Fourth Quarter 2001
Lehman Brothers Reports Net Income of $201 Million, or $0.73 Per Common Share (Diluted), Excluding the Impact from Special Charge of $71 Million Related to the Events of September 11

Firm Reports Full-Year Net Income of $1.326 Billion, and Return on Equity of 17.5%, Excluding Special Charge

NEW YORK, December 20, 2001 —
Lehman Brothers Holdings Inc. (NYSE: LEH) today reported net income of $201 million, or $0.73 per common share (diluted) for the fourth quarter ended November 30, 2001, excluding the impact of a special charge associated with the events of September 11. This compares with $399 million, or $1.46 per common share (diluted) in the fourth quarter of fiscal 2000. Fiscal 2001 fourth quarter results included a special charge of $127 million ($71 million after tax). Fourth quarter earnings, including the impact of the special charge, were $130 million, or $0.46 per common share (diluted).

For the full year of fiscal 2001, the Firm reported net income of $1.326 billion (excluding the impact of the special charge), or $4.64 per common share (diluted), compared with $1.775 billion, or $6.38 per share, in fiscal 2000. Including the impact of the fourth-quarter special charge, net income for the fiscal year was $1.255 billion, or $4.38 per common share (diluted).

The Firm's fourth quarter and full year results for fiscal 2001 were negatively impacted by the events of September 11, which resulted in the displacement and relocation of the Firm's New York employees located in lower Manhattan. The Firm recorded a $127 million special charge stemming from those events. This charge reflects all costs and asset write-offs associated with these events, net of related estimated insurance recoveries. The Firm is pursuing a claim with its insurance carriers for the property damage, incremental costs, and lost revenues from the business interruption resulting from these events.

"Lehman Brothers faced tremendous challenges this year. Despite the difficult economic and market conditions and the direct impact of the tragic events of September 11, we continued to deliver terrific financial performance," said Richard S. Fuld, Jr., Chairman and Chief Executive Officer. "Our people came together and showed the strength and resiliency of our culture. Our commitment to our clients, our shareholders, and each other will continue to help us deliver on our best operator strategy."

He pointed out that despite the impact of September 11 and unfavorable market conditions, Lehman Brothers reported its second best year ever in terms of revenues and net income in fiscal 2001, a return on equity (excluding the special charge) of 17.5% and pre-tax operating margin (excluding the special charge) of 27.8%, reflecting the benefits of the Firm's diversification across its businesses and geographic locations.

Net revenues (total revenues less interest expense) for the fourth quarter were $1.203 billion, a decrease of 29 percent from $1.698 billion in the fourth quarter of fiscal 2000. For the full fiscal year of 2001, net revenues were $6.736 billion, a decrease of 13 percent from $7.707 billion in the 12 months of fiscal 2000.

Nonpersonnel expenses for the fourth quarter of fiscal 2001 were $345 million, compared with $338 million in the previous fiscal year's fourth quarter. Compensation and benefits as a percentage of net revenues was approximately 51 percent. For the full 12 months of 2001, nonpersonnel expenses were $1,424 million, compared with $1,197 million in fiscal 2000. The foregoing exclude the effect of the special charge.

For the fiscal 2001 fourth quarter, the Firm's pre-tax operating margin was 20.2 percent, excluding the special charge (9.6 percent including the special charge), compared with 32.6 percent in the fourth quarter of fiscal 2000. Return on common equity was 10.0 percent for the quarter ended November 30, 2001 excluding the special charge (6.3 percent including the special charge), compared with 22.4 percent a year ago. For the full 12 months of fiscal 2001, the Firm's pre-tax operating margin was 27.8 percent, excluding the special charge (26.0 percent including the special charge), compared with 33.5 percent for the full year of fiscal 2000. Return on common equity was 17.5 percent for the year ended November 30, 2001, excluding the special charge (16.5 percent including the special charge), compared with 27.4 percent in fiscal 2000. Return on common equity for all periods is calculated before adjusting for a special preferred dividend, where applicable.

As of November 30, 2001, Lehman Brothers' stockholders' equity and trust preferred securities were $9.169 billion and total capital (stockholders' equity, trust preferred, and long-term debt) was approximately $47.5 billion. Book value per common share was $31.81.

Earnings per share calculations for 2001 and 2000 include the impact of a special preferred dividend paid to American Express Company and to Nippon Life Insurance Company at fiscal year end. American Express and Nippon Life 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. This special preferred dividend expires on May 31, 2002; since this reflects a half-year period, the dividend applies to 50 percent of the amount by which the Firm's net income in fiscal 2002 exceeds $200 million, up to a maximum of $25 million.

Lehman Brothers (ticker symbol 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.

Conference Call
A conference call to discuss the Firm's financial results and outlook will be held at 9:00 a.m. EST on Thursday, Dec. 20. Members of the public who would like to access the conference call should dial 888-843-7190 in the U.S., or 712-257-3681 outside the U.S. (passcode: BROTHERS). The conference call will also be accessible through the "Shareholders" section of the Firm's web site, www.lehman.com. For those unable to listen to the live broadcast, a replay will be available on the Firm's web site or by dialing 800-813-5529 in the U.S., or 402-280-1634 outside the U.S., beginning approximately one hour after the event, and remaining available until 5:00 p.m. on January 11, 2002. The passcode for the replay is "LEH."

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.

$1,203

$0.49

$248,000

165,000