Dear Clients, IN THIS ISSUE. Jefferies Into the Future Good Things Ultimately Come to Those Who Are Patient and Persevere APRIL 2018

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1 APRIL 2018 Dear Clients, Jefferies Into the Future Good Things Ultimately Come to Those Who Are Patient and Persevere For years, we have shared with our clients, employees and friends our perspective on building for the long-term. For the two of us, nothing has ever been simple, easy or without periodic challenges and setbacks. Jefferies today is the result of creating a foundation of culture and capital, the hard work of many thousands of good people, and the incredible loyalty and confidence of our ever increasing client base. Today is a big and special day for all of us at Jefferies. We would like to share with our clients and friends some major developments that we believe will take Jefferies to yet another level, as we do our best to continue to improve our firm with the primary objective being to best serve you, our clients. In the press release below, we are announcing a series of deals and strategic moves designed to complete the transformation of our parent company, Leucadia, into a public company named Jefferies Financial Group Inc., which will be: 1. A major financial services company with over $11 billion in shareholders equity 2. The parent of our Jefferies global investment banking and capital markets platform 3. The home of all our other financial services businesses, including merchant banking and asset management (both of which will continue to operate under the wonderful Leucadia brand) We intend to continue our strategy of reinvesting in all of our businesses to better serve you, being long term in our horizon as we partner with our clients versus serving as mere counterparties, adding to the breadth and depth of our products, services and geographic reach, and maintaining our unique high integrity, can do, entrepreneurial culture. As we reinforced to our employee-partners today, nothing will change in how we work with you on a day-to-day basis because of today s evolution of Jefferies. The teams that serve you today will do the same tomorrow. There will not be any new strategic pivots, initiatives, or changes in management or philosophy. The new Jefferies Financial Group Inc. essentially will be an even more focused financial services firm with even greater resources. Our goal is to continue to help our clients best achieve your goals. We believe this partnership is the best way we too can build our firm well into the future. IN THIS ISSUE Economics and Strategy Are Fortune Cookies and Sauerkraut Next? Bouncing Back U.S. Outlook The Goods-Producing Sector of the Economy Is Making a Comeback European Outlook The ECB Prepares to Signal the End of QE, but the First Rate Rise is Still a Year Away; Brexit Progress Gives the BoE Room for Two Hikes in 2018 Actionable Ideas for Companies and Sponsors MERGERS AND ACQUISITIONS Increased Global Regulatory Scrutiny Creating Both Opportunities and Challenges in M&A Corporations Growing Use of Hostile Approaches for Strategic Targets Technology Disruption Accelerating M&A Between Technology and Non- Technology Companies EQUITY CAPITAL MARKETS Rapid Growth in SPAC Issuance Expected to Continue Convertible Bond Costs at Historic Lows in the U.S. and Europe New Hong Kong Listing Rules Will Open Market to More Technology, Biotech and Dual Class Share Issuance DEBT CAPITAL MARKETS Increased Use of Unsecured Bonds in Lieu of 2nd Lien Term Loans Triple Credit Ratings Enhancing Issuer Access to CLOs Issuers Using Repricings to Remove Financial Covenants RESTRUCTURING AND RECAPITALIZATION Leveraging Intellectual Property MUNICIPAL FINANCE Municipal Issuers Should Issue Shorter Call Bonds Best Research Ideas AMERICAS U.S. Insights Finding Fresh Arms in the Bottom of the 12th: Stocks That Can Still Work Food Products Brands Still Matter to Consumers, Do They to Investors? Software 2018 Outlook: Still Room for Appreciation Despite Rich Valuations EMEA Autos The Return of Small(er) is Beautiful Anglo American A Combination of Catalysts to Unlock Trapped Value ASIA Basic Materials Initiating on Titanium Industry: Investors, Prepare for Take-Off Technology Optical Transceiver: How It Differs in 5G and Cloud

2 APRIL Needless to say, the two of us and our entire team at Jefferies are energized and thrilled to be able to bring our firm to this next level. We want to thank each of you for your long term commitment and partnership. We look forward to continuing to speak and work with each of you as we do our best to help you achieve all your personal and professional objectives. With great appreciation, Rich and Brian RICHARD B. HANDLER Chairman of the Board and CEO Twitter Instagram BRIAN P. FRIEDMAN Chairman, Executive Committee bfriedman@jefferies.com P.S. To briefly summarize what is detailed below, we are: 1. Selling down from 79% to 31% our ownership of National Beef (which allows us to de-consolidate it from our income statement and balance sheet, where National Beef has been a positive, but disproportionate and confusing presence) 2. Selling 100% of our interest in our auto dealer group, Garcadia, at an attractive price and booking a nice gain 