of the relevant
securities has been materially suspended or materially limited, its good faith
estimate of the closing price that would have prevailed but for such suspension
or limitation) at the close of the principal trading session on such date of
each security most recently comprising the S&P 100 Index (or any successor
index) on the relevant exchange on which such security trades. Notwithstanding
these alternative arrangements, discontinuance of the publication of the S&P 100
Index may adversely affect the trading price of the notes. As used herein,
"closing price" of a security, on any particular day, means the last reported
sales price for that security on the relevant exchange at the scheduled weekday
closing time of the regular trading session of the relevant exchange. If,
however, the security is not listed or traded on a bulletin board, then the
closing price of the security will be determined using the average execution
price per share that an affiliate of Lehman Brothers Holdings pays or receives
upon the purchase or sale of the security used to hedge Lehman Brothers
Holdings' obligations under the notes. The "relevant exchange" for any security
(or any combination thereof then underlying the S&P 100 Index or any successor
index) means the primary exchange, quotation system (which includes bulletin
board services) or other market of trading for such security.

If at any time the method of calculating the S&P 100 Index, any successor index
or the closing level thereof on any particular day is changed in a material
respect, or if the S&P 100 Index or a successor index is in any other way
modified so that such index does not, in the opinion of the calculation agent,
fairly represent the level of the S&P 100 Index or such successor index had such
changes or modifications not been made, then, from and after such time, the
calculation agent will, at the close of trading of the relevant exchanges on
which the securities comprising the S&P 100 Index or such successor index traded
on any date the closing index level is to be determined, make such calculations
and adjustments as, in its good faith judgment, may be necessary in order to
arrive at a level of a stock index comparable to the S&P 100 Index or such
successor index, as the case may be, as if such changes or modifications had not
been made. The calculation agent will calculate the closing index level on any
particular day and the amount payable on the stated maturity date with reference
to the S&P 100 Index or such successor index, as adjusted. Accordingly, if the
method of calculating the S&P 100 Index or a successor index is modified so that
the level of such index is a fraction of what it would have been if it had not
been modified, then the calculation agent will adjust such index in order to
arrive at a level of the S&P 100 Index or such successor index as if it had not
been modified.

DISCONTINUANCE OF THE RUSSELL 2000 INDEX; ALTERATION OF METHOD OF CALCULATION

If Russell discontinues publication of the Russell 2000 Index and Russell 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 Russell 2000 Index, then the calculation agent
shall determine each subsequent closing index level to be used in computing the
amount payable on the stated maturity date by reference to the closing index
level of such successor index on the applicable date.

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

If Russell discontinues publication of the Russell 2000 Index and the
calculation agent determines that no successor index is available at such time
or if Russell (or the publisher of any successor index) fails to calculate and
publish a closing index level for the Russell 2000 Index (or a successor index)
on any date when it would ordinarily do so in accordance with its customary
practice, the calculation agent will determine the closing index level to be
used for purposes of computing the amount payable on the stated maturity date.
In such circumstances, the closing index level will be computed by the
calculation agent in accordance with the formula for and method of calculating
the Russell 2000 Index (or any successor index) last in effect prior to such
discontinuance or failure to publish, using the closing price (or, if trading in
any of the relevant securities has been materially suspended or materially
limited, its good faith estimate of the closing price that would have prevailed
but for such suspension or limitation) at the close of the principal trading
session on such date of each security most recently comprising the Russell 2000
Index (or any successor index) on the relevant exchange on which such security
trades. Notwithstanding these alternative arrangements, discontinuance of the
publication of the Russell 2000 Index may adversely


                                      S-16



affect the trading price of the notes. As used herein, "closing price" of a
security, on any particular day, means the last reported sales price for that
security on the relevant exchange at the scheduled weekday closing time of the
regular trading session of the relevant exchange. If, however, the security is
not listed or traded on a bulletin board, then the closing price of the security
will be determined using the average execution price per share that an affiliate
of Lehman Brothers Holdings pays or receives upon the purchase or sale of the
security used to hedge Lehman Brothers Holdings' obligations under the notes.
The "relevant exchange" for any security (or any combination thereof then
underlying the Russell 2000 Index or any successor index) means the primary
exchange, quotation system (which includes bulletin board services) or other
market of trading for such security.

If at any time the method of calculating the Russell 2000 Index, any successor
index or the closing level thereof on any particular day is changed in a
material respect, or if the Russell 2000 Index or a successor index is in any
other way modified so that such index does not, in the opinion of the
calculation agent, fairly represent the level of the Russell 2000 Index or such
successor index had such changes or modifications not been made, then, from and
after such time, the calculation agent will, at the close of trading of the
relevant exchanges on which the securities comprising the Russell 2000 Index or
such successor index traded on any date the closing index level is to be
determined, make such calculations and adjustments as, in its good faith
judgment, may be necessary in order to arrive at a level of a stock index
comparable to the Russell 2000 Index or such successor index, as the case may
be, as if such changes or modifications had not been made. The calculation agent
will calculate the closing index level on any particular day and the amount
payable on the stated maturity date with reference to the Russell 2000 Index or
such successor index, as adjusted. Accordingly, if the method of calculating the
Russell 2000 Index or a successor index is modified so that the level of such
index is a fraction of what it would have been if it had not been modified, then
the calculation agent will adjust such index in order to arrive at a level of
the Russell 2000 Index or such successor index as if it had not been modified.

