Company Press Release

NEW YORK, September 10, 2008 – Lehman Brothers Holdings Inc. (ticker symbol: LEH), the global investment bank, announced today, in conjunction with its preliminary third quarter results, a comprehensive plan of initiatives to reduce dramatically the Firm’s commercial real estate and residential mortgage exposure, generate additional capital through the sale of a majority stake of the Investment Management Division and reduce the annual dividend, in order to maximize value for clients, shareholders and employees.

Chairman and Chief Executive Officer Richard S. Fuld, Jr. said, “This is an extraordinary time for our industry, and one of the toughest periods in the Firm’s history. The strategic initiatives we have announced today reflect our determination to fundamentally reposition Lehman Brothers by dramatically reducing balance sheet risk, reinforcing our focus on our client-facing businesses and returning the Firm to profitability.”

STRATEGIC INITIATIVES

Significant Reduction in Residential Mortgage and Commercial Real Estate
Lehman Brothers took several steps to significantly reduce its real estate portfolio in the third quarter. The Firm reduced its residential mortgage exposure by 31% to $17.2 billion. Further, Lehman Brothers is formally engaged with BlackRock Financial Management, Inc. to sell approximately $4.0 billion of the Firm’s UK residential mortgage portfolio and expects to complete the sale within the next few weeks. Pro forma for this transaction, the Firm’s residential mortgage exposure is expected to be reduced by 47% to $13.2 billion. Lehman Brothers also reduced its commercial real estate exposure by 18% in the third quarter from $39.8 billion to $32.6 billion.

Spin-Off of Commercial Real Estate Assets
The Firm intends to spin off to its shareholders $25 billion to $30 billion of its commercial real estate portfolio into a separate publicly-traded company, Real Estate Investments Global (“REI Global”), in the first quarter of 2009. The spin-off of REI Global will strengthen Lehman Brothers’ balance sheet while preserving the value of the commercial real estate (“CRE”) portfolio for shareholders.

The concentration of positions in commercial real estate-related assets has become a significant concern for investors and creditors. Therefore, Lehman Brothers believes that it is in the best interests of all its constituents to separate these assets from the rest of the Firm. Transferring the vast majority of the commercial real estate portfolio to REI Global will achieve the following objectives:

REI Global will be appropriately capitalized to hold the CRE assets through the current economic cycle;

REI Global will be able to account for its assets on a hold-to-maturity basis;

REI Global is expected to hold its assets to maximize their value for shareholders;

REI Global will be able to manage the assets without the pressure of mark-to-market volatility; and

REI Global will not be forced to sell assets below what REI Global believes to be their intrinsic value.

At the time of formation, REI Global will be appropriately capitalized through the transfer of common equity and provision of debt financing, which the Firm may syndicate as markets normalize. REI Global will own a high quality portfolio of assets, which is diversified by geography, property and lien type. REI Global’s primary focus will be to maximize shareholder returns by selling assets or holding them to maturity, whichever provides the greatest return. REI Global will not make investments in new assets and any excess cash flow will be returned to shareholders.

Through the creation of REI Global, Lehman Brothers achieves an enterprise solution that removes the vast majority of commercial real estate exposure from the Firm’s balance sheet and realizes a true sale of its commercial real estate assets while maximizing their value. Further, it enables shareholders to benefit from the anticipated financial upside of the portfolio of assets.

Intention to Sell Majority Interest in Investment Management Division
Lehman Brothers has announced its intent to sell a majority stake (estimated to be approximately 55%) in a subset of its Investment Management Division. The subset of businesses (the “IMD Business”) includes the asset management, private equity and wealth management businesses but excludes its middle market institutional distribution business and the Firm’s minority stakes in external hedge fund managers. The sale of a majority stake in the IMD Business will enhance the Firm’s already strong capital base. Goodwill related to the Neuberger Berman business will be eliminated, resulting in significant improvement in the Firm’s Tier 1 ratio and an estimated increase of more than $3 billion in tangible book value. The Firm also expects to maintain the diversification benefits of retaining the majority of the pre-tax income of the Investment Management Division. It also ensures that the IMD Business has the most attractive structure to continue to best serve the Firm’s clients and maximize growth opportunities. The IMD Business will continue to operate under the Lehman Brothers and Neuberger Berman brands and clients will continue to be able to access all of the capabilities of the Firm. The Firm is in advanced discussions with a number of potential partners for the IMD Business and expects to announce the details of the transaction in due course.

Annual Dividend to be Reduced to $0.05 Per Common Share
The Firm has decided to reduce its annual common dividend to $0.05 per common share from $0.68 per common share, enabling the Firm to retain $450 million annually.

OVERVIEW OF PRELIMINARY THIRD QUARTER RESULTS

Lehman Brothers reported a preliminary net loss of approximately ($3.9) billion, or ($5.92) per common share (diluted), for the third quarter ended August 31, 2008, compared to a net loss of ($2.8) billion, or ($5.14) per common share (diluted), for the second quarter of fiscal 2008 and net income of $887 million, or $1.54 per common share (diluted), for the third quarter of fiscal 2007. The net loss was driven primarily by gross mark-to-market adjustments stemming from writedowns on commercial and residential mortgage and real estate assets.