3. Buying some more oil assets in the Bakken at what we believe is a compelling price and complementary to our existing business 4. Changing our parent company name to Jefferies Financial Group Inc. (subject to shareholder approval in May) 5. Netting from all this about $1.3 billion in additional cash, which will bring our total liquidity at the new Jefferies Financial Group Inc. to $2.8 billion 6. Increasing our share buyback authorization by 12.5 million shares to a total of 25 million shares 7. Evaluating the feasibility of changing our parent company fiscal year to November 30 to harmonize with our Jefferies Group LLC fiscal year If you have the time, please read the full press release below as it furthers the strategic thinking we alluded to in our recent Leucadia annual letter. Press Release LEUCADIA NATIONAL CORPORATION ANNOUNCES STRATEGIC TRANSACTIONS THAT COMPLETE TRANSFORMATION TO DIVERSIFIED FINANCIAL SERVICES COMPANY TO BE RENAMED JEFFERIES FINANCIAL GROUP INC. Leucadia National Corporation to Sell 48% of National Beef to Marfrig Global Foods S.A. at a $2.3 Billion Enterprise Valuation, Reducing Leucadia s Ownership to 31% and Deconsolidating National Beef; Transaction and Pre-Closing Distributions Estimated to Yield Approximately $1.05 Billion in Cash to Leucadia, with the Sale Transaction Resulting in an Estimated Pre-Tax Gain of $ Million

3 APRIL Leucadia to Sell 100% of Its Equity Interest in Garcadia, Its Auto Dealer Group, and Related Real Estate at a $675 Million Enterprise Valuation, or a net $425 Million to Leucadia, Recording a Pre-Tax Gain of About $220 Million Leucadia Shareholders to Vote at Upcoming Annual Meeting on Proposal to Change the Name of the Corporation to Jefferies Financial Group Inc., Reflecting Transformation to a Diversified Financial Services Company Leucadia s Vitesse Energy Finance Has Completed $190 Million Acquisition of Additional Bakken Oil and Gas Assets Leucadia s Board Approves Increased Share Buyback Program of Up to 25 Million Shares Leucadia Announces Preliminary Results for Its First Quarter 2018 New York April 9, 2018 Leucadia National Corporation (NYSE: LUK) announced today strategic transactions involving several of its investee companies, a proposal to change the name of the corporation to Jefferies Financial Group Inc., a new share buyback authorization and preliminary results for its first quarter Leucadia has entered into a definitive agreement to sell 48% of National Beef to Marfrig, a great long-term strategic partner, for approximately $900 million in cash, reducing Leucadia s ownership in National Beef to 31% and allowing Leucadia to deconsolidate National Beef and simplify Leucadia s income statement and balance sheet. The estimated pre-tax gain that will be recognized as a result of this transaction is $ million. Leucadia expects to receive an additional estimated $150 million in distributions prior to the closing, representing recent profits plus a true-up to the debt number set in the enterprise valuation associated with the sale. Marfrig has also agreed to acquire a further 3% of National Beef from other shareholders and will own 51% of National Beef. Leucadia will continue to have two board seats and a series of other rights in respect of its continuing equity interest, with a lockup period of five years and thereafter fair market value liquidity protections. This transaction is subject to limited conditions and is expected to close in the second quarter. Rich Handler, CEO of Leucadia, and Brian Friedman, President of Leucadia, commented: As we have consistently stated, we believe that National Beef is an outstanding company, but was too large and concentrated of an investment for Leucadia. We were patient and persevered as National Beef went through an exceptional downturn and then we navigated deliberately toward a transaction that would achieve both our near-term and long-term objectives. Having initially invested $868 million to acquire 79% of National Beef a little over six years ago, with the closing of the Marfrig deal, we will have now received back cash of over $1.6 billion and still retain a 31% equity interest in National Beef. We will account for this right-sized merchant banking investment in National Beef using the equity method. Our 31% interest initially will be on our balance sheet at approximately $590 million, reflecting the valuation we will recognize as a result of the Marfrig transaction. While we are always opportunistic, our intention is to hold this 31% interest in our merchant banking portfolio. We expect an attractive return on equity across the cycle, as the positive cattle supply and growing demand dynamics continue to play out. We are very pleased that Tim Klein, CEO, and the rest of the world class team at National Beef will continue leading National Beef into the future. After a thorough process where we had a number of interested parties, we welcome our new partner, Marfrig, which brings to National Beef its deep and broad expertise in the global beef industry, and is well positioned to partner with National Beef to serve the growing global demand for protein. Leucadia has also agreed to sell 100% of its equity interests in Garcadia and its associated real estate to Leucadia s current partners, the Garff family. The sale price for Leucadia s interests, based on a $675 million enterprise valuation, is a net $425 million, payable $375 million in cash and $50 million in redeemable preferred equity. Leucadia will recognize a