MARKET DISRUPTION EVENTS

A market disruption event with respect to the S&P 100 Index (or any successor
index) or the Russell 2000 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 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. Limitations on trading
     during significant market fluctuations imposed pursuant to New York Stock
     Exchange Rule 80B or any applicable rule or regulation enacted or
     promulgated by The New York Stock Exchange, or any other exchange,
     quotation system or market, any other self regulatory organization or the
     SEC of similar scope or as a replacement for Rule 80B may be considered
     material.

o    A material suspension of, or limitation imposed on, trading in futures or
     options contracts relating to such 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 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
     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 index or any successor index are traded or on
     which futures or options contracts relating to such 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


                                      S-17



     least one hour prior to the earlier of (1) the actual closing time for the
     regular trading session on the relevant exchanges and (2) the submission
     deadline for orders to be entered into the relevant exchanges for execution
     at the close of trading on that day.

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

o    the relevant percentage contribution of a security to the level of the S&P
     100 Index or any successor index will be based on a comparison of (x) the
     portion of the level of the S&P 100 Index or successor index attributable
     to that security and (y) the overall level of the S&P 100 Index or
     successor index, in each case immediately before the occurrence of the
     market disruption event;

o    the relevant percentage contribution of a security to the level of the
     Russell 2000 Index or any successor index will be based on a comparison of
     (x) the portion of the level of the Russell 2000 Index or successor index
     attributable to that security and (y) the overall level of the Russell 2000
     Index or successor index, in each case immediately before the occurrence of
     the market disruption event; and

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

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

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

HYPOTHETICAL RETURNS

The table below illustrates, for a range of hypothetical final relative
performances and assuming (a) the notes have a term of 13 months, (b) the
maximum amount payable on the stated maturity date per $1,000 note is $1,140 and
(c) the notes are not earlier redeemed:

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          HYPOTHETICAL
FINAL RELATIVE   ON THE STATED MATURITY DATE         PRE-TAX          ANNUALIZED PRE-TAX
 PERFORMANCE           PER $1,000 NOTE         TOTAL RATE OF RETURN     RATE OF RETURN
- --------------   ---------------------------   --------------------   ------------------

     -70%                 $  300.00                   -70.00%               -67.09%
     -40                     600.00                   -40.00                -37.60
     -20                     800.00                   -20.00                -18.61
     -10                     900.00                   -10.00                 -9.27
      -5                     950.00                    -5.00                 -4.62
       0                   1,000.00                     0.00                  0.00
       5                   1,100.00                    10.00                  9.20
      10                   1,140.00                    14.00                 12.86
      20                   1,140.00                    14.00                 12.86
      30                   1,140.00                    14.00                 12.86
      40                   1,140.00                    14.00                 12.86
      50                   1,140.00                    14.00                 12.86
      60                   1,140.00                    14.00                 12.86


The above figures are for purposes of illustration only. The actual amount
received by investors on the stated maturity date and the resulting total and
annualized pre-tax rates of return will depend entirely on the actual final
relative performance and the amount payable on the stated maturity date
determined by the


                                      S-18



calculation agent and assumes that the notes are not earlier redeemed. In
particular, the actual final relative performance could be lower or higher than
those reflected in the table.

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

CALCULATION AGENT

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

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

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

o    whether the notes are subject to early redemption;

o    a successor index if publication of the S&P 100 Index or Russell 2000 Index
     is discontinued;

o    the closing index level if no successor index is available or if S&P or
     Russell or the publisher of any successor index, as the case may be, fails
     to calculate and publish a closing index level on any date;

o    adjustments to the S&P 100 Index, the successor index or the closing index
     level thereof if the method of calculating any of these items changes in a
     material respect or if the S&P 100 Index or successor index is in any other
     way modified so that it does not, in the opinion of the calculation agent,
     fairly represent the level of the S&P 100 Index or successor index, as the
     case may be, had such changes or modifications not been made;

o    adjustments to the Russell 2000 Index, the successor index or the closing
     index level thereof if the method of calculating any of these items changes
     in a material respect or if the Russell 2000 Index or successor index is in
     any other way modified so that it does not, in the opinion of the
     calculation agent, fairly represent the level of the Russell 2000 Index or
     successor index, as the case may be, had such changes or modifications not
     been made; 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-19



                                THE S&P 100 INDEX

GENERAL

Lehman Brothers Holdings obtained all information contained in this prospectus
supplement regarding the S&P 100 Index, including, without limitation, its
make-up, method of calculation and changes in its components from publicly
available information. Such information reflects the policies of, and is subject
to change by, S&P. S&P has no obligation to continue to publish, and may
discontinue publication of, the S&P 100 Index. The S&P 100 Index is calculated,
maintained and published by S&P. The consequences of S&P discontinuing
publication of the S&P 100 Index are described in the section entitled
"Description of the Notes - Discontinuance of the S&P 100 Index; Alteration of
method of calculation." Lehman Brothers Holdings makes no representation or
warranty as to the accuracy or completeness of any information relating to the
S&P 100 Index.