Net revenues (total revenues less interest expense) for the third quarter of fiscal 2008 are expected to be negative ($2.9) billion, compared to negative ($0.7) billion for the second quarter of fiscal 2008 and $4.3 billion for the third quarter of fiscal 2007. Net revenues for the third quarter of fiscal 2008 reflect negative mark-to-market adjustments and principal trading losses, net of gains on certain risk mitigation strategies and certain debt liabilities.

During the fiscal third quarter, the Firm is expected to incur negative gross mark-to-market adjustments on assets of ($7.8) billion, including gross negative mark-to-market adjustments of ($5.3) billion on residential mortgage-related positions, ($1.7) billion on commercial real estate positions, ($600) million on other asset-backed positions and ($200) million on acquisition finance positions. These mark-to-market adjustments were offset by $800 million of hedging gains during the quarter and $1.4 billion of debt valuation gains. The Firm is also expected to record losses on principal investments of approximately $760 million.

In order to increase operating efficiency, the Firm has eliminated approximately 1,500 positions since the beginning of the third quarter in discretionary corporate areas and businesses that are in secular decline.

Business Segments
Capital Markets is expected to report net revenues of negative ($4.1) billion in the third quarter of fiscal 2008, compared to negative ($2.4) billion in the second quarter of fiscal 2008 and $2.4 billion in the third quarter of fiscal 2007. Net revenues from Fixed Income Capital Markets are expected to be negative ($4.6) billion, compared to negative ($3.0) billion in the second quarter of fiscal 2008 and $1.1 billion in the third quarter of fiscal 2007. Equities Capital Markets is expected to report net revenues of $0.5 billion, a decrease from $0.6 billion in the second quarter of fiscal 2008 and a decrease from $1.4 billion in the third quarter of fiscal 2007.

Investment Banking is expected to report net revenues of $0.6 billion in the quarter, a decrease from $0.9 billion in the second quarter of fiscal 2008 and a decrease from $1.1 billion in the third quarter of fiscal 2007. Debt underwriting revenues are expected to be $0.2 billion, a decrease from $0.3 billion in the second quarter of fiscal 2008 and a decrease from $0.4 billion in the third quarter of 2007. Equity underwriting revenues are expected to be $0.2 billion, a decrease from $0.3 billion in the second quarter of fiscal 2008 and $0.3 billion in the third quarter of fiscal 2007. Merger and acquisition advisory revenues are expected to be $0.2 billion, consistent with the second quarter of fiscal 2008 and down from $0.4 billion in the third quarter of fiscal 2007.

Investment Management is expected to report net revenues of $0.6 billion, a decrease from $0.8 billion in the second quarter of fiscal 2008 and the third quarter of fiscal 2007. Asset management is expected to report revenues of $0.4 billion, a decrease from $0.5 billion in both the second quarter of fiscal 2008 and third quarter of fiscal 2007. Assets under management are expected to be approximately $273 billion, down from $277 billion at the end of the prior quarter. Private Investment Management revenues are expected to be $0.3 billion, down from $0.4 billion in the second quarter of fiscal 2008 and consistent with $0.3 billion in the third quarter of fiscal 2007.

Firm Profitability and Capital
Non-interest expenses for the third quarter of fiscal 2008 are expected to be $2.9 billion, compared to $3.4 billion in the second quarter of fiscal 2008 and $3.1 billion in the third quarter of fiscal 2007. Compensation expense is expected to be approximately $2.0 billion in the third quarter of fiscal 2008, compared to $2.3 billion in the second quarter of fiscal 2008. Non- personnel expenses for the period are expected to be approximately $1.0 billion, compared to $1.1 billion in the second quarter of fiscal 2008. The tax rate is 32.6%.

As of August 31, 2008, Lehman Brothers’ total stockholders’ equity was an estimated $28.4 billion, up from $26.3 billion at the end of the second quarter of fiscal 2008, and the Firm’s Tier 1 ratio is expected to be approximately 11.0%. Total long-term capital is expected to be approximately $143.0 billion, reflecting the Firm’s June capital raising activities. Book value per common share is estimated to be approximately $27.29. Additionally, through the actions taken during the third quarter, the Firm is expected to reduce its net leverage from 12.1x to 10.6x. These ratios are appropriate for the Firm’s expected lower-risk asset composition.

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, 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.

About Lehman Brothers’ Investment Management Division
Lehman Brothers’ Investment Management Division consists of three businesses: Asset Management, Private Investment Management and Private Equity. Asset Management, which includes Neuberger Berman, offers proprietary products across traditional and alternative asset classes through a variety of distribution channels to individuals and institutions. Private Investment Management offers comprehensive investment, wealth advisory and capital markets execution services for high-net-worth individuals and businesses and leverages all of the resources of the Firm. Private Equity provides investment opportunities in privately negotiated transactions across a variety of asset classes for institutional and qualified individual investors. Since the end of 2003, assets under management (AUM) in Lehman Brothers’ Investment Management Division have grown at a compound annual rate of approximately 20%. AUM totaled $273 billion as of August 31, 2008.