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

PROSPECTUS SUPPLEMENT
(To prospectus dated June 21, 2001)

                              2,000,000 WARRANTS
                         LEHMAN BROTHERS HOLDINGS INC.
                       NIKKEI 225(SM) INDEX CALL WARRANTS
                              EXPIRING MAY 8, 2007
                               ----------------
General:

 o Unsecured contractual obligations of Lehman Brothers Holdings.


 o Performance linked to the Nikkei 225 Index, as calculated by Nihon Keizai
   Shimbun, Inc.


 o Minimum purchase: 500 warrants.


 o Denominations: 100 warrants and whole multiples thereof.


 o Expiration date: May 8, 2007.


 o You will be able to exercise the warrants at any time after July 10, 2005
   until one business day before their expiration, subject to the possibility
   that your right to exercise may be postponed in connection with the limit
   on the maximum number of warrants that may be exercised on any day.


 o You may exercise no fewer than 500 warrants at any one time, except in the
   case of automatic exercise. There is a maximum limit on the number of
   warrants that may be exercised on any one day except in the case of
   automatic exercise.


 o Any warrants that have not been exercised by the expiration date will be
   automatically exercised on that date. If the warrants are delisted, any
   warrants that have not been exercised prior to such delisting will be
   automatically exercised on the delisting date.


 o The valuation date will generally be the first scheduled trading day after
   the relevant exercise date but may be postponed if a market disruption
   event occurs. As a result, you will not be able to determine, at the time
   of your exercise of a warrant, the final index level that will be used in
   calculating the cash settlement value that Lehman Brothers Holdings will
   pay you.

 o Settlement payment date: for each warrant, the third business day after the
   valuation date.

 o The warrants have been approved for listing on the American Stock Exchange
   LLC ("Amex") under the trading symbol "NKZ.WS".

Payments:

 o No payments will be made on the warrants prior to exercise; the warrants may
   expire worthless.

 o On the relevant settlement payment date, Lehman Brothers Holdings will pay
   you, per warrant exercised or automatically exercised, the cash settlement
   value, which will equal the greater of:

   (1)   zero; and

                final index level - strike price
   (2)   $66 x  --------------------------------  , where
                       initial index level

         o  the final index level will generally be the closing index level on
            the applicable valuation date, which will generally be the first
            scheduled trading day following the relevant exercise date;

         o  the closing index level on any particular day will generally be
            the closing index level of the Nikkei 225 Index on such day;

         o  the strike price will be equal to the initial index level; and

         o  the initial index level is 11192.17, the closing index level on
            the date of this prospectus supplement.

   As a result, if the final index level on the applicable valuation date is
   less than or equal to the strike price, the cash settlement value will be
   zero.

   The calculation of the cash settlement value will not take into account
   fluctuations in the Japanese yen/U.S. dollar exchange rate.

Investing in the warrants involves a high degree of risk, including the risk of
  the warrants expiring worthless if the final index level with respect to the
  expiration date is less than or equal to the strike price. Purchasers should
   be prepared to sustain a total loss of the purchase price of their warrants
   and should consider carefully the section entitled "Risk Factors" beginning
                                  on page S-7.

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



                                                     PER WARRANT       TOTAL
                                                    ------------- --------------

    Public offering price .........................     $6.46      $12,920,000
    Underwriting discount .........................     $0.45         $900,000
    Proceeds to Lehman Brothers Holdings ..........     $6.01      $12,020,000


                                ----------------
The warrants are expected to be ready for delivery in book-entry form only
through The Depository Trust Company on or about May 11, 2005.
                                ----------------
Lehman Brothers Inc., a wholly-owned subsidiary of Lehman Brothers Holdings,
makes a market in Lehman Brothers Holdings' securities. It may act as principal
or agent in, and this prospectus 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.
                                ----------------
                                 Joint Managers

LEHMAN BROTHERS                                              OPPENHEIMER & CO.

May 6, 2005

"Nikkei" and "Nikkei 225" are the service marks of Nihon Keizai Shimbun, Inc.
("NKS") and will be licensed for use by Lehman Brothers Holdings Inc. The
warrants, based on the performance of the Nikkei 225 Index, are not sponsored,
endorsed, sold or promoted by NKS, and NKS makes no representation regarding
the advisability of investing in the warrants.

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

                                   ----------

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

                              PROSPECTUS SUPPLEMENT

SUMMARY INFORMATION -- Q&A...................................................S-3
RISK FACTORS.................................................................S-7
USE OF PROCEEDS AND HEDGING.................................................S-15
RATIO OF EARNINGS TO FIXED CHARGES..........................................S-15
DESCRIPTION OF THE WARRANTS.................................................S-16
THE NIKKEI 225 INDEX........................................................S-25
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES...............................S-29
CERTAIN ERISA CONSIDERATIONS................................................S-31
BOOK-ENTRY ISSUANCE.........................................................S-32
UNDERWRITING................................................................S-34
EXPERTS.....................................................................S-37
APPENDIX A: INDEX OF TERMS...................................................A-1
APPENDIX B: FORM OF EXERCISE NOTICE..........................................B-1

                                   PROSPECTUS

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


                                       S-2



                           SUMMARY INFORMATION -- Q&A

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

WHAT ARE THE WARRANTS?

The warrants are a series of unsecured contractual obligations of Lehman
Brothers Holdings Inc. ("Lehman Brothers Holdings") whose value is linked to the
performance of the Nikkei 225 Index. See "The Nikkei 225 Index." The warrants
will rank equally with all other unsecured contractual obligations of Lehman
Brothers Holdings and Lehman Brothers Holdings' unsecured and unsubordinated
debt. The warrants may be exercised at any time after July 10, 2005 and will
expire on May 8, 2007. Any warrants that have not been exercised prior to the
expiration date or an earlier delisting date will be subject to automatic
exercise as described under "Description of the Warrants--Automatic exercise."

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

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

Please note that an investment in the warrants does not entitle you to any
ownership or other interest in the stocks of the companies included in the
Nikkei 225 Index.

WHAT PAYMENTS WILL I RECEIVE ON THE WARRANTS PRIOR TO EXERCISE?

None. No payments will be made on the warrants prior to exercise. The warrants
may expire worthless.

WHAT WILL I RECEIVE UPON EXERCISE OF THE WARRANTS?

On the relevant settlement payment date, which will be the third business day
after the valuation date, Lehman Brothers Holdings will pay you, per warrant
exercised or automatically exercised, the cash settlement value, which will
equal the greater of:

o    zero; and

            final index level - strike price
o    $66 x  -------------------------------- , where
                  initial index level

     o    the final index level will be the closing index level on the valuation
          date, which will generally be the first scheduled trading day
          following the relevant exercise date, and may be postponed if a market
          disruption event occurs;

     o    the closing index level on any particular day will generally be the
          closing index level of the Nikkei 225 Index on such day;

     o    the strike price will be equal to the initial index level; and

     o    the initial index level is 11192.17, the closing index level on the
          date of this prospectus supplement.

As a result, if the final index level on the applicable valuation date is less
than or equal to the strike price, the cash settlement value will be zero.

If the calculation agent determines that one or more market disruption events
have occurred on the scheduled trading day that would otherwise be the valuation
date, the calculation agent will, subject to certain limitations, determine the
final index level by reference to the closing index level on the next scheduled
trading day on which there is not a market disruption event. Any postponement of
the valuation date will cause the date you receive payment to be postponed until
three business days after such postponed valuation date.



                                       S-3




In limited circumstances, the closing index level on any valuation date may be
adjusted by the calculation agent.

The calculation of the cash settlement value will not take into account
fluctuations in the Japanese yen/U.S. dollar exchange rate.

See "Description of the Warrants--Cash settlement value," "--Exercise and
settlement of warrants," "--Market disruption events," "--Maximum exercise
amount" and "--Discontinuance of the Nikkei 225 Index; alteration of method of
calculation" for details.

CASH SETTLEMENT VALUE--EXAMPLES

Here are three examples of hypothetical calculations of cash settlement values
of a warrant.

EXAMPLE 1. ASSUMING FOR PURPOSES OF THIS EXAMPLE THAT THE FINAL INDEX LEVEL OF
THE NIKKEI 225 INDEX ON THE APPLICABLE VALUATION DATE IS 9513.34, OR 15% LESS
THAN THE STRIKE PRICE:

       9513.34 - 11192.17
$66 x  ------------------  = minus $9.9000
           11192.17

Since the cash settlement value cannot be less than zero, the cash settlement
value per warrant is zero and you would receive nothing upon exercise of the
warrants.

EXAMPLE 2. ASSUMING FOR PURPOSES OF THIS EXAMPLE THAT THE FINAL INDEX LEVEL OF
THE NIKKEI 225 INDEX ON THE APPLICABLE VALUATION DATE IS 11192.17, OR EQUAL TO
THE STRIKE PRICE:

       11192.17 - 11192.17
$66 x  -------------------  = $0.0000
           11192.17

As a result, the cash settlement value per warrant is zero and you would receive
nothing upon exercise of the warrants.

EXAMPLE 3. ASSUMING FOR PURPOSES OF THIS EXAMPLE THAT THE FINAL INDEX LEVEL OF
THE NIKKEI 225 INDEX ON THE APPLICABLE VALUATION DATE IS 11751.78, OR 5% GREATER
THAN THE STRIKE PRICE:

       11751.78 - 11192.17
$66 x  -------------------  = $3.3000
            11192.17

As a result, the cash settlement value per warrant is $3.3000 and you would
receive $3.3000 per warrant upon exercise of the warrants.

EXAMPLE 4. ASSUMING FOR PURPOSES OF THIS EXAMPLE THAT THE FINAL INDEX LEVEL OF
THE NIKKEI 225 INDEX ON THE APPLICABLE VALUATION DATE IS 12871.00, OR 15%
GREATER THAN THE STRIKE PRICE:

       12871.00 - 11192.17
$66 x  -------------------  = $9.9000
            11192.17

As a result, the cash settlement value per warrant is $9.9000 and you would
receive $9.9000 per warrant upon exercise of the warrants.

                                   ----------

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

HOW DO I EXERCISE MY WARRANTS?

The warrants will be exercisable at any time after July 10, 2005 and, except in
connection with the maximum limit on exercise, may be exercised on any business
day until 3:00 p.m., New York City time, on the earlier of:

o    the business day immediately preceding the expiration date for the
     warrants; the expiration date is May 8, 2007; or

o    if the warrants are delisted, the business day immediately preceding the
     effective date of their delisting from, or permanent suspension from
     trading on, the Amex and failure to list the warrants on another United
     States national securities exchange (such effective date of their
     delisting, the "delisting date").

You will not have the right to receive physical certificates evidencing your
ownership of the warrants except under limited circumstances. Instead, Lehman
Brothers Holdings will issue the warrants in the form of one or more global
certificates, which will be held by The Depository Trust Company ("DTC") or its
nominee. Direct and indirect participants in DTC, including the depositaries in
the Euroclear or Clearstream clearing systems, will record beneficial ownership
of the warrants by individual investors. To exercise warrants, you must direct a
broker, who may, in turn, need to direct a participating organization in DTC (a
"participant"), to transfer warrants held by DTC on your behalf and


                                       S-4




to submit an exercise notice in the form of Appendix B (an "exercise notice") to
the warrant agent.

In order for the business day on which the exercise notice and related warrants
are delivered on your behalf to the warrant agent to constitute the exercise
date for the warrants being exercised, you must cause the warrants to be
transferred free on the records of DTC to, and the exercise notice to be
received by, the warrant agent at or prior to 3:00 p.m., New York City time, on
that business day. However, in the case of warrants held through Clearstream or
Euroclear, while the exercise notice must be received by the warrant agent at or
prior to 3:00 p.m., New York City time, on that day, the related warrants need
only be transferred to the warrant agent prior to 3:00 p.m., New York City time,
on the applicable valuation date. See "Risk Factors" beginning on page S-7 and
"Description of the Warrants--Exercise and settlement of warrants."

Any warrant not exercised on or before the expiration date or the delisting
date, if any, will be automatically exercised on that date. See "Description of
the Warrants--Automatic exercise."