The S&P 100 Index is a stock index calculated, published and disseminated by
Standard & Poor's that measures the composite price performance of selected
United States stocks. The S&P 100 Index, a subset of the S&P 500 Index, is
comprised of 100 leading U.S. stocks with exchange-listed options. Constituents
of the S&P 100 Index are selected for sector balance and currently represent
about 57% of the market capitalization of the S&P 500 Index and almost 45% of
the market capitalization of the U.S. equity markets. The stocks in the S&P 100
Index are generally among the largest and most established companies in the S&P
500 Index.

The index was originally developed by the Chicago Board Options Exchange (CBOE),
which later transferred the index to Standard & Poor's for management. The
Standard & Poor's U.S. Index Committee, which oversees the S&P 500 Index and
other Standard & Poor's U.S. equity indices, also maintains the S&P 100 Index.

Exchange traded funds on the S&P 100 Index are traded on the American Stock
Exchange, the Chicago Board Options Exchange, the International Securities
Exchange and Pacific Exchange. Options on the S&P 100 Index are traded on the
Chicago Board Options Exchange.

COMPOSITION OF THE S&P 100 INDEX

Because the S&P 100 Index is derived from the S&P 500 Index, the S&P 100 Index
stocks are subject to the published S&P 500 Index criteria for additions and
deletions. Additionally, S&P 100 Index stocks must meet the following criteria:

     o    S&P 500 Index constituents. Only companies included in the S&P 500
          Index are eligible for inclusion in the S&P 100 Index.

     o    Options. All stocks added to the S&P 100 Index must maintain
          exchange-listed options.

     o    Sector representation. Stocks included in the index must meet the
          Index Committee's guidelines for sector representation. The sector
          composition of the S&P 100 Index has remained comparable to the sector
          composition of the S&P 500 Index. Changes in the sector balance of the
          S&P 100 Index or the S&P 500 Index are almost always the result of
          market movements rather than of changes to index membership.

     o    Liquidity and price. The annual dollar value traded to market
          capitalization ratio should be 0.3 or greater, the standard level for
          addition to the S&P 500 Index. Greater liquidity, however, signals
          market importance and increases likelihood of selection for the S&P
          100 Index.

As of June 30, 2006, the 100 companies included in the S&P 100 Index were
divided into 10 industry groups (with the number of companies currently included
in each industry group indicated in parentheses): Consumer Discretionary (16),
Consumer Staples (11), Energy (7), Financials (13), Health Care (11),
Industrials (14), Information Technology (14), Materials (6), Telecommunications
Services (3) and Utilities (5).


                                      S-20



COMPUTATION OF THE S&P 100 INDEX

Currently, S&P calculates the S&P 100 Index based on the fully float-adjusted
market capitalization of each constituent stock. Under float adjustment, the
share counts used in calculating the S&P 100 Index reflect only those shares
that are available to investors and not all of a company's outstanding shares.
S&P defines three groups of shareholders whose holdings are subject to float
adjustment:

     o    holdings by other publicly traded corporations, venture capital firms,
          private equity firms, strategic partners, or leveraged buyout groups;

     o    holdings by government entities, including all levels of government in
          the United States or foreign countries; and

     o    holdings by current or former officers and directors of the company,
          founders of the company, or family trusts of officers, directors, or
          founders, as well as holdings of trusts, foundations, pension funds,
          employee stock ownership plans, or other investment vehicles
          associated with and controlled by the company.

However, treasury stock, stock options, restricted shares, equity participation
units, warrants, preferred stock, convertible stock, and rights are not part of
the float. Within each group, the holdings are totaled. In cases where holdings
in a group exceed 10% of the outstanding shares of a company, the holdings of
that group will be excluded from the float-adjusted count of shares to be used
in the S&P 100 Index calculation. Mutual funds, investment advisory firms,
pension funds, or foundations not associated with the company and investment
funds in insurance companies, shares of a United States company traded in Canada
as "exchangeable shares" unless they fall under one of the three groups
enumerated above, shares that trust beneficiaries may buy or sell without
difficulty or significant additional expense beyond typical brokerage fees, and,
if a company has more than one class of stock outstanding, shares in an unlisted
or nontraded class if such shares are convertible to the listed class by
shareholders without undue delay and cost, are also part of the float.

For each stock, an investable weight factor ("IWF") is calculated by dividing
the available float shares, defined as the total shares outstanding less shares
held in one or more of the three groups listed above where the group holdings
exceed 10% of the outstanding shares, by the total shares outstanding. The
float-adjusted S&P 100 Index is calculated by dividing the sum of the IWF
multiplied by both the price and the total shares outstanding for each stock by
the index divisor. For companies with multiple classes of stock outstanding, S&P
will calculate the weighted average IWF for each stock using the proportion of
the total company market capitalization of each share class as the weights.

