Fourth Quarter 2006
Lehman Brothers Reports Record Net Revenues, Net Income and Earnings Per Share for Fiscal 2006

Reports Record Quarterly Net Revenues for the Fourth Quarter of Fiscal 2006

NEW YORK, December 14, 2006 —
Lehman Brothers Holdings Inc. (ticker symbol: LEH) today reported net income of $1.0 billion, or $1.72 per common share (diluted), for the fourth quarter ended November 30, 2006, representing increases of 22% and 25%, respectively, from net income of $823 million, or $1.38 per common share (diluted), reported for the fourth quarter of fiscal 2005. Third quarter fiscal 2006 net income was $916 million, or $1.57 per common share (diluted).

For the 2006 full fiscal year, net income and earnings per common share (diluted) increased 23% and 25%, respectively, to a record $4.0 billion and $6.81, respectively, compared to $3.3 billion and $5.43, respectively, in fiscal 2005.

Full Year Business Highlights

Richard S. Fuld, Jr., chairman and chief executive officer, said, "Once again, we have achieved outstanding results across all our business segments and geographic regions this year. Our record performance is the result of our client-focused strategy and our continued investment in strategic areas that enable us to deliver the best capabilities, intellectual capital and solutions to our clients. As always, our success is a tribute to how well our people continue to work together across the Firm to deliver superior value to our clients and shareholders."

Net revenues (total revenues less interest expense) for the fourth quarter of fiscal 2006 were $4.5 billion, an increase of 23% from $3.7 billion reported in the fourth quarter of fiscal 2005 and an increase of 8% from the $4.2 billion reported in the third quarter of fiscal 2006. Investment Banking revenues were a record for the quarter, increasing 5% to $858 million from $817 million in the fourth quarter of fiscal 2005. These revenues were driven by strong performances in debt and equity origination, which increased 14% and 7%, respectively, from the prior year's period, and solid merger and acquisition advisory revenue, which decreased 7% from the record results in the fourth quarter of fiscal 2005. Capital Markets net revenues increased 28% to $3.0 billion in the fourth quarter of fiscal 2006 from $2.4 billion in the prior year's fourth quarter on strong performances from both Fixed Income and Equities Capital Markets. Fixed Income Capital Markets reported its second highest revenue quarter, an increase of 31% from the fourth quarter of fiscal 2005, reflecting strong levels of client activity, as well as improved results in credit products. Equities Capital Markets also reported its second highest revenue quarter, an increase of 22% compared to the fourth quarter of fiscal 2005, driven by solid customer flow activities, improved market conditions and continued growth in the prime brokerage businesses. The Firm also reported its highest revenue quarter in Investment Management, with net revenues increasing 26% to $640 million in the fourth quarter of fiscal 2006, from $509 million in the fourth quarter of fiscal 2005. This performance was driven by record revenues in Private Investment Management and record-matching revenues in Asset Management. Assets under management grew to a record $225 billion.

For the full 2006 fiscal year, net revenues increased 20% to a record $17.6 billion, from $14.6 billion for fiscal 2005, with record net revenues in each business segment and in each region. For fiscal 2006, non-U.S. revenues grew 21% to a record $6.5 billion, representing 37% of Firmwide net revenues.

Non-interest expenses for the fourth quarter of fiscal 2006 were $3.0 billion, compared to $2.8 billion in the third quarter of fiscal 2006 and $2.5 billion in the fourth quarter of fiscal 2005. Compensation and benefits as a percentage of net revenues was 49.3% during the fourth quarter of fiscal 2006, compared to 49.3% for the third quarter of fiscal 2006 and 48.7% for the fourth quarter of fiscal 2005. For the full 2006 fiscal year, compensation and benefits as a percentage of net revenues remained flat at 49.3% compared to fiscal 2005. Non-personnel expenses in the fourth quarter of fiscal 2006 were $809 million, compared with $751 million in the third quarter of fiscal 2006 and $675 million in the fourth quarter of fiscal 2005, reflecting continued investments in growing the franchise. Non-personnel expenses for the full year of fiscal 2006 were $3.0 billion, compared with $2.6 billion in fiscal 2005.

The Firm's pre-tax margin was 32.8% for the fourth quarter of fiscal 2006 and a record 33.6% for the full 2006 fiscal year, compared to 33.0% for both the quarter and year ended November 30, 2005. Return on average common equity was 22.3% for the fourth quarter of fiscal 2006, compared with 20.9% for the fourth quarter of fiscal 2005. For the full 2006 fiscal year, return on average common equity was 23.4%, compared with 21.6% for fiscal 2005. Return on average tangible common equity was 27.6% for the fourth quarter of fiscal 2006, compared with 26.5% for the fourth quarter of fiscal 2005. For the full 2006 fiscal year, return on average tangible common equity was 29.1%, compared with 27.8% for fiscal 2005.

As of November 30, 2006, Lehman Brothers' total stockholders' equity was $19.2 billion, and total long-term capital (stockholders' equity and long-term borrowings, excluding any borrowings with remaining maturities of less than twelve months) was approximately $99.8 billion. Book value per common share was $33.87.

Prior period share and earnings per share amounts have been restated to reflect the two-for-one common stock split on April 28, 2006.

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 investment banking, equity and fixed income sales, trading and research, private investment management, asset management and private equity. The Firm is headquartered in New York, with regional headquarters in 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 the Firm's Web site at www.lehman.com.

Conference Call
A conference call, to discuss the Firm's financial results and outlook, will be held today at 11:00 a.m. EST. 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 866-457-6650 (domestic) or 203-369-1299 (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. EST on January 14, 2007, and by phone until 11:59 p.m. EST on January 14, 2007.

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 "Risk Factors" and "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 (123 k)

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