You may exercise no fewer than 500 warrants at any one time, except in the case
of automatic exercise. See "Description of the Warrants--Minimum exercise
amount." All exercises of warrants, other than automatic exercises, are subject,
at the calculation agent's option, to the limitation that not more than 400,000
warrants in total may be exercised on any exercise date. See "Description of the
Warrants--Maximum exercise amount."

HOW HAS THE NIKKEI 225 INDEX PERFORMED HISTORICALLY?

Lehman Brothers Holdings has provided a table, beginning on page S-26, showing
the performance of the Nikkei 225 Index from January 1, 1990 through May 6,
2005. Lehman Brothers Holdings has provided this historical information to help
you evaluate the behavior of the Nikkei 225 Index so that you can make an
informed decision with respect to an investment in the warrants. You should
realize, however, that past performance is not necessarily indicative of how the
Nikkei 225 Index or the warrants will perform in the future.

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

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

ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?

Yes, the warrants are subject to a number of risks, including the risk of the
warrants expiring worthless if the final index level with respect to the
expiration date is equal to or less than the strike price. See "Risk Factors"
beginning on page S-7.

WHAT ABOUT TAXES?

A warrant will be treated as a cash settlement option that is subject to the
"mark-to-market" rules under section 1256 of the Internal Revenue Code of 1986,
as amended (the "Code"). As a result, holders will recognize gain or loss each
year equal to the difference between the fair market value of the warrant on the
last business day of the year and the holder's adjusted basis in the warrant. A
holder's tax basis in the warrant will be adjusted to take into account any gain
or loss recognized in prior periods. Any gain or loss recognized on the warrants
will be 60% long-term capital gain or loss and 40% short-term capital gain or
loss. See "United States Federal Income Tax Consequences."

WHO IS LEHMAN BROTHERS HOLDINGS?

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

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



                                       S-5




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

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

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

WHAT IS THE ROLE OF LEHMAN BROTHERS INC.?

Lehman Brothers Inc., a subsidiary of Lehman Brothers Holdings, is an
underwriter for the offering and sale of the warrants. Lehman Brothers Inc. will
also be the calculation agent for purposes of calculating the amount payable to
you upon exercise of warrants. Potential conflicts of interest may exist between
Lehman Brothers Inc. and you as a beneficial owner of the warrants. 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 Warrants--Calculation agent."

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

WILL THE WARRANTS BE LISTED ON A STOCK EXCHANGE?

The warrants have been approved for listing on the Amex under the trading symbol
"NKZ.WS". The listing of the warrants on the Amex will not necessarily ensure
that a liquid trading market will be available for the warrants.

The delisting of the warrants from, or permanent suspension of trading of the
warrants on, the Amex, and failure to list the warrants on another national
securities exchange will result in the automatic exercise of the warrants, and
could result in your total loss of the purchase price for your warrants. You
should review the sections "Risk Factors--The warrants may not be actively
traded" and "Description of the Warrants--Automatic exercise."


                                       S-6



                                  RISK FACTORS

The warrants involve a high degree of risk. Prospective purchasers of the
warrants should recognize that their warrants may expire worthless and should be
prepared to sustain a total loss of the purchase price of their warrants.
Prospective purchasers of the warrants should be experienced with respect to
options and options transactions, should understand the risks of transactions in
equity-indexed instruments and should reach an investment decision only after
careful consideration, with their advisers, of the suitability of the warrants
in light of their particular financial circumstances, the information set forth
below and the other information set forth in this prospectus supplement, the
accompanying prospectus and the documents incorporated in this document by
reference.

THE WARRANTS ARE A RISKY INVESTMENT AND MAY EXPIRE WORTHLESS.

You will receive a cash payment from Lehman Brothers Holdings upon exercise,
including automatic exercise, of a warrant only if the warrant has a cash
settlement value greater than zero at that time. If the final index level on the
applicable valuation date is less than or equal to the strike price, the cash
settlement value will be zero. The strike price will be set to equal the initial
index level on the day the warrants are priced for initial sale to the public
and will remain constant throughout the term of the warrants.

Investment decisions relating to equity-indexed warrants, such as warrants
offered by this prospectus supplement, require the investor to predict the
direction of movements in the values of the stocks underlying the relevant index
as well as the amount and timing of those movements. Equity-indexed warrants may
change substantially in value, or lose all of their value, with relatively small
movements in the value of the relevant index. Moreover, an equity-indexed
warrant is a "wasting asset" in that, in the absence of countervailing factors,
such as an offsetting movement in the value of the relevant index, the market
value of an equity-indexed warrant will tend to decrease over time and the
warrant will have no market value after the time for exercise has expired.
Assuming all other factors are held constant, the more a warrant is
"out-of-the-money" (as described below) and the shorter its remaining term to
expiration, the greater the risk that a purchaser of the warrant will lose all
or part of his purchase price for the warrant. This means that if the final
index level with respect to the expiration is less than or equal to the strike
price, then investors in the warrants who have not exercised their warrants or
sold their warrants in the secondary market prior to expiration will necessarily
lose their entire purchase price for the warrants upon expiration. The risk of
the loss of all of the purchase price of a warrant upon expiration means that,
in order to recover and realize a return upon your investment, you must
generally be correct about all of the direction, timing and magnitude of an
anticipated change in the value of the Nikkei 225 Index. Even if the warrant is
"in-the-money" (as described below) when exercised, including automatic exercise
upon expiration, if the final index level is not greater than the strike price
to an extent sufficient to cover your cost of the warrant (that is, the purchase
price plus transaction costs, if any), you will lose all or part of your
purchase price for the warrant. Investors in the warrants will thus bear the
risk of a decline in the level of the Nikkei 225 Index.

Accordingly, equity-indexed warrants, such as the warrants offered by this
prospectus supplement, involve a high degree of risk and are not appropriate for
every investor. Investors who are considering purchasing the warrants must be
able to understand and bear the risk of a speculative investment in the
warrants, be experienced with respect to options and options transactions and
understand the risks of transactions in equity-indexed instruments.

ASSUMING ALL OTHER FACTORS ARE HELD CONSTANT, THE VALUE OF THE WARRANTS WILL
FALL IF THE LEVEL OF NIKKEI 225 INDEX DECLINES.

While the trading prices of the stocks underlying the Nikkei 225 Index will
determine the level of the Nikkei 225 Index, it is impossible to predict whether
the level of the Nikkei 225 Index will fall or rise. Trading prices of the
stocks underlying the Nikkei 225 Index will be influenced by the complex and
interrelated political, economic, financial and other factors that can affect
the capital markets generally and the equity trading markets on which the
underlying stocks are traded, and by various circumstances that can influence
the values of the underlying stocks in a specific market segment or a particular
underlying stock. There is, of course, no assurance that any of the underlying
stocks comprising the Nikkei 225 Index will appreciate in value, and indeed any
or all of the underlying stocks, and the Nikkei 225 Index, may depreciate in
value at any time in the future.


                                       S-7



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

The warrants will have a cash settlement value of zero at the time of their
initial public offering. The cash settlement value of the warrants at any time
prior to their expiration is expected typically to be less than the trading
price of the warrants at that time. The difference between the trading price and
the cash settlement value will reflect, among other things, a "time value" for
the warrants. The "time value" of the warrants will depend partly upon the
length of time remaining to their expiration and expectations concerning the
value of the Nikkei 225 Index and the underlying stocks during that period. The
expiration date of the warrants will be accelerated should the warrants be
delisted from, or should there be a permanent suspension of their trading on,
the Amex, unless the warrants simultaneously are accepted for listing on another
national securities exchange. Any acceleration of this type would result in the
total loss of any otherwise remaining "time value," and could occur when the
warrants are "at-the-money" or "out-of-the-money," as these terms are described
in the following paragraphs, thus resulting in the total loss of the purchase
price of the warrants.

The final index level on any given day will determine whether the warrants have
a cash settlement value greater than zero on that day. The warrants will be
"at-the-money" (that is, their cash settlement value will be zero) on any given
day if the final index level is equal to the strike price, will be "out-of-the-
money" (that is, their cash settlement value will be zero) on any given day if
the final index level is less than the strike price and will be "in-the-money"
(that is, their cash settlement value will be greater than zero) on any given
day only if the final index level exceeds the strike price. An increase in the
positive difference, if any, between the final index level and the strike price
will result in a greater cash settlement value, and a decrease in the difference
will result in a lesser or zero cash settlement value. Potential profit or loss
upon exercise, including automatic exercise, of a warrant will be a function of
the cash settlement value of the warrant upon exercise, the purchase price of
the warrant and any related transaction costs.

Before purchasing, exercising or selling warrants, investors in the warrants
should carefully consider, among other things:

o    the purchase or trading price of the warrants;

o    the value of the Nikkei 225 Index at that time;

o    the time remaining to their expiration;

o    the probable range of cash settlement values; and

o    any related transaction costs.

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

o    INDEX VALUE. Lehman Brothers Holdings expects that the market value of the
     warrants will depend substantially on the amount, if any, by which the
     closing index level at any given point in time exceeds the strike price. If
     you decide to sell your warrants prior to the expiration date, you may
     receive substantially less than the amount that would be payable on the
     expiration date based on that closing index level because of expectations
     that the closing index level will continue to fluctuate until the cash
     settlement value is determined. If you decide to sell your warrants when
     the closing index level is less than the strike price, you can expect to
     receive less than the initial purchase price of the warrants. Political,
     economic and other developments that affect the outlook for securities in
     the Nikkei 225 Index may also affect the closing index level and could
     indirectly affect the value of the warrants.

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

o    VOLATILITY OF THE NIKKEI 225 INDEX. Volatility is the term used to describe
     the size and frequency of market fluctuations. If the volatility of the
     level of the Nikkei 225 Index changes, the trading value of the warrants
     may be adversely affected. Lehman Brothers Holdings is unable to predict
     the effect of these events on the future value or volatility of the Nikkei
     225 Index.


                                       S-8



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

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

o    MERGER AND ACQUISITION TRANSACTIONS. Some of the securities included in the
     Nikkei 225 Index may be affected by mergers and acquisitions, which can
     contribute to volatility of the Nikkei 225 Index. Additionally, as a result
     of a merger or acquisition, one or more securities in the Nikkei 225 Index
     may be replaced with a surviving or acquiring entity's securities. The
     surviving or acquiring entity's securities may not have the same
     characteristics as the securities originally included in the Nikkei 225
     Index.

o    TIME REMAINING TO EXPIRATION. The value of the warrants may be affected by
     the time remaining to expiration due to expectations concerning the level
     of the Nikkei 225 Index prior to the expiration of the warrants. As the
     time remaining to the expiration of the warrants decreases, this time value
     may decrease, adversely affecting the trading value of the warrants.

o    DIVIDEND YIELDS. If dividend yields on the securities included in the
     Nikkei 225 Index increase, the value of the warrants may be adversely
     affected because the Nikkei 225 Index does not incorporate the value of
     those payments.

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

o    ECONOMIC CONDITIONS AND EARNINGS PERFORMANCE OF THE UNDERLYING COMPANIES.
     General economic conditions and earnings results of the companies whose
     stocks are included in the Nikkei 225 Index and real or anticipated changes
     in those conditions or results may affect the market value of the warrants.

You should understand that the impact of one of the factors specified above,
such as an increase in interest rates, may offset some or all of any change in
the trading value of the warrants attributable to another factor, such as an
increase in the index level. In general, assuming all relevant factors are held
constant, the effect on the trading value of the warrants 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 warrants.

THERE ARE RISKS AND COSTS ASSOCIATED WITH EXERCISE OF WARRANTS.

Lehman Brothers Holdings will issue the warrants in the form of one or more
global certificates, which will be held by DTC or its nominee. Direct and
indirect participants in DTC, including the depositaries in the Euroclear or
Clearstream clearing systems, will record beneficial ownership of the warrants
by individual investors. To exercise warrants, you must direct a broker, who
may, in turn, need to direct a participant, to transfer warrants held by DTC on
your behalf and to submit an exercise notice to the warrant agent.

