Second Quarter 2005
Lehman Brothers Reports Second Quarter Results

Second Highest Ever Quarterly Revenues, Net Income and Earnings Per Common Share

NEW YORK, June 14, 2005 —
Lehman Brothers Holdings Inc. (ticker symbol: LEH) today reported net income of $683 million, or $2.26 per common share (diluted), for the second quarter ended May 31, 2005, up 12% from both net income of $609 million and diluted earnings per common share of $2.01, in the second quarter of fiscal 2004. Second quarter 2005 net income and earnings per common share declined compared to both net income of $875 million and diluted earnings per common share of $2.91 from the record first quarter of 2005.

For the first half of the fiscal year, the Firm reported record net income of $1.6 billion and record diluted earnings per common share of $5.17, up 22% from the first half of fiscal 2004.

Second Quarter Business Highlights

•	Reported record Investment Management net revenues, driven by a steady increase in Assets Under Management to a record $151 billion
•	Posted record results in Asia for the second consecutive quarter

Chairman and Chief Executive Officer Richard S. Fuld, Jr. said, "Although we faced tougher markets this quarter, we are announcing our second best quarter ever. The Firm is truly benefiting from the regional diversification and increased depth and scale of business that we have worked so hard to achieve. With our continued discipline around expense and risk management, we are well-positioned to continue to deliver strong returns to our shareholders."

Net revenues (total revenues less interest expense) for the second quarter were $3.3 billion, up 12%, from $2.9 billion for the same period in fiscal 2004, and down 14% compared to $3.8 billion in the first quarter of 2005. For the first six months of fiscal 2005, the Firm reported record net revenues of $7.1 billion, an increase of 17% from $6.1 billion for the first half of fiscal 2004.

Investment Banking revenues increased 6% to $579 million for the second quarter of fiscal 2005, from $546 million for the same period a year ago, reflecting the second highest debt underwriting revenue level ever and the second highest quarterly equity underwriting revenue in almost five years. Capital Markets revenues increased 14% to $2.2 billion in the second quarter of fiscal 2005, from $2.0 billion in the second quarter of 2004. Within this segment, the Fixed Income business reported revenues of $1.8 billion in the second quarter of fiscal 2005, a 23% increase from $1.4 billion reported in the prior year, and down 15% versus the first fiscal quarter of 2005. Mortgages and real estate remained resilient, driven by high levels of securitization and asset monetization activity. Customer flow activity was strong, despite a challenging environment affected by increased volatility in interest rates and credit and by widening credit spreads. Equities Capital Markets revenues decreased 9%, to $474 million, compared to $520 million for the prior year's second quarter, largely attributable to challenging conditions in the convertibles market. Record Investment Management revenues, which increased 10% to $472 million in the second quarter of fiscal 2005, from $429 million in the second quarter of fiscal 2004, were driven by a record Asset Management performance, with revenues increasing 33% compared to a year ago, contributed largely by Neuberger Berman and private equity results.

For the second quarter of fiscal 2005, non-U.S. net revenues were $1.3 billion or 40% of the Firm's total net revenues and up 45% from the prior year's quarter. Asia reported record results for the second consecutive quarter, reflecting continued strength in fixed income and investment banking. European net revenues increased 58%, driven by strong performances in interest rate products, mortgage securitizations and equity derivatives.

Non-interest expenses for the quarter were $2.3 billion, compared to $2.0 billion for the second quarter of fiscal 2004 and $2.5 billion for the first quarter of fiscal 2005. Compensation and benefits as a percentage of net revenues was 49.5% during the second quarter of fiscal 2005, consistent with the first quarter of fiscal 2005, and compared to 49.8% for the second quarter of fiscal 2004. Non-personnel expenses in the fiscal 2005 second quarter were $642 million, compared to $618 million in the first quarter of fiscal 2005 and $585 million in the second quarter of fiscal 2004.

For the quarter ended May 31, 2005, the Firm's pretax margin was 30.9%, compared to 30.2% in the fiscal 2004 second quarter and 34.3% in the fiscal 2005 first quarter. For the fiscal 2005 second quarter, the Firm's return on average common equity was 18.2%, compared to 18.6% in the fiscal 2004 second quarter and 24.5% in the fiscal 2005 first quarter. Return on average tangible common equity was 23.5% for the second quarter of fiscal 2005, compared with 26.0% in the second quarter of fiscal 2004 and 32.0% in the first quarter of fiscal 2005.

As of May 31, 2005, Lehman Brothers stockholders' equity totaled $15.9 billion, and total capital (stockholders' equity and long-term debt) was approximately $76 billion. Book value per common share was $53.27.

Lehman Brothers (ticker symbol: LEH), an innovator in global finance, serves the financial needs of corporations, governments and municipalities, institutional clients, and high net worth individuals worldwide. Founded in 1850, Lehman Brothers maintains leadership positions in equity and fixed income sales, trading and research, investment banking, private investment management, asset management and private equity. The Firm is headquartered in New York, London, and Tokyo and operates in a network of offices around the world. For further information about Lehman Brothers' services, products and recruitment opportunities, visit our Web site at www.lehman.com.

Conference Call
A conference call, to discuss the Firm's financial results and outlook, will be held at 9:30 a.m., EDT today. The call will be open to the public. Members of the public who would like to access the conference call should dial, from the U.S., 888-323-4182 or from outside the U.S., 517-623-4500. The pass code for all callers is LEHMAN. The conference call will also be accessible through the "Shareholders" section of the Firm's Web site under the subcategory "Webcasts." For those unable to listen to the live broadcast, a replay will be available on the Firm's Web site or by dialing 866-416-1185 (domestic) or 203-369-0716 (international). The replay will be available approximately one hour after the event and will remain available on the Lehman Brothers Web site until 5:00 p.m. EDT on July 14, 2005, and by phone until 11:59 p.m. EDT on July 14, 2005. Please direct any questions regarding the conference call to Shaun Butler at 212-526-8381, sbutler@lehman.com or Elizabeth Besen at 212-526-2733, ebesen@lehman.com.

Cautionary Note Regarding Forward-Looking Statements
This press release may contain forward-looking statements. These statements are not historical facts, but instead represent only the Firm's expectations, estimates and projections regarding future events. These statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, which may include risks and uncertainties relating to market fluctuations and volatility, industry competition and changes in the competitive environment, investor sentiment, liquidity and credit ratings, credit exposures, operational risks and legal and regulatory matters. The Firm's actual results and financial condition may differ, perhaps materially, from the anticipated results and financial condition in any such forward-looking statements and, accordingly, readers are cautioned not to place undue reliance on such statements. The Firm undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. For more information concerning the risks and other factors that could affect the Firm's future results and financial condition, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Firm's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

Selected Statistical and Financial Information Attached (168k)

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