The daily calcualtion of the S&P 100 Index is computed by dividing the total
market value of the S&P 100 component stocks by a number called the index
divisor. By itself, the index divisor is an arbitrary number. However, in the
context of the calculation of the S&P 100 Index, it is the only link to the
original base level of the S&P 100 Index. The index divisor keeps the S&P 100
Index comparable over time and is the manipulation point for all adjustments to
the S&P 100 Index.

INDEX MAINTENANCE

Because the S&P 100 Index is derived from the S&P 500 Index, the policies
governing maintenance of the S&P 500 Index, plus the additional criteria for
index listing in the S&P 100 Index, are used to maintain the S&P 100 Index. The
Index Committee may remove a company from the S&P 100 Index if the company does
not meet the inclusion qualifications or if the index becomes unbalanced in its
sector representation. The Index Committee may also remove any company that
violates any of the S&P 500 Index criteria.

Index maintenance includes monitoring and completing the adjustments for company
additions and deletions, share changes, stock splits, stock dividends, and stock
price adjustments due to company restructurings or spin-offs. Some corporate
actions, such as stock splits and stock dividends, require changes in the common
shares outstanding and the stock prices of the companies in the S&P 500 Index
and do not require index divisor adjustments.

To prevent the level of the S&P 100 Index from changing due to corporate
actions, corporate actions which affect the total market value of the S&P 100
Index require an index divisor adjustment. By adjusting the index divisor for
the change in market value, the level of the S&P 100 Index remains constant.
This helps keep the level of the S&P 100 Index accurate as a barometer of stock
market performance and ensures that the movement of the S&P 100 Index does not
reflect the corporate actions of companies in the S&P 500 Index. Divisor


                                      S-21



adjustments are made after the close of trading and after the calculation of the
S&P 100 Index closing level.

Changes in a company's shares outstanding of 5% or more due to mergers,
acquisitions, public offerings, private placements, tender offers, Dutch
auctions or exchange offers are made as soon as reasonably possible. All other
changes of 5% or more (due to, for example, company stock repurchases,
redemptions, exercise of options, warrants, subscription rights, conversion of
preferred stock, notes, debt, equity participation units or other
recapitalizations) are made weekly and are announced on Tuesdays for
implementation after the close of trading on Wednesday. Changes of less than 5%
are accumulated and made quarterly on the third Friday of March, June, September
and December, and are usually announced two days prior.

Changes in IWFs of more than ten percentage points caused by corporate actions
(such as M&A activity, restructurings or spinoffs) will be made as soon as
reasonably possible. Other changes in IWFs will be made annually, in September,
when IWFs are reviewed.


                                      S-22



HISTORICAL INFORMATION

The following table sets forth the high and low level, as well as the
end-of-quarter closing levels, of the S&P 100 Index for each quarter in the
period from January 1, 2001 through September 29, 2006. The closing level on
September 29, 2006 was 620.03. 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 100 Index in the future. The historical levels of the S&P
100 Index are not indications of future performance.

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

                                                HIGH      LOW    PERIOD-END
                                               ------   ------   ----------
2001
First Quarter ..............................   719.70   567.66     591.63
Second Quarter .............................   678.60   560.99     632.02
Third Quarter ..............................   639.96   491.70     533.10
Fourth Quarter .............................   597.70   533.40     584.28

2002
First Quarter ..............................   598.61   548.58     577.87
Second Quarter .............................   576.68   482.57     490.12
Third Quarter ..............................   492.66   396.75     407.25
Fourth Quarter .............................   480.36   392.69     444.75

2003
First Quarter ..............................   474.31   406.74     429.13
Second Quarter .............................   510.56   435.00     490.39
Third Quarter ..............................   522.60   486.66     498.56
Fourth Quarter .............................   550.78   510.33     550.78

2004
First Quarter ..............................   573.44   534.49     551.13
Second Quarter .............................   562.86   530.40     553.87
Third Quarter ..............................   549.01   519.56     534.86
Fourth Quarter..............................   577.16   524.00     575.29

2005
First Quarter...............................   584.43   555.90     561.86
Second Quarter..............................   572.34   543.60     558.07
Third Quarter...............................   577.51   558.58     566.80
Fourth Quarter..............................   583.24   544.50     570.00

2006
First Quarter...............................   594.79   568.76     587.75
Second Quarter..............................   603.82   560.70     579.56
Third Quarter (through September 29, 2006)..   621.54   566.62     620.03


                                      S-23



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 its affiliated or subsidiary
companies a license, in exchange for a fee, to use the S&P 100 Index in
connection with certain securities, including the notes.