In order for the business day on which your exercise notice and related warrants
are delivered on your behalf to the warrant agent to constitute the exercise
date for the warrants being exercised, you must cause the warrants to be
transferred free on the records of DTC to, and the exercise notice to be
received by, the warrant agent at or prior to 3:00 p.m., New York City time, on
that business day. However, in the case of warrants held through Clearstream or
Euroclear, while the exercise notice must be received by the warrant agent at or
prior to 3:00 p.m., New York City time, on that day, the related warrants need
only be transferred to the warrant agent prior to 3:00 p.m., New York City time,
on the applicable valuation date.


                                       S-9



TO ENSURE THAT THE WARRANTS AND EXERCISE NOTICE WILL BE RECEIVED BY THE WARRANT
AGENT AT OR PRIOR TO THE APPLICABLE DEADLINE, YOU MUST GIVE THE APPROPRIATE
DIRECTION TO YOUR BROKER BEFORE THAT BROKER'S CUT-OFF TIME FOR ACCEPTING
EXERCISE INSTRUCTIONS FROM CUSTOMERS FOR THAT DAY. IF YOUR BROKER IS NOT A
PARTICIPANT, YOU MUST DO SO BEFORE THE APPLICABLE PARTICIPANT'S CUT-OFF TIME.
DIFFERENT BROKERAGE FIRMS MAY HAVE DIFFERENT CUT-OFF TIMES FOR ACCEPTING AND
IMPLEMENTING EXERCISE INSTRUCTIONS FROM THEIR CUSTOMERS. THEREFORE, YOU SHOULD
CONSULT WITH YOUR BROKER OR OTHER INTERMEDIARIES, IF APPLICABLE, AS TO
APPLICABLE CUT-OFF TIMES AND OTHER EXERCISE MECHANICS. SEE "DESCRIPTION OF THE
WARRANTS--EXERCISE AND SETTLEMENT OF WARRANTS," "--CLEARSTREAM AND EUROCLEAR"
AND "--LIMIT OPTION." A FORM OF EXERCISE NOTICE FOR WARRANTS APPEARS IN APPENDIX
B. ADDITIONAL FORMS MAY BE OBTAINED AT THE WARRANT AGENT'S OFFICE DURING THE
WARRANT AGENT'S NORMAL BUSINESS HOURS. SEE "DESCRIPTION OF THE
WARRANTS--GENERAL."

If a warrant is not exercised at or prior to 3:00 p.m., New York City time, on
the earlier of (1) the business day immediately preceding the expiration date
and (2) the business day immediately preceding the delisting date, if any, the
warrant will be subject to automatic exercise as described under "Description of
the Warrants." However, if at that time, the final index level on the applicable
valuation date is equal to or less than the strike price, the warrant will
expire worthless and you will have sustained a total loss of the purchase price
of the warrant.

THERE IS A MINIMUM NUMBER OF WARRANTS THAT CAN BE EXERCISED.

Except in the event of automatic exercise, a holder must tender at least 500
warrants at any one time in order to exercise its warrants. Thus, except in the
case of automatic exercise, holders with fewer than 500 warrants will need
either to sell their warrants or to purchase additional warrants, incurring
transaction costs in either case, in order to realize upon their investment.
Furthermore, such holders incur the risk that there may be differences between
the trading price of the warrants and the cash settlement value of such
warrants.

THERE ARE LIMITS ON THE NUMBER OF WARRANTS THAT CAN BE EXERCISED ON ANY SINGLE
DAY.

The calculation agent will have the option to limit the number of warrants
exercisable on any date, except on automatic exercise, to an aggregate of
400,000. In the event that the total number of warrants being exercised on any
date exceeds such maximum number and the calculation agent elects to limit the
number of warrants exercisable on that date, you may not be able to exercise all
of the warrants that you desire to exercise on that date. Warrants to be
exercised on that date will be selected on a pro rata basis. The warrants
tendered for exercise but not exercised on that date will be automatically
exercised on the next date on which warrants may be exercised, subject to the
same daily maximum limitation and certain delayed exercise provisions. Any
limitation of this type will not apply in the event of automatic exercise,
including at expiration.

THERE WILL BE A TIME LAG AFTER EXERCISE INSTRUCTIONS ARE GIVEN.

In the case of any exercise of warrants, there will be a time lag between the
time you give instructions to exercise and the time the final index level used
to calculate the cash settlement value relating to the exercise is determined.
Except under the circumstances described in this risk factor and the following
risk factor "Market disruption events may postpone the valuation date," the
valuation date for an exercised warrant will be the first scheduled trading day
after the relevant exercise date. Generally, the exercise date for an exercised
warrant, subject to certain exceptions described under "Description of the
Warrants--Exercise and settlement of warrants," "--Limit option" and
"--Automatic exercise," will be the business day on which the warrant and an
exercise notice in proper form are received by the warrant agent if received at
or prior to 3:00 p.m., New York City time, on that day; if the warrant and
exercise notice are received after that time, the exercise date will be the
following business day. See "Description of the Warrants--Exercise and
settlement of warrants."

The valuation date for an exercised warrant will occur after the exercise date.
See "Description of the Warrants--Exercise and settlement of warrants."
Therefore, you will not be able to determine, at the time of exercise of a
warrant, the final index level that will be used in calculating the cash
settlement value of the warrant, and you will thus be unable to determine the
cash settlement value. In addition, the valuation date for exercised warrants
may be


                                      S-10



postponed upon the occurrence and continuation of a market disruption event. See
"Description of the Warrants--Market disruption events." Moreover, because the
exercise date for warrants may be delayed to the extent the number of warrants
sought to be exercised exceeds the limit on exercise described under
"Description of the Warrants--Maximum exercise amount", the valuation date for
warrants whose exercise is so delayed will be further delayed.

Any downward movement in the value of the Nikkei 225 Index between the time you
submit an exercise notice and the time the final index level for that exercise
is determined will result in your receiving a cash settlement value, including a
zero cash settlement value, that is less than the cash settlement value you may
have anticipated based on the last available closing index level as of the
applicable exercise date. The period between exercise and valuation will, at a
minimum, represent one full business day and, in the case of a valuation date
postponed as a result of there being exercised a number of warrants exceeding
the maximum permissible amount or the occurrence and continuance of a market
disruption event, may be substantially longer. The value of the Nikkei 225 Index
may change significantly during any such period, and any change of this type may
adversely affect the cash settlement value to be paid on your warrants.

MARKET DISRUPTION EVENTS MAY POSTPONE THE VALUATION DATE.

The valuation date for an exercised warrant may be postponed upon the occurrence
and continuation of a market disruption event described under "Description of
the Warrants--Market disruption events." If the calculation agent determines
that a market disruption event has occurred and is continuing on any day that
would otherwise be a valuation date for any exercised warrant, then the
valuation date for the warrant will be postponed to the next scheduled trading
day on which there is no market disruption event. The cash settlement value of a
warrant determined as of any postponed valuation date may be substantially lower
than the otherwise applicable cash settlement value thereof, and may be zero.
See "Description of the Warrants--Market disruption events," which includes a
description of events, circumstances or causes constituting a market disruption
event.

YOUR RETURN ON THE WARRANTS COULD BE LESS THAN IF YOU OWNED THE STOCKS THAT MAKE
UP THE NIKKEI 225 INDEX.

o    YOUR RETURN WILL NOT REFLECT DIVIDENDS ON THE STOCKS INCLUDED IN THE NIKKEI
     225 INDEX. Your return on the warrants will not reflect the return you
     would realize if you actually owned the stocks included in the Nikkei 225
     Index and received the dividends paid on those stocks. This is because the
     calculation agent will calculate the amount payable to you by reference to
     the level of the Nikkei 225 Index, which is calculated by reference to the
     prices of the stocks in the Nikkei 225 Index without taking into
     consideration the value of dividends paid on that stock.

o    YOUR RETURN WILL NOT BE ADJUSTED FOR CHANGES IN CURRENCY EXCHANGE RATES.
     Although the stocks included in the Nikkei 225 Index are traded in Japanese
     yen and the warrants are denominated in U.S. dollars, the amount payable
     upon exercise of warrants will not be adjusted for the currency exchange
     rate in effect at that time. Any amount payable to you upon exercise is
     based solely upon the percentage increase in the Nikkei 225 Index. Changes
     in exchange rates, however, may reflect changes in the Japanese economy,
     which in turn may affect the value of the Nikkei 225 Index and the
     warrants.

THE PRICE OF THE WARRANTS WILL EXCEED THAT OF SIMILAR OPTIONS.

The initial offering price of the warrants will be in excess of the price that a
commercial user of options on the Nikkei 225 Index or the underlying stocks
might pay for a comparable option in a private transaction.

THE WARRANTS ARE NOT SUITABLE FOR ALL INVESTORS.

The Amex requires that the warrants be sold only to investors whose accounts
have been approved for options trading. In addition, the Amex requires that its
members and member organizations and registered employees thereof make certain
suitability determinations before recommending transactions in the warrants. It
is suggested that investors considering the purchase of warrants be experienced
with respect to options on securities and options transactions and reach an
investment decision only after carefully considering, with their advisers, the
suitability of the warrants in light of their particular circumstances. The
warrants are not suitable for persons solely dependent upon a fixed income, for
retirement plan accounts or for accounts under the Uniform Gift to Minors Act.
Before making any investment in the warrants, it is important that a prospective
investor become informed about and


                                      S-11



understand the nature of the warrants in general, the specific terms of the
warrants and the nature of the Nikkei 225 Index and the underlying stocks that
will comprise the Nikkei 225 Index. An investor should understand the
consequences of liquidating his investment in a warrant by exercising, as
opposed to selling, the warrant. It is especially important for an investor to
be familiar with the procedures governing the exercise of warrants, since a
failure to properly exercise a warrant prior to its expiration could result in
the loss of his entire investment. This includes knowing when warrants are
exercisable and how to exercise them.

THE WARRANTS ARE NOT STANDARDIZED OPTIONS ISSUED BY THE OPTIONS CLEARING
CORPORATION.

The warrants are unsecured contractual obligations of Lehman Brothers Holdings
and will rank equally with all other unsecured contractual obligations of Lehman
Brothers Holdings and Lehman Brothers Holdings' unsecured and unsubordinated
debt. The warrants are not standardized stock index options of the type issued
by the Options Clearing Corporation (the "OCC"), a clearing agency regulated by
the SEC. For example, unlike purchasers of OCC standardized options who have the
credit benefits of guarantees and margin and collateral deposits by OCC clearing
members to protect the OCC from a clearing member's failure, purchasers of
warrants must look solely to Lehman Brothers Holdings for performance of its
obligations to pay the cash settlement value on the exercise of warrants.
Further, the market for warrants is not expected to be generally as liquid as
the market for OCC standardized options.

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 warrants
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 warrants, as well as the
projected profit included in the cost of hedging our obligations under the
warrants. 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 WARRANTS MAY NOT BE ACTIVELY TRADED.

There may be little or no secondary market for the warrants. Although the
warrants have been approved for listing on the Amex, it is not possible to
predict whether the warrants will trade in the secondary market. Even if there
is a secondary market, it may not provide significant liquidity. Lehman Brothers
Inc. currently intends to act as a market maker for the warrants, but it is not
required to do so. To the extent warrants are exercised, the number of warrants
outstanding will decrease, resulting in a decrease in the liquidity of the
warrants. In addition, during the life of the warrants, Lehman Brothers Holdings
or its affiliates may from time to time purchase and exercise warrants,
resulting in a decrease in the liquidity of the warrants. If additional warrants
or options relating to the Nikkei 225 Index or the underlying stocks are
subsequently offered to the public, the supply of warrants and options relating
to the Nikkei 225 Index or the underlying stocks in the market will increase,
which could cause the price at which the warrants and any other warrants and
options trade in the secondary market to decline significantly.

UNEXERCISED WARRANTS WILL BE AUTOMATICALLY EXERCISED IF THE WARRANTS ARE
DELISTED.

In the event the warrants are delisted from, or permanently suspended from
trading, within the meaning of the Securities Exchange Act of 1934 and the rules
and regulations thereunder, on the Amex and not accepted at the same time for
listing on another United States national securities exchange, warrants not
previously exercised will be deemed automatically exercised on the delisting
date, and any cash settlement value will be calculated and settled as provided
under "Description of the Warrants--Delisting of warrants." Lehman Brothers
Holdings will covenant in the warrant agreement that it will not seek delisting
of the warrants from, or suspension of their trading on, the Amex unless Lehman
Brothers Holdings has, at the same time, arranged for listing of the warrants on
another United States national securities exchange.