4 APRIL pre-tax gain of about $220 million. This transaction is expected to close in the third quarter of Leucadia has cumulatively invested $321 million in Garcadia since 2006 and has received cash distributions of $394 million to date prior to the net $425 million sale proceeds plus the pre-closing earnings distribution. To recognize the change in Leucadia s reality that has advanced considerably through the right-sizing and deconsolidation of Leucadia s interest in National Beef, Leucadia s Board of Directors will ask shareholders at the upcoming Annual Meeting to change the holding company name of Leucadia National Corporation to Jefferies Financial Group Inc. Messrs. Handler and Friedman added, The National Beef and Garcadia deals complete Leucadia s transformation from a highly diversified, but relatively random, group of assets before the combination with Jefferies into a financial services company with clear focus and drive. The proposed name change is intended to reflect that we now will be a diversified financial services company, rather than one that is more broadly focused, and Jefferies is by far our largest business and our engine of opportunity. We will continue to use the wonderful Leucadia name in our asset management and merchant banking activities where its brand recognition adds tremendous value. We believe the change in name will better reflect who we are today and going forward, materially aid the brand recognition of our Jefferies investment banking and trading operations, and unify our presence and our prominence in the financial community. The name change in and of itself will not materially change our destiny, but we and our Board believe it is sufficiently additive to warrant shareholder support of this proposal. Jefferies Financial Group Inc. will be a diversified financial services company engaged in investment banking and capital markets, merchant banking, and the early stages of building an alternative asset management platform. Our Leucadia merchant banking effort will continue Leucadia s over 40-year tradition of opportunistically deploying capital to drive long-term value creation. Our renamed Jefferies Financial Group Inc. will be well-capitalized, with approximately $11 billion of shareholders equity, or $31.20 per share, and $1 billion of parent company long-term debt, pro forma for the National Beef and Garcadia deals, as of year-end It is anticipated that our new ticker on the NYSE will be JEF, effective post-approval of our name change. Vitesse Energy Finance, 97%-owned by Leucadia, has completed the acquisition of a package of non-operated Bakken assets from an institutional seller for $190 million in cash, of which $145 million was funded as equity by Leucadia and the balance drawn under Vitesse s credit lines. Vitesse is acquiring 4,200 boe/day of flowing production and 23,000 net acres in the Bakken core, with over 85% of the assets remaining to be developed. Messrs. Handler and Friedman noted, The acquisition of these assets is a compelling investment for Leucadia and Vitesse, essentially doubling the size of Vitesse s assets in the valuable core of the Bakken Field. The risk/return profile of this acquisition is attractive to us as most of the acquired assets are already well known to Bob Gerrity, CEO of Vitesse, and his team. In many cases, Vitesse is simply increasing its working interest in high returning Bakken drilling spacing units and flowing wells in which Vitesse has an existing interest. This acquisition should improve Vitesse s future financial performance as we continue to finance, as a non-operating partner, the development of a larger pool of new high quality horizontal oil wells that are projected to produce strong returns. Leucadia ended 2017 with about $1.5 billion in liquidity at its parent company pro forma for the $200 million distribution Leucadia received from Jefferies in. The pending sale of 48% of National Beef and estimated pre-closing distribution, plus the proceeds of the Garcadia transaction, net of the $145 million invested in the Vitesse acquisition, will add a further $1.3 billion to Leucadia s liquidity, bringing pro forma year-end 2017 total parent company liquidity at the new Jefferies Financial Group Inc. to about $2.8 billion. Consistent with past practice, Leucadia