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

The notes are not sponsored, endorsed, sold or promoted by S&P. S&P makes no
representation or warranty, express or implied, to the holders 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 100 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 100 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 holders of the notes into
consideration in determining, composing or calculating the S&P 100 Index. S&P is
not responsible for and has not participated in the determination of the timing
of the sale of the notes, prices at which the notes are to be initially sold, 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 has no
obligation or liability in connection with the administration, marketing or
trading of the notes.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 100 INDEX
OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY LEHMAN BROTHERS HOLDINGS, INVESTORS, OWNERS OF
THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 100 INDEX OR
ANY DATA INCLUDED THEREIN. S&P 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 S&P 100 INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY
LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.


                                      S-24



                             THE RUSSELL 2000 INDEX

GENERAL

Lehman Brothers Holdings obtained all information contained in this prospectus
supplement regarding the Russell 2000 Index, including, without limitation, its
make-up, method of calculation and changes in its components, from publicly
available information. Such information reflects the policies of, and is subject
to change by, Russell. Russell has no obligation to continue to publish, and may
discontinue publication of, the Russell 2000 Index. The consequences of Russell
discontinuing publication of the Russell 2000 Index are described in the section
entitled "Description of the Notes - Discontinuance of the Russell 2000 Index;
Alteration of method of calculation." Lehman Brothers Holdings makes no
representation or warranty as to the accuracy or completeness of any information
relating to the Russell 2000 Index.

COMPOSITION OF THE RUSSELL 2000 INDEX

The Russell 2000 Index is a stock index calculated, maintained, published and
disseminated by Russell, and measures the composite price performance of stocks
of 2,000 companies (the "Component Stocks") domiciled in the United States and
its territories. All 2,000 stocks must trade on a major U.S. exchange. Bulletin
board, pink-sheets or OTC traded securities are not eligible for inclusion. The
Russell 2000 stocks are the 2,000 smallest market capitalization securities that
form the Russell 3000 Index. The Russell 3000 Index is composed of the 3,000
largest U.S. companies as determined by market capitalization and currently
represents approximately 98% of the U.S. equity market.

The Russell 2000 Index consists of the smallest 2,000 companies included in the
Russell 3000 Index and represents approximately 8% of the total market
capitalization of the Russell 3000 Index. The Russell 2000 Index is designed to
track the performance of the small capitalization segment of the U.S. equity
market.

The Russell 2000 Index is a sub-group of the Russell 3000 Index. To be eligible
for inclusion in the Russell 3000 Index, and, consequently, the Russell 2000
Index, a company's stocks must be listed on May 31 of a given year and Russell
must have access to documentation verifying the company's eligibility for
inclusion. Beginning September 2004, eligible initial public offerings were
added to Russell U.S. indices at the end of each calendar quarter, based on
total market capitalization rankings within the market-adjusted capitalization
breaks established during the most recent reconstitution. To be added to any
Russell U.S. index during a quarter outside of reconstitution, initial public
offerings must meet additional eligibility criteria.

Only common stocks belonging to corporations domiciled in the U.S. and its
territories are eligible for inclusion in the Russell 3000 Index and,
consequently, the Russell 2000 Index. The following securities are specifically
excluded from the Russell 2000 Index:

     o    stocks traded on U.S. exchanges but domiciled in other countries;

     o    preferred and convertible preferred stock, redeemable shares,
          participating preferred stock, warrants and rights; and

     o    trust receipts, royalty trusts, limited liability companies, OTC
          Bulletin Board companies, pink sheets, closed-end mutual funds and
          limited partnerships that are traded on U.S. exchanges.

In addition, Berkshire Hathaway is excluded as a special exception. The primary
criteria used to determine the initial list of securities eligible for the
Russell 3000 Index is total market capitalization, which is defined as the price
of the shares times the total number of available shares. All common stock share
classes are combined in determining market capitalization. If multiple share
classes have been combined, the price of the primary vehicle (usually the most
liquid) is used in the calculations. In cases where the common stock share
classes act independently of each other (e.g., tracking stocks), each class is
considered for inclusion separately. Stocks must trade at or above $1.00 on May
31 of each year to be eligible for inclusion in the Russell 2000 Index. However,
if a stock falls below $1.00 intra-year, it will not be removed until the next
reconstitution if it is still trading below $1.00.

The Russell 2000 Index is reconstituted annually to reflect changes in the
marketplace. The list of companies is ranked based on May 31 total market
capitalization, with the actual reconstitution effective at the beginning of
third quarter. Changes in the constituents are pre-announced and subject to
change if any corporate activity occurs or if any new information is received
prior to release.


                                      S-25



CALCULATION OF THE RUSSELL 2000 INDEX

Capitalization Adjustments. As a capitalization-weighted index, the Russell 2000
Index reflects changes in the capitalization, or market value, of the Component
Stocks relative to the capitalization on a base date. The current Russell 2000
Index value is calculated by adding the market values of the Russell 2000
Index's Component Stocks, which are derived by multiplying the price of each
stock by the number of available shares, to arrive at the total market
capitalization of the 2,000 stocks. The total market capitalization is then
divided by a divisor, which represents the "adjusted" capitalization of the
Russell 2000 Index on the base date of December 31, 1986. To calculate the
Russell 2000 Index, last sale prices will be used for exchange-traded and NASDAQ
stocks. If a component stock is not open for trading, the most recently traded
price for that security will be used in calculating the Russell 2000 Index. In
order to provide continuity for the Russell 2000 Index's value, the divisor is
adjusted periodically to reflect events including changes in the number of
common shares outstanding for Component Stocks, company additions or deletions,
corporate restructurings and other capitalization changes.

