Past Quarterly Earnings

Fourth Quarter 2000
Lehman Brothers Reports Record 2000 Earnings Of $1.78 Billion, Up 57% From 1999

Fourth Quarter Earnings Increase 33%, Revenues Up 20%

NEW YORK, January 4, 2001 —
Lehman Brothers Holdings Inc. (NYSE: LEH) today reported that net income was a record $1.78 billion for the full fiscal year 2000, an increase of 57 percent from the $1.13 billion of net income reported in fiscal 1999. For the full year, earnings per common share increased 56 percent to a record $6.38 (diluted), compared with $4.08 per share (diluted) in fiscal 1999.

For the quarter ended November 30, 2000, net income was $399 million, or $1.46 per common share (diluted), an increase of 33 percent from $301 million, or $1.14 per share (diluted), reported in the fourth quarter of fiscal 1999.

"This was a terrific year for Lehman Brothers, as we set new records for revenues, net income, and return on equity," said Richard S. Fuld, Jr., Chairman and Chief Executive Officer. "Across the board, our results clearly demonstrate that the Firm is among the top performers in the industry."

Mr. Fuld also noted that Lehman Brothers' performance in the 2000 fourth quarter, in particular, underscored the strategic and financial strength of the Firm's global equity, fixed income and investment banking franchises.

"In what was clearly one of the most difficult operating environments in several years, Lehman Brothers posted significant year-over-year increases in the fourth quarter, and a return on equity over 22 percent," he said. "This demonstrates not only the strength, but also the diversification of the Firm's business mix from a product and a geographic standpoint, as well as our continued successful management of expenses and risk."

Mr. Fuld said that for the full year, Lehman Brothers posted record results in its investment banking, global equities, fixed income, and high-net-worth retail businesses, as well as across all regions.

For the 12 months of fiscal 2000, net revenues (total revenues less interest expense) were $7.7 billion, an increase of 44 percent from $5.3 billion in fiscal 1999. Net revenues for the fourth quarter were $1.7 billion, an increase of 20 percent from $1.4 billion in the fourth quarter of fiscal 1999.

For the full fiscal year, non-interest expenses were $5.1 billion. Non-personnel expenses were $1.2 billion, compared with $1 billion in the 1999 fiscal year. Non-interest expenses for the fiscal 2000 fourth quarter were $1.1 billion. Non-personnel expenses for the same period were $338 million, compared with $312 million in the fiscal 2000 third quarter, and $258 million in the previous fiscal year's fourth quarter. For the year, compensation and benefits as a percentage of net revenues were 51 percent, down from 52 percent in the first three quarters of fiscal 2000, even as the Firm continued to expand its investment banking, equities, and European businesses, as well as its technology infrastructure around the world.

For the full year, the Firm's pre-tax margin was 33.5 percent, compared with 30.5 percent in fiscal 1999. Return on common equity was 27.4 percent, compared with 21.8 percent in fiscal 1999. For the fiscal 2000 fourth quarter, the Firm's pre-tax margin was 32.6 percent, compared with 31.1 percent in the fourth quarter of fiscal 1999. Return on common equity was 22.4 percent for the quarter ended November 30, 2000, compared with 21.6 percent in the fourth quarter of fiscal 1999. Return on common equity is calculated before any adjustments for special preferred dividends.

As of November 30, 2000, Lehman Brothers stockholders' equity and trust preferred securities totaled $8.6 billion, and total capital (stockholders' equity, trust preferred securities, and long-term debt) was $44 billion. Book value per common share was $28.78.

Earnings per share calculations reflect a 2-for-1 split of the Firm's common stock effective on October 20, 2000. Earnings per share also include the impact of a special preferred dividend of $50 million in the full 1999 and 2000 fiscal years. American Express Company and Nippon Life Insurance Company are entitled to receive an annual non-cumulative preferred dividend equal to 50 percent of the amount by which the Firm's net income for the full fiscal year exceeds $400 million, up to a maximum of $50 million per year, through mid-year 2002.

Lehman Brothers (NYSE: 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 equity, and private client services. 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.

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. 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. 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 Operation" in the Firm's most recent Annual Report to Shareholders and most recent Quarterly Report on Form 10-Q.