5 APRIL plans to deploy our available capital to continue to add to existing businesses where appropriate, to make acquisitions of new businesses and investments when possible and, from time to time, to repurchase common shares. Leucadia s Board of Directors has approved an increase to Leucadia s share repurchase program to 25 million common shares from the 12.5 million remaining under its prior authorization. Shares may be repurchased by Leucadia from time to time in the open market, through block trades or otherwise. In connection with these pending changes, Leucadia is reviewing the feasibility of changing its fiscal year-end to November 30th to simplify and harmonize periodic reporting by the consolidated enterprise and Jefferies Group LLC. In any event, Jefferies Group LLC will continue to be a separate SEC reporting company. In light of the breadth of today s announcements, which will naturally involve Leucadia engaging with its shareholders, bondholders, clients, analysts and prospective investors, Leucadia is also announcing today preliminary estimates of financial results for its fiscal first quarter Leucadia will release final results for its first quarter 2018 on April 26, Leucadia estimates that, based on current calculations, it will report quarterly income before income taxes of $ million, and net income attributable to Leucadia National Corporation common shareholders of $ million, or $ per diluted share (all estimates remain subject to final adjustments). Leucadia anticipates that it will have a net tax benefit for the first quarter due to the reversal of valuation allowances related to deferred tax assets, which Leucadia has determined are now realizable. Messrs. Handler and Friedman added, Our estimated first quarter results reflect expected continued strong performances from our businesses. We are pleased with Jefferies first quarter net revenues of approximately $820 million and pre-tax income of approximately $120 million, as well as National Beef s estimated pre-tax income of approximately $64 million in what is typically a lighter seasonal quarter for beef processing. Berkadia, Garcadia, Idaho Timber and Vitesse all continued to perform well this quarter. Our estimated results also include an unrealized $21 million mark-to-market decrease in the value of our HRG investment and a net loss at Leucadia Asset Management as a result of the first quarter period of exceptional volatility. Messrs. Handler and Friedman concluded: We are excited and energized by the simplification of our business mix, the focus and brand awareness of our anticipated name change, our abundance of cash, and the strength and potential of our businesses. We would like to thank our clients and customers, employee-partners, fellow shareholders, bondholders and all others associated with our businesses for their continued support. Morgan Stanley and Jefferies served as advisors to Leucadia in respect of the National Beef transaction. Jefferies also served as advisor to Leucadia in connection with the Garcadia and Vitesse transactions. Leucadia Contact: Laura Ulbrandt (212) * * * * This press release contains forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of Forward-looking statements include statements about our future and statements that are not historical facts. These forward-looking statements are usually preceded by the words should, expect, intend, may, will, or similar expressions. Forward-looking statements include expectations relating to the National Beef, Garcadia and Vitesse transactions disclosed in this press release, expected first quarter 2018 results and statements of future performance, plans, and objectives. Forward-looking statements also include statements pertaining to our strategies for future development of our businesses and products. Forward-looking statements represent only our belief regarding future events, many of which by their nature are

6 APRIL inherently uncertain. It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Information regarding important factors, including Risk Factors that could cause actual results to differ, perhaps materially, from those in our forward-looking statements is contained in reports we file with the SEC. You should read and interpret any forward-looking statement together with reports we file with the SEC. The following table reconciles financial results reported in accordance with generally accepted accounting principles ( GAAP ) to non-gaap financial results. This press release contains non-gaap financial information to aid investors in viewing our businesses and investments through the eyes of management while facilitating a comparison across historical periods. However, these non-gaap financial measures should be viewed in addition to, and not as a substitute for, reported results prepared in accordance with GAAP. The following table reconciles Leucadia shareholders equity as of December 31, 2017 to pro forma Leucadia shareholders equity as of December 31, 2017 (amounts in billions except shares outstanding and per share amounts): Shareholders Equity as of December 31, 2017 Leucadia shareholders equity (GAAP) $ 10.1 Estimated National Beef pre-tax gain 0.8 Estimated Garcadia pre-tax gain 0.2 Tax effect of National Beef and Garcadia gains (0.2) National Beef redeemable noncontrolling interest sale adjustment (1) 0.2 Pro forma Leucadia shareholders equity (non-gaap) $ 11.1 Leucadia shares outstanding as of December 31, ,227,038 Pro forma Leucadia shareholders equity per share as of December 31, 2017 $31.20 (1) Represents the cumulative increase in fair value of National Beef redeemable noncontrolling interests charged to additional paid-in capital since the purchase of National Beef in December When a subsidiary with redeemable noncontrolling interest is deconsolidated, any previous fair value adjustments to the carrying amount of the noncontrolling interest are reset to zero prior to deconsolidation.