Available shares are assumed to be shares available for trading. Exclusion of
capitalization held by other listed companies and large holdings of private
investors (10% or more) is based on information recorded in SEC corporate
filings. Other sources are used in cases of missing or questionable data.

The following types of shares are considered unavailable for the purposes of
capitalization determinations:

     o    ESOP or LESOP shares - corporations that have Employee Stock Ownership
          Plans that comprise 10% or more of the shares outstanding are
          adjusted;

     o    Corporate cross-owned shares - when shares of a company in the Index
          are held by another company also in the Index, this is considered
          corporate cross-ownership. Any percentage held in this class will be
          adjusted;

     o    Large private and corporate shares - large private and corporate
          holdings are defined as those shares held by an individual, a group of
          individuals acting together or a corporation not in the Index that own
          10% or more of the shares outstanding. However, not to be included in
          this class are institutional holdings, which are: investment companies
          not in the Index, partnerships, insurance companies not in the Index,
          mutual funds, banks not in the Index or venture capital funds;

     o    Unlisted share classes - classes of common stock that are not traded
          on a U.S. securities exchange; and

     o    Initial public offering lock-ups - shares locked-up during an initial
          public offering are not available to the public and will be excluded
          from the market value at the time the initial public offering enters
          the index.

Corporate Actions Affecting the Russell 2000 Index. The following summarizes the
types of Russell 2000 Index maintenance adjustments and indicates whether or not
an Index adjustment is required.

     o    "No Replacement" Rule - Securities that leave the Russell 2000 Index,
          between reconstitution dates, for any reason (e.g., mergers,
          acquisitions or other similar corporate activity) are not replaced.
          Thus, the number of securities in the Russell 2000 Index over a year
          will fluctuate according to corporate activity.

     o    Rule for Deletions - When a stock is acquired, delisted, or moves to
          the pink sheets or bulletin boards on the floor of a U.S. securities
          exchange, the stock is deleted from the Index at the close of the
          following day using the closing OTC price.

     o    When acquisitions or mergers take place within the Russell 2000 Index,
          the stock's capitalization moves to the acquiring stock, hence,
          mergers have no effect on the Index total capitalization. Shares are
          updated for the acquiring stock at the time the transaction is final.
          Prior to April 1, 2000, if the acquiring stock was a member of a
          different index (e.g., Russell 3000 or Russell 1000 ), the shares for
          the acquiring stock were not adjusted until month end.

     o    Deleted Stocks - Effective on January 1, 2002, when deleting stocks
          from the Russell 2000 Index as a result of exchange de-listing or
          reconstitution, the price used will be the market price on the day of
          deletion, including


                                      S-26



          potentially the OTC bulletin board price. Previously, prices used to
          reflect de-listed stocks were the last traded price on the primary
          exchange. Exceptions: there may be corporate events, like mergers or
          acquisitions, that result in the lack of current market price for the
          deleted security and in such an instance the latest primary exchange
          closing price available will be used.

     o    Rule for Additions - The only additions between reconstitution dates
          are as a result of spin-offs. Spin-off companies are added to the
          parent company's index and capitalization tier of membership, if the
          spin-off is large enough. To be eligible, the spun-off company's total
          market capitalization must be greater than the market-adjusted total
          market capitalization of the smallest security in the Russell 2000
          Index at the latest reconstitution.

     o    Rule for Corporate Action-Driven Changes - Beginning April 1, 2003
          changes resulting from corporate actions will generally be applied
          when an action is final. An action is final determined as final when
          notification is received from the exchange. For reclassification of
          shares, mergers and acquisitions, spin-offs or reorganizations,
          adjustments will be applied to the index after the action is
          determined to be final and effective after the close of the day the
          action is final. For re-incorporations and exchange delisting, deleted
          entities will be removed from the index when the re-incorporation is
          final.

Updates to Share Capital Affecting the Russell 2000 Index. Each month, the
Russell 2000 Index is updated for changes to shares outstanding as companies
report changes in share capital to the SEC. Effective April 30, 2002 only
cumulative changes to shares outstanding greater than 5% are reflected in the
Russell 2000 Index. This does not affect treatment of major corporate events,
which are effective on the ex-date.