AN INVESTMENT IN THE WARRANTS IS SUBJECT TO RISKS ASSOCIATED WITH THE JAPANESE
SECURITIES MARKETS.

The securities included in the Nikkei 225 Index are issued by Japanese companies
and are denominated in Japanese yen. You should be aware that investments in
securities linked to the value of Japanese equity securities involve particular
risks. The Japanese securities markets may be more volatile


                                      S-12



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

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

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

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

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

The trading prices of the securities underlying the Nikkei 225 Index will
determine the index level. As a result, it is impossible to predict whether the
index level will fall or rise. Trading prices of the securities underlying the
Nikkei 225 Index will be influenced by complex and interrelated political,
economic, financial and other factors that can affect the markets in which those
securities are traded and the values of those securities themselves.

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

The policies of NKS concerning additions, deletions and substitutions of the
securities underlying the Nikkei 225 Index and the manner in which NKS takes
account of certain changes affecting such underlying securities may affect the
value of the Nikkei 225 Index. The policies of NKS with respect to the
calculation of the Nikkei 225 Index could also affect the value of the Nikkei
225 Index. NKS may discontinue or suspend calculation or dissemination of the
Nikkei 225 Index or materially alter the methodology by which it calculates the
Nikkei 225 Index. Any such actions could affect the value of the warrants. See
"Description of the Warrants--Discontinuance of the Nikkei 225 Index; alteration
of method of calculation" and "The Nikkei 225 Index."

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

Actions by these companies may have an adverse effect on the price of the common
stock or any other equity securities underlying the Nikkei 225 Index, the Nikkei
225 Index and the warrants. In addition, these companies are not involved in
this offering of warrants and have no obligations with respect to the warrants,
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 the warrants and are not responsible for, and have
not participated in, the determination of the timing of, prices for, or
quantities of, the warrants to be issued. These companies are not involved with
the administration, marketing or trading of the warrants and have no obligations
with respect to the amount to be paid to you upon exercise of the warrants.

LEHMAN BROTHERS HOLDINGS AND ITS AFFILIATES HAVE NO AFFILIATION WITH NKS AND ARE
NOT RESPONSIBLE FOR ITS PUBLIC DISCLOSURE OF INFORMATION.

NKS provides and services the Nikkei 225 Index. Lehman Brothers Holdings and its
affiliates are not affiliated with NKS in any way (except for licensing
arrangements discussed below in "The Nikkei 225 Index--License agreement between
NKS and Lehman Brothers Holdings") and have no ability to


                                      S-13



control or predict its actions, including any errors in or discontinuation of
disclosure regarding its methods or policies relating to the calculation of the
Nikkei 225 Index. See "Description of the Warrants--Market disruption events"
and "Description of the Warrants--Discontinuance of the Nikkei 225 Index;
alteration of method of calculation." NKS is not involved in this offering of
the warrants in any way and has no obligation to consider your interest as an
owner of the warrants in taking any actions that might affect the value of your
warrants.

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

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

Lehman Brothers Inc. will act as the calculation agent, which determines, among
other things, the amount you will receive on the warrants upon exercise, whether
to limit the number of warrants exercisable on any date, other than automatic
exercises, to an aggregate of 400,000, whether adjustments should be made to the
closing index level and whether a market disruption event has occurred. As a
result, potential conflicts of interest may exist between Lehman Brothers Inc.
and you. See "Description of the Warrants--Cash settlement value," "Description
of the Warrants--Discontinuance of the Nikkei 225 Index; alteration of method of
calculation" and "Description of the Warrants--Market disruption events."

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

Lehman Brothers Holdings and its affiliates, including Lehman Brothers Inc., may
from time to time buy or sell securities underlying the Nikkei 225 Index or
derivative instruments related to those securities for their own accounts in
connection with their normal business practices or in connection with hedging of
Lehman Brothers Holdings' obligations under the warrants. Through these
transactions, Lehman Brothers Holdings and its affiliates may take positions in
the underlying stocks that are inconsistent with an investment in the warrants.
In addition, these transactions could affect the prices of those securities or
the level of the Nikkei 225 Index. See "Use of Proceeds and Hedging."

YOU HAVE NO SHAREHOLDER RIGHTS.

Investing in the warrants is not equivalent to investing in the component stocks
of the Nikkei 225 Index. As an investor in the warrants, you will not have
voting rights or rights to receive dividends or other distributions or any other
rights with respect to the stocks that underlie the Nikkei 225 Index.

WARRANTS THAT ARE PURCHASED BY U.S. TAXPAYERS WILL BE SUBJECT TO
"MARK-TO-MARKET" RULES, WHICH WILL REQUIRE INVESTORS TO RECOGNIZE TAXABLE INCOME
OR LOSS WHILE HOLDING THE WARRANTS.

For United States federal income tax purposes, a warrant will be treated as a
cash settlement option that is subject to the "mark-to-market" rules under
section 1256 of the Code. As a result, regardless of whether you sell, exercise
or continue to hold a warrant, you will recognize gain or loss each year. Such
gain or loss will equal the difference between the fair market value of the
warrant on the last business day of the year (or date of sale) and your adjusted
basis in the warrant. Your tax basis in the warrant will be adjusted to take
into account any gain or loss recognized in prior periods. Any gain or loss
recognized on the warrants will be 60% long-term capital gain or loss and 40%
short-term capital gain or loss. The deductibility of capital losses is subject
to limitations. See "United States Federal Income Tax Consequences."


                                      S-14



                           USE OF PROCEEDS AND HEDGING

A portion of the proceeds to be received by Lehman Brothers Holdings from the
sale of the warrants may be used by Lehman Brothers Holdings or one or more of
its subsidiaries before and immediately following the initial offering of the
warrants to acquire securities included in the Nikkei 225 Index or to acquire
futures contracts or listed or over-the-counter options contracts in, or other
derivative or synthetic instruments related to, the Nikkei 225 Index or those
securities included in the Nikkei 225 Index. From time to time, Lehman Brothers
Holdings or one or more of its subsidiaries may acquire futures contracts or
listed or over-the-counter options contracts in, or other derivative or
synthetic instruments related to, the Nikkei 225 Index or those securities
included in the Nikkei 225 Index, to hedge Lehman Brothers Holdings' obligations
under the warrants. The balance of the proceeds will be used for general
corporate purposes. These hedging techniques will result in nominal transaction
costs to Lehman Brothers Holdings. See "Use of Proceeds and Hedging" on page 7
of the accompanying prospectus.

From time to time after the initial offering and before the expiration of the
warrants, depending on market conditions, including the market price of the
securities included in the Nikkei 225 Index, Lehman Brothers Holdings expects
that it or one or more of its subsidiaries will increase or decrease their
initial hedging positions using dynamic hedging techniques. Lehman Brothers
Holdings or one or more of its subsidiaries may take long or short positions in
those securities or in the futures contracts or in listed or over-the-counter
options contracts or other derivative or synthetic instruments related to those
securities or the Nikkei 225 Index. In addition, Lehman Brothers Holdings or one
or more of its subsidiaries may purchase or otherwise acquire a long or short
position in warrants from time to time and may, in their sole discretion, hold
or resell those warrants. Lehman Brothers Holdings or one or more of its
subsidiaries may also take positions in other types of appropriate financial
instruments that may become available in the future.

To the extent that Lehman Brothers Holdings or one or more of its subsidiaries
has a long hedge position in any of the securities underlying the Nikkei 225
Index, or futures or options contracts or other derivative or synthetic
instruments related to those securities or the Nikkei 225 Index, Lehman Brothers
Holdings or one or more of its subsidiaries may liquidate a portion of their
holdings at or about the time of the expiration of the warrants or at or about
the time of a change in the securities that make up the Nikkei 225 Index.
Depending, among other things, on future market conditions, the aggregate amount
and the composition of the positions are likely to vary over time. Profits or
losses from any of those positions cannot be ascertained until the position is
closed out and any offsetting position or positions are taken into account.
Certain activity by Lehman Brothers Holdings or one or more of its subsidiaries
described above can potentially increase or decrease the prices of the
securities that are included in the Nikkei 225 Index and, accordingly, increase
or decrease the level of the Nikkei 225 Index. Although Lehman Brothers Holdings
has no reason to believe that any of those activities will have a material
impact on the price of the securities that make up the Nikkei 225 Index, these
activities could have such an effect.

                          LEHMAN BROTHERS HOLDINGS INC.
                       RATIO OF EARNINGS TO FIXED CHARGES

                                                          THREE
                                                          MONTHS
                YEAR ENDED NOVEMBER 30,                   ENDED
----------------------------------------------------   FEBRUARY 28,
  2000       2001       2002       2003       2004         2005
--------   --------   --------   --------   --------   ------------
  1.14       1.11       1.13       1.29       1.36         1.36


                                      S-15



                           DESCRIPTION OF THE WARRANTS

GENERAL

You will find information about the warrants in two separate parts of this
document that progressively provide more detail:

o    the accompanying prospectus; and

o    this prospectus supplement.

Because the terms of the warrants 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 warrants will be issued pursuant to a warrant agreement, to be
dated as of the date of issuance of the warrants, between Lehman Brothers
Holdings, Citibank, N.A., as warrant agent (the "warrant agent"), and Lehman
Brothers Inc., as calculation agent. The following summaries of certain
provisions of the warrants and the warrant agreement do not purport to be
complete and reference is made to all the provisions of the warrant agreement,
including the form of global warrant certificate attached as an exhibit to the
warrant agreement. The warrant agreement will be available for inspection by any
registered holder at the office of the warrant agent (the "warrant agent's
office"), which is currently located at 111 Wall Street, 15th Floor, New York,
New York 10043, during the warrant agent's normal business hours. See
"Description of Warrants" beginning on page 17 of the accompanying prospectus.
An index of certain terms used in this prospectus supplement is included herein
as Appendix A.

Lehman Brothers Holdings will initially issue 2,000,000 warrants. Lehman
Brothers Holdings may, without the consent of the holders of the warrants,
create and issue additional warrants ranking equally with the warrants and
otherwise similar in all respects so that such further warrants shall be
consolidated and form a single series with the warrants.

A warrant will not require or entitle a holder to receive any of the underlying
stocks comprising the Nikkei 225 Index from Lehman Brothers Holdings. Upon
exercise of a warrant, Lehman Brothers Holdings will make only a U.S. dollar
cash payment in the amount of the cash settlement value, if any, of such
warrant. Lehman Brothers Holdings is under no obligation to, nor will it, sell
the underlying stocks to, or purchase the underlying stocks from, holders in
connection with the exercise of any warrants. Holders will not receive any
interest on any cash settlement value. No payments will be made on the warrants
prior to exercise. The warrants may expire worthless.

The warrants will rank equally with all other unsecured contractual obligations
of Lehman Brothers Holdings and Lehman Brothers Holdings' unsecured and
unsubordinated debt.

The warrants will be issued in denominations of 100 warrants and whole multiples
of 100.

CASH SETTLEMENT VALUE

On the relevant settlement payment date, which will be the third business day
after the valuation date, Lehman Brothers Holdings will pay you, per warrant
exercised or automatically exercised, the cash settlement value, which will
equal an amount in U.S. dollars (rounded down to the nearest one-hundredth of a
cent) that is the greater of:

o    zero; and

             final index level - strike price
o    $66  x  -------------------------------- , where
                   initial index level

     o    the final index level will be the closing index level on the valuation
          date, which will generally be the first scheduled trading day
          following the relevant exercise date, and may be postponed if a market
          disruption event occurs;

     o    the closing index level on any particular day will generally be the
          closing index level of the Nikkei 225 Index on such day;

     o    the strike price will be equal to the initial index level; and

     o    the initial index level is 11192.17, the closing index level on the
          date of this prospectus supplement.

As a result, if the final index level on the applicable valuation date is less
than or equal to the strike price, the cash settlement value will be zero.