7 APRIL Economics and Strategy Are Fortune Cookies and Sauerkraut Next? Well, it had to happen at some point. We all knew Trump had the power to set tariffs unilaterally as long as he invoked national security concerns. And steel and aluminum were certainly natural candidates. The questions now of course center on international escalation and congressional backlash, since these specific trade protections are not particularly meaningful for U.S. or global economic activity on their own. Before tackling those two questions, though, let s take a step back and remind ourselves of ALL the new Trump policy levers. Just after the election I put forth the idea that the financial markets would need to weigh the effects from four new Trump policy changes: fiscal, regulatory, trade, and immigration. And looking through the lens of real rates (or more specifically expected real rates of return on capital), I claimed the first two would have a positive impact while the second two would have a negative impact. It s been almost a year and a half now of watching the good stuff evolve (i.e. tax cuts and deregulation), so I suppose it s only natural that we have to have a little of the bad stuff, too. And rest assured, watching Pete Navarro on the Sunday morning talk shows is a highly unpleasant experience for me. I would certainly rather see Randy Quarles touting the unwind of the more draconian portions of Dodd-Frank. But as with everything in life, we always have to take a little of the bad stuff to get the good stuff. Now, turning to the two questions above, I fully expect this trade brouhaha to be much more about bluster, game theory, and politics than anything else. The most sensible of Trump s advisors, as well as the core folks in his party, know all too well that escalated trade wars are terrible for business. But if he can convince our trading partners that he is crazy enough to start a battle, then maybe they back down from some of their current unfair practices. There is no doubt that WTO rules are being violated behind the scenes by many of our trading partners. There is also no doubt that many foreign industries are subsidized through their governments when they engage in mercantilist activity. And there is no doubt that many foreign markets are protected from U.S. competition via a multitude of trade barriers. Trump is executing a classic tit-for-tat game theory strategy in a repeated prisoner s dilemma trade game in which the U.S. has been more cooperative than its partners. The only question is which equilibrium we head toward: the one where everyone defects, or the one where everyone cooperates. John Nash would tell us it s the former, but Trump is playing for some form of the latter. More subtly, I suspect Trump is just trying to move the needle ever so slightly toward a more cooperative outcome one that involves less defection by our partners. If he is successful it is actually a positive sum improvement in the game (and a huge improvement for the U.S. economy). However, if this moves us towards a more uncooperative outcome, then of course it s a negative sum outcome all around. Actually, all things considered, I would argue it is probably a reasonable risk/reward strategy for Trump, especially when one considers his political motives in the heartland. He can gracefully back away by having Congress gazump him with their own trade legislation if this escalates negatively. And alternatively, he may just get the Chinese and the Germans to play a slightly fairer game so as not to risk some messiness at home. The easiest win is no doubt in China, as their game is more transparent. The Germans have hidden very well behind the weak euro, and it will be hard to tease out concessions from such a wellcrafted mercantilist structure. In the end, I do not expect to see this game move to the point where we start placing tariffs and quotas on everything from fortune cookies to sauerkraut. More than likely the players fall into line and the global trading game becomes slightly more cooperative. Good luck trading. David Zervos, Chief Market Strategist