HISTORICAL INFORMATION

The following table sets forth the high and low level, as well as the
end-of-quarter closing levels, of the Russell 2000 Index for each quarter in the
period from January 1, 2001 through September 29, 2006. The closing level on
September 29, 2006 was 725.59. The results shown should not be considered as a
representation of the income, yield or capital gain or loss that may be
generated by the Russell 2000 Index in the future. The historical levels of the
Russell 2000 Index are not indications 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 ..............................   511.66   432.80     450.53
Second Quarter .............................   517.23   425.74     512.80
Third Quarter ..............................   498.19   378.89     404.87
Fourth Quarter .............................   493.62   397.60     488.50

2002
First Quarter ..............................   506.46   458.40     506.46
Second Quarter .............................   522.95   452.45     462.65
Third Quarter ..............................   447.73   356.58     362.27
Fourth Quarter .............................   410.24   327.04     383.09

2003
First Quarter ..............................   398.45   345.94     364.54
Second Quarter .............................   458.01   368.69     448.37
Third Quarter ..............................   520.20   449.17     487.68
Fourth Quarter .............................   565.47   500.32     556.91

2004
First Quarter ..............................   601.50   557.63     590.31
Second Quarter .............................   606.39   535.34     591.52
Third Quarter ..............................   582.72   517.10     572.94
Fourth Quarter..............................   654.57   564.88     651.57

2005
First Quarter...............................   644.95   604.53     615.07
Second Quarter..............................   644.19   575.02     639.66
Third Quarter...............................   688.51   643.04     667.80
Fourth Quarter..............................   690.57   621.57     673.22

2006
First Quarter...............................   765.14   684.05     765.14
Second Quarter..............................   781.83   672.72     724.67
Third Quarter (through September 29, 2006)..   734.48   671.94     725.59


                                      S-28



LICENSE AGREEMENT BETWEEN RUSSELL AND LEHMAN BROTHERS HOLDINGS

Lehman Brothers Holdings has entered into a non-exclusive license agreement with
Russell, which grants Lehman Brothers Holdings and its affiliated or subsidiary
companies a license, in exchange for a fee, to use the Russell 2000 Index in
connection with certain securities, including the notes.

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

The notes are not sponsored, endorsed, sold, or promoted by Frank Russell
Company or any successor thereto or index owner ("Frank Russell" or the "Index
Owner") and neither Frank Russell nor any party hereto makes any representation
or warranty whatsoever, whether 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 Russell
2000 Index to track general stock market performance or a segment of the same.
Frank Russell's publication of the Russell 2000 Index in no way suggests or
implies an opinion by Frank Russell as to the advisability of investment in any
or all of the securities upon which the Russell 2000 Index is based. Frank
Russell's only relationship to Lehman Brothers Holdings, Inc. and its affiliates
is the licensing of certain trademarks and trade names of Frank Russell and of
the Russell 2000 Index which is determined, composed and calculated by Frank
Russell without regard to Lehman Brothers Holdings, Inc. and its affiliates or
the notes. Frank Russell is not responsible for and has not reviewed the notes
nor any associated literature or publications and Frank Russell makes no
representation or warranty express or implied as to their accuracy or
completeness, or otherwise. Frank Russell reserves the right, at any time and
without notice, to alter, amend, terminate or in any way change the Russell 2000
Index. Frank Russell has no obligation or liability in connection with the
administration, marketing or trading of the notes.

"Russell 2000(R) Index" and "Russell 3000(R) Index" are trademarks of Frank
Russell Company and have been licensed for use by Lehman Brothers Holdings Inc.
This transaction is not sponsored, endorsed, sold, or promoted by Frank Russell
Company and Frank Russell Company makes no representation regarding the
advisability of entering into this transaction.

FRANK RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
RUSSELL 2000 INDEX OR ANY DATA INCLUDED THEREIN AND FRANK RUSSELL SHALL HAVE NO
LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. FRANK RUSSELL
MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LEHMAN
BROTHERS HOLDINGS, INC. AND/OR ITS AFFILIATES, INVESTORS, OWNERS OF THE
PRODUCT(S), OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RUSSELL 2000 INDEX
OR ANY DATA INCLUDED THEREIN. FRANK RUSSELL 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 RUSSELL 2000 INDEX OR ANY
DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL
FRANK RUSSELL HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.


                                      S-29



                         HISTORICAL RELATIVE PERFORMANCE

The following table sets forth the high and low relative performance, as well as
the end-of quarter relative performance, of the S&P 100 Index and the Russell
2000 Index for each quarter in the period from January 1, 2001 through September
29, 2006, calculated on a rolling basis using as the respective initial index
levels the respective closing index levels on the date that is 13 months before
the respective scheduled trading day (or, if such a date was not a scheduled
trading day, the previous scheduled trading day) with respect to which relative
performance is measured (for example, the relative performance as of June 30,
2006 was calculated using the closing index levels of May 31, 2005 as the
initial index levels). The historical relative performances are not indicators
of future relative performances.