If the calculation agent determines that one or more market disruption events
have occurred on the scheduled trading day that would otherwise be the


                                      S-16



valuation date, the calculation agent will, subject to certain limitations,
determine the final index level by reference to the closing index level on the
next scheduled trading day on which there is not a market disruption event;
provided, however, if a market disruption event occurs on each of the eight
scheduled trading days following the originally scheduled valuation date, then
(a) that eighth scheduled trading day shall be deemed the valuation date and (b)
the calculation agent shall determine the final index level based upon its good
faith estimate of the level of the index on that eighth scheduled trading day.
Any postponement of the valuation date will cause the date you receive payment
to be postponed until three business days after such postponed valuation date.

In limited circumstances, the closing index level on any valuation date may be
adjusted by the calculation agent.

The calculation of the cash settlement value will not take into account
fluctuations in the Japanese yen/U.S. dollar exchange rate.

See "--Exercise and settlement of warrants," "--Market disruption events,"
"--Maximum exercise amount" and "--Discontinuance of the Nikkei 225 Index;
alteration of method of calculation" for details.

The "closing index level" of the Nikkei 225 Index (or any successor index) on
any particular day means the closing level of the Nikkei 225 Index as reported
by NKS (or of any successor index, as reported by the publisher of such
successor index), on such day or as otherwise determined by the calculation
agent pursuant to the warrant agreement.

"Scheduled trading day" means any day on which the Nikkei 225 Index (or any
successor index) is published by NKS (or the publisher of such successor index)
or otherwise determined by the calculation agent pursuant to the warrant
agreement.

HYPOTHETICAL CASH SETTLEMENT VALUE ON EXERCISE

Set forth in the following table is an illustrative example of the cash
settlement values of a warrant based on various hypothetical final index levels.
The illustrative cash settlement values in the table do not reflect any "time
value" for a warrant, which may be reflected in trading value, and are not
necessarily indicative of potential profit or loss, which are also affected by
purchase price and transaction costs.

                      CASH SETTLEMENT
                     VALUE (ALSO KNOWN
                       AS "INTRINSIC
HYPOTHETICAL FINAL     VALUE") OF A
    INDEX LEVEL          WARRANT
------------------   -----------------
       7834.52             $0.0000
       8394.13             $0.0000
       8953.74             $0.0000
       9513.34             $0.0000
      10072.95             $0.0000
      10632.56             $0.0000
      11192.17             $0.0000
      11751.78             $3.3000
      12311.39             $6.6000
      12871.00             $9.9000
      13430.60            $13.1999
      13990.21            $16.4999
      14549.82            $19.7999

DTC BOOK-ENTRY PROCEDURES

Lehman Brothers Holdings will issue the warrants in the form of one or more
global certificates, which will be held by DTC or its nominee. Direct and
indirect participants in DTC, including the depositaries in the Euroclear and
Clearstream clearing systems, will record beneficial ownership of the warrants
by individual investors. Accordingly, except in certain limited circumstances
described in the accompanying prospectus under "Book-Entry Procedures and
Settlement," ownership of the warrants in certificated form will not be
available to investors. For additional information on DTC and its procedures,
see "--Exercise and settlement of warrants," "Book-Entry Issuance" and
"Book-Entry Procedures and Settlement" in the accompanying prospectus.

All information in this prospectus supplement regarding DTC is derived from DTC
and reflects the policies of DTC; such policies are subject to change without
notice.

CLEARSTREAM AND EUROCLEAR PROCEDURES

Holders may hold their warrants through the accounts maintained by Clearstream
Banking, societe anonyme ("Clearstream") or the Euroclear System operated by
Morgan Guaranty Trust's Brussels Office ("Euroclear") in DTC only if they are
participants of those systems, or indirectly through organizations which are
participants in those systems.

Clearstream and Euroclear will hold omnibus book-entry positions on behalf of
their participants through customers' securities accounts in Clearstream's and


                                      S-17



Euroclear's names on the books of their respective depositaries which in turn
will hold such positions in customers' securities accounts in the names of the
nominees of the depositaries on the books of DTC. Citibank, N.A. ("Citibank"),
will act as depositary for Clearstream and Morgan Guaranty Trust Company of New
York, New York Office ("Morgan Stanley"), will act as depositary for Euroclear
(in such capacities, the "depositaries"). All securities in Clearstream or
Euroclear are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts.

Exercises of warrants by persons holding through Clearstream or Euroclear
participants will be effected through DTC, in accordance with DTC rules, on
behalf of the relevant European international clearing system by its
depositaries; however, such transactions will require delivery of exercise
instructions to the relevant European international clearing system by the
participant in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the exercise meets its requirements,
deliver instructions to its depositaries to take action to effect exercise of
the warrants on its behalf by delivering warrants through DTC and receiving
payment in accordance with its normal procedures for next-day funds settlement.
Payments with respect to the warrants held through Clearstream or Euroclear will
be credited to the cash accounts of Clearstream participants or Euroclear
participants in accordance with the relevant system's rules and procedures, to
the extent received by its depositaries. See "--Exercise and settlement of the
warrants" below.

All information in this prospectus supplement regarding Clearstream and
Euroclear is derived from Clearstream or Euroclear, as the case may be, and
reflects the policies of such organizations; such policies are subject to change
without notice.

EXERCISE AND SETTLEMENT OF WARRANTS

The warrants will be exercisable at any time after July 10, 2005 and will expire
on the expiration date for the warrants, which is May 8, 2007. Warrants not
exercised (including by reason of any postponed exercise) at or prior to 3:00
p.m., New York City time, on the "last non-automatic exercise date", which is
the earlier of:

o    the business day immediately preceding the expiration date; and

o    the business day immediately preceding the delisting day, if any,

will be automatically exercised as described under "--Automatic exercise" below.

Warrants held through the facilities of the DTC

In the case of warrants held through the facilities of DTC, a holder may
exercise such warrants on any business day after July 10, 2005 until 3:00 p.m.,
New York City time, on the last non-automatic exercise date by causing:

o    a duly completed and executed exercise notice to be delivered on behalf of
     the holder by a participant to the warrant agent; and

o    such warrants to be transferred free to the warrant agent on the records of
     DTC.

A form of exercise notice for warrants is included herein as Appendix B and may
also be obtained from the warrant agent at the warrant agent's office.

Except for warrants subject to automatic exercise or subject to the limit
option, the "exercise date" for such warrants will be:

o    the business day on which the warrant agent receives the exercise notice in
     proper form and related warrants, if such exercise notice and warrants are
     received at or prior to 3:00 p.m., New York City time, on such day; or

o    the business day following the business day on which the warrant agent
     receives the exercise notice in proper form and related warrants, if such
     exercise notice and warrants are received after 3:00 p.m., New York City
     time, on such day.

TO ENSURE THAT AN EXERCISE NOTICE AND THE RELATED WARRANTS WILL BE DELIVERED TO
THE WARRANT AGENT AT OR PRIOR TO 3:00 P.M., NEW YORK CITY TIME, ON A GIVEN
BUSINESS DAY, A HOLDER MAY HAVE TO GIVE EXERCISE INSTRUCTIONS TO HIS BROKER OR
OTHER INTERMEDIARY SUBSTANTIALLY EARLIER THAN 3:00 P.M., NEW YORK CITY TIME, ON
SUCH DAY. DIFFERENT BROKERAGE FIRMS MAY HAVE DIFFERENT CUT-OFF TIMES FOR
ACCEPTING AND IMPLEMENTING EXERCISE INSTRUCTIONS FROM THEIR CUSTOMERS.
THEREFORE, HOLDERS SHOULD CONSULT WITH THEIR BROKERS OR OTHER INTERMEDIARIES, IF
APPLICABLE, AS TO APPLICABLE CUT-OFF TIMES AND OTHER EXERCISE


                                      S-18



MECHANICS. SEE ALSO "RISK FACTORS" BEGINNING ON PAGE S-7.

Warrants held through the facilities of Clearstream or Euroclear

In the case of warrants held through the facilities of Clearstream or Euroclear,
a holder may exercise such warrants on any business day after July 10, 2005
until 3:00 p.m., New York City time, on the last non-automatic exercise date by
causing:

o    a duly completed and executed exercise notice to be delivered on behalf of
     the holder by Clearstream or Euroclear, as the case may be, to the warrant
     agent; and

o    such warrants to be transferred free to the warrant agent on the records of
     DTC, by giving appropriate instructions to the participant holding such
     warrants in either the Clearstream or Euroclear system, as the case may be.

Except for warrants subject to automatic exercise or subject to the limit
option, the "exercise date" for such warrants will be:

o    the business day on which the warrant agent receives the exercise notice in
     proper form if such exercise notice is received at or prior to 3:00 p.m.,
     New York City time, on such day; provided that the warrants are received by
     the warrant agent by 3:00 p.m., New York City time, on the applicable
     valuation date; or

o    the business following the business day on which the warrant agent receives
     the exercise notice in proper form if such exercise notice is received
     after 3:00 p.m., New York City time, on such day; provided that the
     warrants are received by 3:00 p.m., New York City time, on the valuation
     date;

provided, however, in the event that in either case the warrants are received
after 3:00 p.m., New York City time, on the applicable valuation date, then the
exercise date for such warrant will be the day on which such warrants are
received or, if such day is not a business day, the following business day.

In order to ensure proper exercise on a given business day, participants in
Clearstream or Euroclear must submit exercise instructions to Clearstream or
Euroclear, as the case may be, by 10:00 a.m., Luxembourg time, in the case of
Clearstream and by 10:00 a.m., Brussels time, in the case of Euroclear.

In addition, in the case of book-entry exercises by means of Euroclear:

o    participants must also transmit, by facsimile, to the warrant agent a copy
     of the exercise notice submitted to Euroclear by 3:00 p.m., New York City
     time, on the desired exercise date, and

o    Euroclear must confirm by telex to the warrant agent by 9:00 a.m., New York
     City time, on the valuation date that the warrants will be received by the
     warrant agent on such date. However, if the telex communication is received
     after 9:00 a.m., New York City time, on the valuation date, Lehman Brothers
     Holdings will be entitled to direct the warrant agent to reject the related
     exercise notice or waive the requirement for timely delivery of such telex
     communication.

                                   ----------

Except in the case of warrants subject to automatic exercise, if on any
valuation date the cash settlement value for any warrants then exercised would
be zero, the attempted exercise of such warrants will be void and of no effect
and such warrants will be transferred back to the participant, including the
depositaries, that submitted them free to the warrant agent on the records of
DTC, and, in any such case, the warrants in question will remain outstanding and
exercisable thereafter.

The "exercise date" described above is subject to postponement as a result of
the exercise of a number of warrants exceeding the limit on exercise as
described below under "--Maximum exercise amount."

The "valuation date" for a warrant will be the first scheduled trading day
following the exercise date, subject to postponement as a result of a market
disruption event as described under "--Market disruption events."

The following is an illustration of the timing of an exercise date and the
applicable valuation date, assuming:

o    all relevant dates are business days and scheduled trading days;

o    the number of exercised warrants does not exceed the maximum permissible
     amount; and

o    no market disruption event has occurred and is continuing.