8 APRIL Bouncing Back After a strong rally in early January, global shares succumbed to a melt up in the VIX index in February. Nevertheless, global equities regained their poise quickly as fears subsided over any contagion while the dollar was subdued. In retrospect, equity indices simply became overbought at a time when U.S. bond yields were rising. Ironically, global growth continues to firm while sales and earnings revisions have remained healthy. It is interesting to note that global emerging markets normally the most sensitive to changes in risk appetite actually outperformed the S&P 500 post the correction. There is still good news for S&P 500 international revenue generators. Firstly, both the IMF and World Bank in January revised up their Global GDP projections. Secondly, global sales projections are soaring, helped by the U.S., China and Japan. Thirdly, the dollar has been weak both nominally and real. Lastly, stock baskets of high overseas earners have outperformed domestic ones. The Philadelphia Capex Intentions Index has remained at its most elevated level since the 1970s. Equally, small business optimism is rising while construction indices are just shy of all-time highs, and technology-leading indicators are still firming. Coupled with a turnaround in mining and oil investment as well as improving overseas investment trends, it is possibly one of the best ever environments for U.S. capex. According to the Chinese Zodiac, the Dog is the symbol of loyalty and honesty. Similarly, investors will be expecting a third consecutive year of Chinese corporate profit growth and record high free cash flow. China GDP growth will moderate while monetary policy may see some modest tightening. Yi Gang, the deputy PBOC Governor, will assume the reins of the Chinese central bank once the current Head Zhou Xiaochuan retires after fifteen years at the helm. We remain Bullish on Chinese equities. There seems to be several misconceptions about the environment for Japanese equities at present. A regime shift occurred in September 2016 when the Bank of Japan adopted Yield Curve Control (YCC). Whether by design or chance, the results have been much better than consensus had estimated. Indeed, it could be argued that conditions remain very favorable despite the apparent strength of the Yen. In Europe, it is clear that Germany is experiencing inflation. German equities offer a wide population of stocks either offering quality-at-a-reasonable price, value or growth attributes. We remain Bullish on Germany within our Global Asset Allocation. The bottom line is that rate normalization was always going to bring about the return of volatility. Corporate balance sheets are healthy and companies are seeing improving earnings and FCF generation. Global equities are well placed to show modest absolute returns. Sean Darby, Global Head of Equity Strategy U.S. Outlook The Goods-Producing Sector of the Economy Is Making a Comeback The changing structure of the U.S. economy has been one of the key features of the past several decades. For example, the share of private sector payrolls involved in the service sector has risen from roughly 60% in 1950 to more than 85%. In contrast, the share of payrolls in the private goods-producing sector has declined from roughly 40% to less than 15%. Private Service sector payrolls stand at million, while private goods-producing payrolls stand at 20.5 million. Manufacturing in the U.S. was the hardest hit sector during the transition period when the economy transformed from being a roughly balanced economy to an overwhelmingly service-dominated economy as it is now. Between 1979 and 2010, for example, manufacturing payrolls declined 8.1 million. The U.S. construction industry did not suffer as significantly as the manufacturing sector during the transition to a servicedominated economy, although growth in construction payrolls tended to lag other sectors. There is growing evidence that the U.S. manufacturing sector is making a comeback and that construction activity is also gaining momentum.