                                                  HIGH      LOW    PERIOD-END
                                                 ------   ------   ----------
2001
First Quarter.................................     4.09%  -15.13%      3.41%
Second Quarter................................     7.10   -24.96     -24.96
Third Quarter.................................   -10.15   -20.18     -11.31
Fourth Quarter................................    -7.79   -24.45     -24.45

2002
First Quarter.................................   -10.93   -24.19     -15.27
Second Quarter................................   -13.50   -24.43     -15.21
Third Quarter.................................    -2.62   -14.21      -5.20
Fourth Quarter................................    -0.22    -9.23      -5.79

2003
First Quarter.................................     2.43    -5.33      -0.07
Second Quarter................................     6.76    -0.28       2.11
Third Quarter.................................     2.84   -20.07     -15.24
Fourth Quarter................................   -14.75   -31.87     -20.73

2004
First Quarter.................................   -20.73   -32.87     -32.87
Second Quarter................................   -15.60   -35.92     -18.21
Third Quarter.................................    -3.65   -17.61      -7.62
Fourth Quarter................................    -5.64   -13.28      -7.45

2005
First Quarter.................................    -1.91    -8.69      -4.21
Second Quarter................................     3.78   -11.13      -8.89
Third Quarter.................................    -8.21   -19.97     -15.69
Fourth Quarter................................    -2.68   -14.83      -2.68

2006
First Quarter.................................    -3.07   -17.05     -17.05
Second Quarter................................    -9.35   -19.58     -14.30
Third Quarter (through September 29, 2006) ...     3.02   -13.08       0.86


                                      S-30



                              UNITED STATES FEDERAL
                             INCOME TAX CONSEQUENCES

The following is a summary of the material United States federal income tax
consequences of the purchase, ownership, and disposition of notes as of the date
of this prospectus supplement. Except where 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 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
     U.S. dollar;

o    alternative minimum tax consequences, if any; or

o    any state, local or foreign tax consequences.

If a partnership holds our 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 our notes, you should consult your
tax advisors.

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

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

UNITED STATES HOLDERS

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

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

o    an individual citizen or resident of the United States;

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

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

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

GENERAL

No statutory, judicial or administrative authority directly addresses the
characterization of the notes or instruments similar to the notes for United
States federal income tax purposes. As a result, significant aspects of the
United States federal income tax consequences of an investment in the notes are
not certain. No ruling is being requested from the Internal Revenue Service with
respect to the notes and no assurance can be given that the Internal Revenue
Service will agree with the treatment described herein. 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 described below, rather


                                      S-31



than as a debt instrument. Except where noted, the remainder of this discussion
assumes that this treatment is correct, although no assurance is given in this
regard.

SALE, EXCHANGE OR OTHER DISPOSITION, OR CASH SETTLEMENT UPON MATURITY

Upon a sale, exchange or other disposition, or payment upon cash settlement at
maturity or upon early redemption 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.

ALTERNATIVE CHARACTERIZATIONS

There can be no assurance that the Internal Revenue Service will agree with the
foregoing treatment of the notes, and it is possible that the Internal Revenue
Service could assert another treatment and a court could agree with such
assertion. For instance, it is possible that the Internal Revenue Service could
seek to apply the regulations governing contingent payment debt obligations, in
particular because the notes in form are debt instruments. Those regulations
would require you to accrue interest income at a market rate, notwithstanding
that no cash interest payments are actually made, and generally would
characterize gain or, to some extent, loss as ordinary rather than capital. The
Internal Revenue Service could also assert other characterizations that could
affect the timing, amount and character of income or deductions.

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 on any sale, exchange or
other disposition or on payments received at maturity in respect of the notes,
provided that the stock issuers underlying an index are not United States real
property holding corporations 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 on the sale, exchange or other
disposition of a note. 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 the sale, exchange or other disposition of a note or upon payments received
at maturity in respect of the notes 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 the sale, exchange or other disposition, and certain other conditions
are met or (iii) possibly to the extent that an issuer of stock underlying an
index is a United States real property holding corporation.

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.

INFORMATION REPORTING AND BACKUP WITHHOLDING

If you are a United States holder of notes, information reporting requirements
will generally apply to all payments received by you 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.


                                      S-32



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 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 with respect to 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 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-33



                          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-34



                               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


                                      S-35



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

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

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

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

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

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


                                      S-36



                                  UNDERWRITING

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

Lehman Brothers Holdings has granted to the underwriter an option to purchase,
at any time within 13 days of the original issuance of the notes, up to $
additional aggregate principal amount of notes solely to cover over-allotments.
To the extent that the option is exercised, the underwriter will be committed,
subject to certain conditions, to purchase the additional notes. If this option
is exercised in full, the total public offering price, underwriting discount and
proceeds to Lehman Brothers Holdings would be $       , $        and $       ,
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 will enter 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 will earn 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-37



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

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

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

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

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

Germany

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

Ireland

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

Panama

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

Switzerland

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


                                      S-38



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:

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

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

Uruguay

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

Venezuela

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

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-39

                                       $
                         LEHMAN BROTHERS HOLDINGS INC.



                              Outperformance Notes
                              Due November  , 2007
             Linked to the performance of the S&P 100(R) Index (OEX)
          relative to the performance of the Russell 2000(R) Index (RTY)


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


                             PROSPECTUS SUPPLEMENT
                                     , 2006


                             (INCLUDING PROSPECTUS
                              DATED MAY 30, 2006)

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



                                LEHMAN BROTHERS