                                      S-19



                ILLUSTRATIVE TIMING FOR WARRANTS HELD THROUGH DTC



   DATE AND TIME BOTH                                             FINAL INDEX LEVEL
EXERCISE NOTICE IN PROPER                                         USED TO DETERMINE       LIMIT OPTION
  FORM AND WARRANTS ARE                                            CASH SETTLEMENT      INDEX LEVEL EQUAL
   RECEIVED BY WARRANT                                             VALUE DETERMINED   TO FINAL INDEX LEVEL
         AGENT                 EXERCISE DATE     VALUATION DATE          ON                    ON
---------------------------   ---------------   ---------------   -----------------   --------------------

Monday, October 3, 2005, at   October 3, 2005   October 4, 2005     October 4, 2005      October 3, 2005
or before 3:00 p.m., New
York City time

Monday, October 3, 2005,      October 4, 2005   October 5, 2005     October 5, 2005      October 4, 2005
after 3:00 p.m., New York
City time


     ILLUSTRATIVE TIMING FOR WARRANTS HELD THROUGH CLEARSTREAM AND EUROCLEAR



                                                                                  FINAL INDEX
                                                                                 LEVEL USED TO
                                                                                   DETERMINE        LIMIT
     DATE AND TIME                                                                   CASH          OPTION
   EXERCISE NOTICE IN                                                             SETTLEMENT     INDEX LEVEL
     PROPER FORM IS              DATE AND TIME                                       VALUE         EQUAL TO
   RECEIVED BY WARRANT        WARRANTS ARE RECEIVED     EXERCISE     VALUATION    DETERMINED     FINAL INDEX
         AGENT                   BY WARRANT AGENT         DATE         DATE           ON           LEVEL ON
-------------------------   ------------------------   ----------   ----------   -------------   -----------

Monday, October 3, 2005,    Tuesday, October 4,        October 3,   October 4,    October 4,      October 3,
at or before 3:00 p.m.,     2005, at or before 3:00    2005         2005          2005            2005
New York City time          p.m., New York City time

Monday, October 3, 2005,    Tuesday, October 4,        October 4,   October 5,    October 5,      October 4,
after 3:00 p.m., New York   2005, after 3:00 p.m.,     2005         2005          2005            2005
City time                   New York City time


Following receipt of the exercise notice in proper form and related warrants,
the warrant agent will, not later than 5:00 p.m., New York City time, on the
applicable valuation date,

o    obtain from the calculation agent the cash settlement value of such
     warrants, and

o    advise Lehman Brothers Holdings of the aggregate cash settlement value of
     the exercised warrants.

Lehman Brothers Holdings will be required to make available to the warrant
agent, no later than 3:00 p.m., New York City time, on the relevant settlement
payment date, funds in an amount sufficient to pay the aggregate cash settlement
value of the exercised warrants. If Lehman Brothers Holdings has made such funds
available by that time, the warrant agent will thereafter be responsible for
making funds available to DTC. DTC will be responsible for disbursing such funds
to each appropriate participant, and such participant will be responsible for
disbursing such funds to the holders it represents and to each brokerage firm
for which it acts as agent. Participants include Citibank and Morgan Stanley,
who, in turn, will disburse payments to Clearstream and Euroclear, respectively,
who will be responsible for disbursing such payments to each of their respective
participants, who, in turn, will be responsible for disbursing payments to the
holders they represent. Similarly, each brokerage firm will be responsible for
disbursing funds to the holders that it represents.


                                      S-20



MINIMUM EXERCISE AMOUNT

No fewer than 500 warrants may be exercised by a holder at any one time, except
in the case of automatic exercise. Accordingly, except in the case of automatic
exercise of warrants, holders with fewer than 500 warrants will need either to
sell their warrants or to purchase additional warrants, thereby incurring
transaction costs, in order to realize upon their investment.

MAXIMUM EXERCISE AMOUNT

All exercises of warrants, other than automatic exercises, are subject, at the
calculation agent's option, to the limitation that not more than 400,000
warrants in total may be exercised on any exercise date. If any business day
would otherwise, under the terms of the warrant agreement, be the exercise date
in respect of more than 400,000 warrants, then, at the calculation agent's
option, 400,000 of such warrants, selected by the warrant agent on a pro rata
basis, shall be deemed exercised on such exercise date and the remainder of such
warrants (the "remaining warrants") shall be deemed exercised on the following
business day, subject to successive applications of this provision. Remaining
warrants shall be deemed exercised in the order of their respective initial
exercise dates, and remaining warrants shall be deemed exercised before any
other warrants initially exercised after such remaining warrants.

To the extent that the exercise of any warrants is postponed as a result of this
limitation, the valuation date used to determine the cash settlement value of
such warrants will also be postponed.

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

If NKS discontinues publication of the Nikkei 225 Index and NKS or another
entity publishes a successor or substitute index that the calculation agent
determines, in its sole discretion exercised in good faith, to be comparable to
the discontinued Nikkei 225 Index, then the calculation agent shall determine
each subsequent closing index level to be used in computing the cash settlement
value 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 warrants.

If NKS discontinues publication of the Nikkei 225 Index and the calculation
agent determines that no successor index is available at such time or if NKS (or
the publisher of any successor index) fails to calculate and publish a closing
index level for the Nikkei 225 Index (or a successor index) on any date when it
would ordinarily do so in accordance with its customary practice, the
calculation agent will determine each subsequent closing index level to be used
in computing the cash settlement value. In such circumstances, each such closing
index level will be computed by the calculation agent in accordance with the
formula for and method of calculating the Nikkei 225 Index (or any successor
index) last in effect prior to such discontinuance, 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
Nikkei 225 Index (or any successor index) on the relevant exchange on which such
security trades. Notwithstanding these alternative arrangements, discontinuance
of the publication of the Nikkei 225 Index may adversely affect the value of the
warrants. The "relevant exchange" for any security (or any combination thereof
then included in the Nikkei 225 Index or any successor index) means the primary
exchange, quotation system (which includes bulletin board services) or other
market of trading for such security.

If at any time the calculation agent determines that the method of calculating
the Nikkei 225 Index, any successor index or the closing index level on any
particular day, is changed in a material respect, or if the Nikkei 225 Index or
a successor index is in any other way modified so that such index does not, in
the opinion of the calculation agent, fairly represent the level of the Nikkei
225 Index or such successor index had such changes or modifications not been
made, then, from and after such time, the calculation agent will, at the close
of trading of the relevant exchanges on which the securities comprising the
Nikkei 225 Index or such successor index are traded, on any date the closing
index level is to be determined, make such calculations and adjustments as, in
its good faith judgment, may be necessary in order to arrive at a level of a
stock index comparable to the Nikkei 225 Index or such successor index, as the
case may be, as if such changes or modifications had not been made. The
calculation agent will calculate the closing index level on any particular day
and the cash settlement value with reference to the


                                      S-21



Nikkei 225 Index or such successor index, as adjusted.

Accordingly, if the method of calculating the Nikkei 225 Index or a successor
index is modified so that the level of such index is a fraction of what it would
have been if it had not been modified, then the calculation agent will adjust
such index in order to arrive at a level of the Nikkei 225 Index or such
successor index as if it had not been modified.

MARKET DISRUPTION EVENTS

If the calculation agent determines that on a scheduled trading day that would
otherwise be a valuation date a market disruption event has occurred and is
continuing, then the valuation date shall be postponed, as described under
"--Cash settlement value."

A market disruption event with respect to the Nikkei 225 Index (or any successor
index) will occur on any day if the calculation agent determines in its sole
discretion that any of the following have occurred:

o    A material suspension of or limitation imposed on trading relating to the
     securities that then comprise 20% or more of the Nikkei 225 Index or any
     successor index, by the relevant exchanges on which those securities are
     traded, at any time during the one-hour period that ends at the close of
     trading on such day, whether by reason of movements in price exceeding
     limits permitted by that relevant exchange or otherwise. 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, 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 the Nikkei 225 Index or any successor index
     by the primary exchange or quotation system on which those futures or
     options contracts are traded, at any time during the one-hour period that
     ends at the close of trading on such day, whether by reason of movements in
     price exceeding limits permitted by the exchanges or otherwise.

o    Any event, other than an early closure, that disrupts or impairs the
     ability of market participants in general to effect transactions in, or
     obtain market values for the securities that then comprise 20% or more of
     the Nikkei 225 Index or any successor index on the relevant exchanges on
     which those securities are traded, at any time during the one-hour period
     that ends at the close of trading on such day.

o    Any event, other than an early closure, that disrupts or impairs the
     ability of market participants in general to effect transactions in, or
     obtain market values for, the futures or options contracts relating to the
     Nikkei 225 Index or any successor index on the primary exchange or
     quotation system on which those futures or options contracts are traded at
     any time during the one-hour period that ends at the close of trading on
     such day.

o    The closure of the relevant exchanges on which the securities that then
     comprise 20% or more of the Nikkei 225 Index or any successor index are
     traded or on which futures or options contracts relating to the Nikkei 225
     Index or any successor index are traded prior to its scheduled closing time
     unless the earlier closing time is announced by the relevant exchanges at
     least one hour prior to the earlier of (1) the actual closing time for the
     regular trading session on the relevant exchanges and (2) the submission
     deadline for orders to be entered into the relevant exchanges for execution
     at the close of trading on such day.

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

o    the relevant percentage contribution of a security to the level of the
     Nikkei 225 Index or any successor index will be based on a comparison of
     (x) the portion of the level of the Nikkei 225 Index or any such successor
     index attributable to that security and (y) the overall level of the Nikkei
     225 Index or any such 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.


                                      S-22



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 warrants.

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

Certain of the market disruption events may be events that would tend to
decrease the level of the final index level, and accordingly decrease the cash
settlement value for the warrants following the occurrence of any such market
disruption event. However, as a result of any postponed exercise as described
above, holders would not receive such cash settlement value, but would receive
instead a cash settlement value determined as of a later date. In any such case,
any immediate impact of the related market disruption event on the final index
level may have been negated by interim market and other developments and, as a
result of any such postponement, the cash settlement value actually received by
holders may be substantially different than the otherwise applicable cash
settlement value if the valuation of the warrants had not been postponed.

LIMIT OPTION

Except for warrants subject to automatic exercise, each holder, in connection
with any exercise of warrants, will have the option (the "limit option") to
specify that such warrants are not to be exercised if the final index level that
would otherwise be used to determine the cash settlement value of such warrants
has declined by 5% or more from the last available closing index level as of the
applicable exercise date (such level, the "limit option index level"), as
determined by the calculation agent. A holder's election of the limit option
must be specified in the applicable exercise notice delivered to the warrant
agent.

To ensure that the limit option will have its intended effect of limiting the
risk of any downward movement in the value of the Nikkei 225 Index or successor
index between the date on which a holder submits an exercise notice and the
related valuation date, such exercise notice and the related warrants must be
received by the warrant agent not later than 3:00 p.m., New York City time, on
the business day on which they are submitted. See "--Exercise and settlement of
warrants" and "Risk Factors."

Following receipt of an exercise notice and the related warrants subject to the
limit option, the warrant agent will obtain the applicable limit option index
level from the calculation agent and will determine whether such warrants will
not be exercised because of the limit option. Warrants that are not exercised
will be treated as not having been tendered for exercise, and such warrants will
be transferred back to the account at DTC, Clearstream or Euroclear, as the case
may be, from which they were transferred to the warrant agent and will remain
outstanding. To exercise such warrants, a holder will be required to cause the
warrants and a related exercise notice to be submitted again to the warrant
agent.

Once elected by a holder in connection with an exercise of warrants, the limit
option will continue to apply, on the basis of the limit option index level as
initially determined for such warrants, even if the valuation date for such
warrants is postponed, except when such valuation date is postponed to a date of
automatic exercise of warrants. Pursuant to the limit option, such warrants will
either (1) be exercised on a delayed basis if the closing index level on the
applicable postponed valuation date is not less than the limit option index
level by 5% or more or (2) not be exercised if, on the applicable postponed
valuation date, the closing index level is less than the limit option index
level by 5% or more.

AUTOMATIC EXERCISE

All warrants not previously exercised will be automatically exercised on the
expiration date or a delisting day, if any. The exercise date for these warrants
will be the day they are automatically exercised or, if such day is not a
business day, the following business day. The valuation date for these warrants
will be the scheduled trading day immediately following the date of automatic
exercise, subject to postponement in the event of a market disruption event, as
described under "--Cash settlement value." The relevant settlement payment date
for these warrants will be the third business day after the valuation date.

For a description of the payment procedures, see "--Exercise and settlement of
warrants."


                                      S-23



LISTING

The warrants have been approved for listing on the Amex under the trading symbol
"NKZ.WS".

The listing of the warrants on the Amex will not necessarily ensure that a
liquid trading market will be available for the warrants. See "Risk Factors--The
warrants may not be actively traded."

DELISTING OF WARRANTS

In the event the warrants are delisted from, or permanently suspended from
trading on (within the meaning of the Securities Exchange Act of 1934) the Amex
and not accepted at the same time for listing on another United States national
securities exchange, warrants not previously exercised will be deemed
automatically exercised on the delisting date, and the cash settlement value
will be calculated and settled as described under "--Cash settlement value."
Lehman Brothers Holdings will notify the warrant agent, who will notify the
holders as soon as practicable of such delisting or trading suspension. However,
if Lehman Brothers Holdings first receives notice of the delisting or suspension
on the same day on which the warrants are delisted or suspended, such day will
be deemed the delisting date. Lehman Brothers Holdings will covenant in the
warrant agreement that it will not seek delisting of the warrants from, or
suspension of their trading on, the Amex unless Lehman Brothers Holdings has, at
the same time, arranged for listing of the warrants on another United States
national securities exchange.

CALCULATION AGENT

Lehman Brothers Inc., a subsidiary of Lehman Brothers Holdings, will act as
initial calculation agent for the warrants. Pursuant to the warrant 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 upon exercise of the
warrants.

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

o    the successor index if publication of the Nikkei 225 Index is discontinued;

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

o    adjustments to the Nikkei 225 Index, the successor index or the closing
     index level if the method of calculating any of these items changes in a
     material respect or if the Nikkei 225 Index or successor index is in any
     other way modified so that it does not, in the opinion of the calculation
     agent, fairly represent the value of the Nikkei 225 Index, or successor
     index, as the case may be, had such changes or modifications not been made;

o    whether to limit the number of warrants exercisable on any date, other than
     automatic exercises, to an aggregate of 400,000;

o    any limit option index level; 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 warrant agreement.


                                      S-24



                              THE NIKKEI 225 INDEX

GENERAL

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

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

As of May 6, 2005 the 225 companies included in the Nikkei 225 Index were
divided into six sector categories: Technology, Financials, Consumer Goods,
Materials, Capital Goods/Others and Transportation/Utilities. These sector
categories are further divided into 36 Nikkei industrial classifications (with
the number of companies currently included in each industrial classification
indicated in parentheses):

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

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

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

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

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

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

COMPUTATION OF THE NIKKEI 225 INDEX

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

The Nikkei 225 Index is a modified, price-weighted index. Each stock's weight in
the Nikkei 225 Index is based on its price per share rather than the total
market capitalization of the issuer. NKS calculates the Nikkei 225 Index by
multiplying the per share price of each underlying stock by the corresponding
weighting factor for that underlying stock (a "Weight Factor"), calculating the
sum of all these products and dividing that sum by a divisor. The divisor,
initially set on May 16, 1949 at 225, was 23.881 as of April 1, 2005, and is
subject to periodic adjustments as set forth below. Each Weight Factor is
computed by dividing (Y)50 by the par value of the relevant underlying stock, so
that the share price of each underlying stock when multiplied by its Weight
Factor corresponds to a share price based on a uniform par value of (Y)50. Each
Weight Factor represents the number of shares of the related underlying stock,
which are included in one trading unit of the Nikkei 225 Index. The stock prices
used in the calculation of the Nikkei 225 Index are those reported by a primary
market for the underlying stocks, which is currently the TSE. The level of the
Nikkei 225 Index is calculated once per minute during TSE trading hours.

In order to maintain continuity in the level of the Nikkei 225 Index in the
event of certain changes due


                                      S-25



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

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

THE TOKYO STOCK EXCHANGE

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

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

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

HISTORICAL INFORMATION

The following table sets forth the high and low level, as well as the
end-of-quarter closing levels, calculated in Japanese yen, of the Nikkei 225
Index for each quarter in the period from January 1, 1990 through May 6, 2005.
The closing level on May 6, 2005 was 11192.17. The results shown should not be
considered as a representation of the income, yield or capital gain or loss that
may be generated by the Nikkei 225 Index in the future. It is impossible to
predict whether the level of the Nikkei 225 Index will rise or fall. The
historical levels of the Nikkei 225 Index are not indications of future
performance.

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


                                      S-26



                                                  HIGH        LOW     PERIOD-END
                                                --------   --------   ----------
1990
First Quarter ...............................   38712.88   29843.34    29980.45
Second Quarter ..............................   33192.50   28002.07    31940.24
Third Quarter ...............................   33172.28   20983.50    20983.50
Fourth Quarter ..............................   25352.63   20221.86    23848.71
1991
First Quarter ...............................   27146.91   22442.70    26292.04
Second Quarter ..............................   26980.37   23290.96    23290.96
Third Quarter ...............................   24120.75   21456.76    23916.44
Fourth Quarter ..............................   25222.28   21502.90    22983.77
1992
First Quarter ...............................   23801.18   19345.95    19345.95
Second Quarter ..............................   18804.60   15741.27    15951.73
Third Quarter ...............................   18908.47   14309.41    17399.08
Fourth Quarter ..............................   17690.67   15993.48    16924.95
1993
First Quarter ...............................   19048.38   16287.45    18591.45
Second Quarter ..............................   21076.00   19099.09    19590.00
Third Quarter ...............................   21148.11   19621.46    20105.71
Fourth Quarter ..............................   20500.25   16078.71    17417.24
1994
First Quarter ...............................   20677.77   17369.74    19111.92
Second Quarter ..............................   21552.81   19122.22    20643.93
Third Quarter ...............................   20862.77   19468.89    19563.81
Fourth Quarter ..............................   20148.83   18666.93    19723.06
1995
First Quarter ...............................   19684.04   15749.77    16139.95
Second Quarter ..............................   17103.69   14507.17    14517.40
Third Quarter ...............................   18758.55   14485.41    17913.06
Fourth Quarter ..............................   20011.76   17337.19    19868.15
1996
First Quarter ...............................   21406.85   19734.70    21406.85
Second Quarter ..............................   22666.80   21171.82    22530.75
Third Quarter ...............................   22455.49   20107.11    21556.40
Fourth Quarter ..............................   21612.30   19161.71    19361.35
1997
First Quarter ...............................   19446.00   17303.65    18003.40
Second Quarter ..............................   20681.07   17485.75    20604.96
Third Quarter ...............................   20575.26   17683.27    17887.71
Fourth Quarter ..............................   17842.16   14775.22    15258.74
1998
First Quarter ...............................   17264.34   14664.44    16527.17
Second Quarter ..............................   16536.66   14715.38    15830.27
Third Quarter ...............................   16731.92   13406.39    13406.39
Fourth Quarter ..............................   15207.77   12879.97    13842.17
1999
First Quarter ...............................   16378.78   13232.74    15836.59
Second Quarter ..............................   17782.79   15972.68    17529.74
Third Quarter ...............................   18532.58   16821.06    17605.46
Fourth Quarter ..............................   18934.34   17254.17    18934.34
2000
First Quarter ...............................   20706.65   18168.27    20337.32
Second Quarter ..............................   20833.21   16008.14    17411.05
Third Quarter ...............................   17614.66   15626.96    15747.26
Fourth Quarter ..............................   16149.08   13423.21    13785.69


                                      S-27



2001
First Quarter ...............................   14032.42   11819.70    12999.70
Second Quarter ..............................   14529.41   12574.26    12969.05
Third Quarter ...............................   12817.41    9504.41     9774.68
Fourth Quarter ..............................   11064.30    9924.23    10542.62
2002
First Quarter ...............................   11919.30    9420.85    11024.94
Second Quarter ..............................   11979.85   10074.56    10621.84
Third Quarter ...............................   10960.25    9075.09     9383.29
Fourth Quarter ..............................    9215.56    8303.39     8578.95
2003
First Quarter ...............................    8790.92    7862.43     7972.71
Second Quarter ..............................    9137.14    7607.88     9083.11
Third Quarter ...............................   11033.32    9265.56    10219.05
Fourth Quarter ..............................   11161.71    9614.60    10676.64
2004
First Quarter ...............................   11770.65   10365.40    11715.39
Second Quarter ..............................   12163.89   10505.05    11858.87
Third Quarter ...............................   11896.01   10687.81    10823.57
Fourth Quarter...............................   11488.76   10659.15    11488.76
2005
First Quarter................................   11966.69   11238.37    11668.95
Second Quarter (through May 6) ..............   11874.75   10938.44    11192.17

LICENSE AGREEMENT BETWEEN NKS AND LEHMAN BROTHERS HOLDINGS

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

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

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

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

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


                                      S-28



                  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 warrants as of the
date of this prospectus supplement.

Except where noted, this summary deals only with a warrant held as a capital
asset by a United States holder and it 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 warrants as part of a hedging,
     integrated, constructive sale or conversion transaction or a straddle;

o    tax consequences to holders of warrants 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 warrants, 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 warrants, you
should consult your tax advisors.

The discussion below is based upon the provisions of 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.

If you are considering the purchase of warrants, 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 warrants.

For purposes of this discussion, a United States holder is a beneficial owner of
a warrant 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    a trust if (1) it 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) it 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
warrants that is not a United States holder.

TAXATION OF WARRANTS

Lehman Brothers Holdings intends to treat and, by purchasing a warrant, you
agree to treat, for all tax purposes, a warrant as a cash settlement option
within the meaning of section 1234(c) of the Code. As a result, each warrant
will be subject to the "mark-to-market" rules under section 1256 of the Code.
Thus, a United States holder could incur federal income tax liability on an
annual basis in respect of an increase in the value of the warrant without a
corresponding receipt of cash.

Under the mark-to-market rules of section 1256 of the Code, a United States
holder of a warrant will recognize capital gain or loss equal to the difference
between the fair market value of the warrant on the last business day of each
taxable year and the United States holder's adjusted tax basis for the warrant.
In addition, upon sale, exchange or exercise (including automatic exercise) of a
warrant, a United States holder will recognize gain or loss equal to the
difference between the amount realized, if any, and


                                      S-29



the United States holder's tax basis in the warrant. Any gain or loss recognized
with respect to a warrant (including any gain or loss recognized under the
mark-to-market rules or on sale, exchange or exercise (including automatic
exercise) of a warrant) will be 60% long-term capital gain or loss and 40%
short-term capital gain or loss. In general, a United States Holder's tax basis
in a warrant will equal the amount paid for the warrant, plus or minus the net
gain or loss recognized by the United States Holder in respect of the warrant in
prior taxable years.

Long-term capital gains of non-corporate United States holders are eligible for
reduced rates of taxation. The deductibility of capital losses is subject to
limitations.

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
warrants.

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 warrants described above, you will not be subject
to United States federal withholding tax for any payment on the warrants.

UNITED STATES FEDERAL INCOME TAX

Based on the treatment of the warrants described above, any gain or income
realized on a warrant generally will not be subject to United States federal
income tax unless (i) the gain or income is effectively connected with a trade
or business in the United States of a non-United States holder or (ii) in the
case of a non-United States holder who is an individual, such individual is
present in the United States for 183 days or more in the taxable year and
certain other conditions are met.

UNITED STATES FEDERAL ESTATE TAX

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

If you are a non-United States holder of warrants, Lehman Brothers Holdings must
report annually to the IRS and to you the amount of any payment paid to you and
the amount of tax, if any, withheld with respect to such payment. Copies of the
information returns reporting such payment and withholding may also be made
available to the tax authorities in the country in which you reside under the
provisions of an applicable income tax treaty. In general, you will not be
subject to backup withholding with respect to a payment 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 warrant 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 IRS.


                                      S-30



                          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
warrants should consider whether an investment in the warrants 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 of the warrants by an ERISA plan with respect to which Lehman
Brothers Holdings Inc., Lehman Brothers Inc., Oppenheimer & Co. Inc. or certain
of their respective 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 warrants are acquired pursuant to and in accordance with an
applicable exemption. The DOL has issued prohibited transaction class
exemptions, or "PTCEs", as well as individual exemptions that may provide
exemptive relief if required for direct or indirect prohibited transactions that
may arise from the purchase or holding of the warrants.

Each purchaser and holder of the warrants or any interest in the warrants will
be deemed to have represented by its purchase or holding of the warrants that
either (1) it is not a plan or a plan asset entity and is not purchasing or
holding those warrants on behalf of or with "plan assets" of any plan or plan
asset entity or (2) the purchase or holding of the warrants will not constitute
a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975
of the Code or a 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 warrants 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-31



                               BOOK-ENTRY ISSUANCE

The warrants will be represented by one or more global securities that will be
deposited with and registered in the name of The Depository Trust Company, or
DTC, or its nominee. This means that Lehman Brothers Holdings will not issue
certificates to you for the warrants. 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 warrants. 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 warrants through the DTC system, the purchases must be made by
or through a direct participant, who will receive credit for the warrants on
DTC's records. Since you actually own the warrants, 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
warrants. DTC's records only show the identity of the direct participants and
the amount of the warrants 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 warrant agent for the warrants will wire payments on the warrants to DTC's
nominee. Lehman Brothers Holdings and the warrant agent will treat DTC's nominee
as the owner of each global security for all purposes. Accordingly, Lehman
Brothers Holdings, the warrant agent 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 credit direct participants' accounts
on the payment date in accordance with their respective 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 warrants based on
customary practices. Payments to you will be the responsibility of the
participants and not of DTC, the warrant agent or Lehman Brothers Holdings.

Warrants 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 warrant
agent will keep the registration books for the warrants 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 Securities and Exchange Commission.


                                      S-32



CLEARSTREAM AND EUROCLEAR

Links have been established among DTC, Clearstream Banking and Euroclear (two
European book-entry depositories similar to DTC), to facilitate the initial
issuance of the warrants and cross-market transfers of the warrants 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 warrants 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 warrants against
payment. After settlement, Clearstream or Euroclear will credit its
participant's account. Credit for the warrants 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 warrants 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 warrants 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
warrants 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 (that is, the trade fails), proceeds credited to the Clearstream or
Euroclear participant's account would instead be valued as of the actual
settlement date.


                                      S-33



                                  UNDERWRITING

Subject to the terms and conditions set forth in an underwriting agreement,
Lehman Brothers Holdings has agreed to sell to each of the underwriters named
below, and each of the underwriters has severally agreed to purchase from Lehman
Brothers Holdings, the respective number of warrants set forth opposite its name
below:

                                                      NUMBER OF
                UNDERWRITERS                           WARRANTS
                -----------------------------------   ---------
                Lehman Brothers Inc................     911,000
                Oppenheimer & Co. Inc..............   1,089,000
                                                      ---------
                   Total...........................   2,000,000
                                                      =========

The underwriters have advised Lehman Brothers Holdings that they propose to
initially offer the warrants to the public at the public offering price
indicated on the cover page of this prospectus supplement; they may also offer
warrants to certain dealers at the same price less a concession not in excess of
$0.27 per warrant. After the initial public offering of the warrants is
completed, the public offering price and concessions may be changed.

In connection with the offering, the rules of the Securities and Exchange
Commission permit the underwriters to engage in various transactions that
stabilize, maintain or otherwise affect the price of the warrants. These
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the warrants or imposing penalty bids that permit
the managing underwriter to reclaim a selling concession from a syndicate member
or dealer in connection with the offering when warrants originally sold by the
syndicate member or dealer are purchased in syndicate covering transactions. If
the underwriters create a short position in the warrants in connection with the
offering (that is, if they sell a larger number of the warrants than is
indicated on the cover page of this prospectus supplement), the underwriters may
reduce that short position by purchasing warrants in the open market.

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

The underwriters will not confirm sales to any account over which they exercise
discretionary authority without the prior written approval of the customer.

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

The underwriting arrangements for this offering comply with the requirements of
Rule 2720 of the National Association of Securities Dealers, Inc. regarding a
National Association of Securities Dealers, Inc. member firm underwriting
securities of its affiliate. This rule requires, among other things, that the
initial public offering price be no higher than that recommended by a "qualified
independent underwriter," who must participate in the preparation of this
prospectus supplement and who must exercise the usual standards of "due
diligence" with respect thereto. Oppenheimer & Co. Inc. is acting as a qualified
independent underwriter in the offering, and the initial public offering price
of the warrants will not be higher than the price recommended by Oppenheimer &
Co. Inc.

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


                                      S-34



will be made by the underwriters on the same basis as other allocations.

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

Each underwriter has agreed that, in connection with warrants offered outside of
the United States by such underwriter, it will comply with all applicable laws
and regulations in force in any jurisdiction in which it offers or sells
warrants, including but not limited to the laws and regulations of the following
jurisdictions.

BRAZIL

The warrants may not be offered or sold to the public in Brazil. Accordingly,
the offering of the warrants 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 warrants 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.

GERMANY

The warrants 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

Each underwriter has represented, warranted and agreed that (a) it has not
offered or sold and will not offer or sell any warrants in Ireland, and that it
will not issue any application form for warrants 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 warrants.

PANAMA

The warrants 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 warrants 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

Each underwriter has agreed that it has only offered or sold and will only offer
or sell the warrants 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 warrants under the laws and regulations in force in
Switzerland.

URUGUAY

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


                                      S-35



VENEZUELA

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


                                      S-36



                                     EXPERTS

The consolidated financial statements and financial statement schedule of Lehman
Brothers Holdings Inc. as of November 30, 2004, and for each of the years in the
three-year period ended November 30, 2004, and management's assessment of the
effectiveness of internal control over financial reporting as of November 30,
2004 of Lehman Brothers Holdings Inc. have been audited by Ernst & Young LLP,
independent certified public accountants, as set forth in their reports thereon
appearing in Lehman Brothers Holdings' annual report on Form 10-K, as amended by
Form 10-K/A, for the year ended November 30, 2004 and incorporated herein by
reference. Such consolidated financial statements and management's assessment of
internal control over financial reporting are incorporated by reference in this
prospectus supplement in reliance upon such reports given on the authority of
said firm as experts in accounting and auditing. To the extent that Ernst &
Young LLP audits and reports on Lehman Brothers Holdings' consolidated financial
statements and management's assessment of internal control over financial
reporting issued at future dates, and consents to the use of their reports
thereon, such consolidated financial statements and management's assessment of
internal control over financial reporting also will be incorporated by reference
in this prospectus supplement in reliance upon their reports given on said
authority.

With respect to the unaudited consolidated interim financial information of
Lehman Brothers Holdings Inc. for the three-month periods ended February 28,
2005 and February 29, 2004, which is incorporated herein by reference, Ernst &
Young LLP reported that they have applied limited procedures in accordance with
standards of the Public Company Accounting Oversight Board (United States) for a
review of such information. However, their report included in Lehman Brothers
Holdings' quarterly report on Form 10-Q for the quarter ended February 28, 2005,
and incorporated by reference herein, states that they did not audit and they do
not express an opinion on that interim financial information. Accordingly, the
degree of reliance on their report on such information should be restricted in
light of the limited nature of the review procedures applied. Ernst & Young LLP
is not subject to the liability provisions of Section 11 of the Securities Act
for their report on the unaudited interim financial information because that
report is not a "report" or a "part" of the registration statement prepared or
certified by Ernst & Young LLP within the meaning of Sections 7 and 11 of the
Securities Act.


                                      S-37



                                                                      APPENDIX A

                                 INDEX OF TERMS

Amex ..............................................................          S-1
at-the-money ......................................................          S-8
calculation agent .................................................          S-6
cash settlement value .............................................          S-3
Citibank ..........................................................         S-18
Clearstream .......................................................         S-17
close of trading ..................................................         S-22
closing index level ...............................................          S-3
Code ..............................................................          S-5
delisting date ....................................................          S-4
depositaries ......................................................         S-18
DTC ...............................................................          S-4
ERISA .............................................................         S-31
ERISA plans........................................................         S-31
Euroclear .........................................................         S-17
exercise date .....................................................   S-18, S-19
exercise notice ...................................................          S-5
expiration date ...................................................          S-3
final index level .................................................          S-3
initial index level ...............................................          S-3
in-the-money ......................................................          S-8
JPY/USD Rate ......................................................          S-9
last non-automatic exercise date ..................................         S-18
Lehman Brothers Holdings ..........................................          S-3
limit option ......................................................         S-23
limit option index level ..........................................         S-23
mark-to-market ....................................................         S-29
market disruption event ...........................................         S-22
Morgan Stanley ....................................................         S-18
NKS ...............................................................          S-1
OCC ...............................................................         S-12
out-of-the-money ..................................................          S-8
participant .......................................................          S-4
parties in interest ...............................................         S-31
plan ..............................................................         S-31
plan assets .......................................................         S-31
PTCE ..............................................................         S-31
relevant exchange .................................................         S-21
remaining warrants ................................................         S-21
scheduled trading day .............................................         S-17
SEC ...............................................................          S-5
similar laws ......................................................         S-31
strike price ......................................................          S-3
time value ........................................................          S-8
TSE ...............................................................          S-3
valuation date ....................................................         S-19
warrant agent .....................................................         S-16
warrant agent's office ............................................         S-16
wasting asset .....................................................          S-7
Weight Factor .....................................................         S-25


                                       A-1



                                                                      APPENDIX B

                             FORM OF EXERCISE NOTICE

For Warrants Represented by the Global Warrant Certificate
CUSIP No.: 524908456
Citibank, N.A.
111 Wall Street, 15th Floor Zone 8
New York, New York 10043
Attn: Sebastian Andrieszyn
Telephone No.: (212) 657-9055
Facsimile No.: (212) 657-1020

Attention:

     1. We refer to the Warrant Agreement dated as of May 11, 2005 (the "Warrant
Agreement"), among Lehman Brothers Holdings Inc. (the "Company"), Citibank,
N.A., as Warrant Agent (the "Warrant Agent"), and Lehman Brothers Inc., as
Calculation Agent (the "Calculation Agent"). On behalf of certain beneficial
owners, each of whose Warrants have been, or will be, transferred to the Warrant
Agent in accordance with the provisions of the Representations Letter relating
to the Warrants, we hereby irrevocably exercise Warrants (the "Tendered
Warrants"). We hereby acknowledge that the Tendered Warrants and this Exercise
Notice must be received by you by 3:00 p.m., New York City time, on a Business
Day in order for the Valuation Date for the Tendered Warrants to be the
Scheduled Trading Day following such Business Day and that, if the Tendered
Warrants and this Exercise Notice are received by you after 3:00 p.m., New York
City time, on a Business Day (or, in the case of Warrants held through
Clearstream or Euroclear, if the Warrants are not received by 3:00 p.m., New
York City time, on the first Scheduled Trading Day following such Business Day),
the Valuation Date of the Tendered Warrants shall be the following Scheduled
Trading Day, in each case subject to certain provisions of the Warrant
Agreement.

     2. If you determine that this Exercise Notice has not been duly completed
or is not in proper form, this Exercise Notice will be void and of no effect and
will be deemed not to have been delivered.

     3. We hereby direct you to make payment to us of amounts payable to our
clients as a result of the exercise of the Warrants hereunder as follows:

     By cashier's check or an official bank check;
     By wire transfer to the following U.S. Dollar
     bank account in the United States:

     (Minimum payments of $100,000 only)

        Bank: ________________________________

        Account No.: ______________________________

        ABA Routing No.: _____________________________________________

        Reference: ___________________________


                                       B-1



     4. The Tendered Warrants covered hereby [ARE/ARE NOT] subject to the Limit
Option(1).

FOR DEPOSITARY PARTICIPANTS ONLY

     5. We hereby certify that we are a Participant of The Depository Trust
Company (the "Depositary") with the present right to use and receive its
services.

     Capitalized terms used but not defined herein have the meanings assigned
thereto in the Warrant Agreement.

Dated:

                                        NAME OF DEPOSITARY PARTICIPANT
                                        Participant Number

                                        NAME OF EUROCLEAR PARTICIPANT
                                        Participant Number

                                        NAME OF CLEARSTREAM PARTICIPANT
                                        Participant Number


                                        By:
                                            ------------------------------------
                                            Authorized Signature
                                            Address:
                                            Telephone: ( )

----------
(1) Separate Notices of Exercise shall be submitted with respect to Warrants
subject to the Limit Option and Warrants not subject to the Limit Option.


                                       B-2

[GRAPHIC OMITTED]



                              2,000,000 WARRANTS



                         LEHMAN BROTHERS HOLDINGS INC.


                       NIKKEI 225(SM) INDEX CALL WARRANTS
                              EXPIRING MAY 8, 2007


                                 -------------
                             PROSPECTUS SUPPLEMENT
                                  MAY 6, 2005


                             (INCLUDING PROSPECTUS
                              DATED JUNE 21, 2001)
                                 -------------



                                 Joint Managers



LEHMAN BROTHERS                                              OPPENHEIMER & CO.