9 APRIL The ISM Manufacturing Index rose to 60.8 in February, hitting the highest level since May As a diffusion index, any reading above 50 reflects improved activity, so the February reading is quite impressive. The Manufacturing Index was as low as 47.8 at the outset of 2016, but there has been gradual and steady improvement since that time. The component that made the biggest contribution to the improved headline ISM Manufacturing Index reading in the U.S. came from the employment index, which rose 5.5 points to This is an indication that the demand for workers remains strong in the manufacturing sector, where hiring has improved substantially over the past few years. Manufacturing payrolls rose 224,000 over the prior twelve months. As recently as 2016, manufacturing payrolls were on the decline, falling by 45,000 on the year. The recent Phoenix-like renewal of manufacturing activity over the past several months has been a much needed reversal of a painful secular trend. The turnaround has been very abrupt, impressive and encouraging. While the U.S. construction industry has not struggled the same type of secular decline that has plagued manufacturing, the construction sector suffered mightily during the recession and financial crisis that was induced by the subprime mortgage crisis. Between April 2006 and January 2011, payrolls in the construction industry fell by 2.3 million. The good news is that construction payrolls have been on the rise. To-date this cycle, construction payrolls have risen by 1.75 million. Construction payrolls rose 254,000 over the prior twelve months but it will take at least a few more years to get back to the prior cyclical peak. The U.S. mining sector, which includes oil and gas extraction and support activities, has also suffered from both secular and cyclical problems. Mining sector payrolls peaked in 1979 at 19.5 million but declined to as low as 11.5 million in Payrolls in this sector have been very sensitive to the price of energy, so payrolls began a long dissent along with energy prices in the 1980s. Payrolls in this sector did benefit modestly from the revival of energy prices after the turn of the century, but suffered mightily from the recession. The good news is that payrolls in this sector have again been on the rise, and are up 1.2 million from the 2010 low, including an increase of more than 58,000 jobs over the prior twelve months. Ward McCarthy, Chief Financial Economist European Outlook The ECB Prepares to Signal the End of QE, but the First Rate Rise is Still a Year Away; Brexit Progress Gives the BoE Room for Two Hikes in 2018 Globally, monetary policy continues to adjust, and while the ECB significantly lags the Fed and the BoE, it too is preparing to move on from QE, with the first rate rise expected sometime around the middle of next year. Forward guidance will be adjusted gradually, the commitment to sequencing remains, and the ECB is wary of a repetition of the taper tantrum that unsettled the markets in But, the data, despite the persistent weakness in core inflation, no longer justifies its extraordinary policy stance something that both the hawks and the doves on the Governing Council agree on. The ECB stepped down its QE purchases from the start of the year, but in terms of its market presence, reinvestment flows are set to rise significantly in April (Public Sector Purchase Program redemptions will approach 23 billion in April after totaling 15 billion in the whole of the first quarter). Later in the year, there will be further large ECB reinvestment flows coming through in October 2018 and in January 2019 which could coincide with the start of a short taper, and the first month without QE since early 2015, respectively. Time will tell whether the European bond markets will be driven by higher U.S. rates and less capital outflows from the euro area, or instead, by technical issues around domestic reinvestments, bond scarcity and the still negative net supply in some countries. Either way, however, the ECB expects volatility to be kept in check by the fact that after years of QE, the so-called free float of bonds still in the hand of private investors is significantly reduced. On the political front, the inconclusive Italian elections did not come as a surprise, and now the focus is on the shape of the coalition that may eventually emerge. A 5-Star/Northern League pact is currently being mooted, but the longevity of any new government will be questioned, with another election perhaps after a change to the electoral law potentially on the horizon.

10 APRIL In the UK, the outline of the post-brexit transitional deal is taking shape, and while some key issues remain unresolved (such as the Northern Irish border), the likelihood of the UK ejecting out of the EU in early 2019 on WTO terms has fallen sharply. For the BoE, in the long term, Brexit implies a reduction in the UK s growth potential; but by the same token, in the near term, lower trend growth helps to justify why the MPC is looking to raise interest rates in the face of what in the past would be considered as sub-par quarterly GDP growth prints. Two rate hike this year (in May and November) are likely to us; and, Brexit terms permitting, the BoE would hope to deliver something similar next year. FULL REPORT David Owen, Chief European Financial Economist Marchel Alexandrovich, European Financial Economist Actionable Ideas for Companies and Sponsors MERGERS AND ACQUISITIONS Increased Global Regulatory Scrutiny Creating Both Opportunities and Challenges in M&A Active intervention by government regulatory bodies around the world driven by anti-trust concerns, national security protection, tax policy and changing domestic regulations is having both positive and negative implications on M&A activity. For well-prepared potential buyers both strategic and financial sponsor the increasing number and size of disposals from transactions with anti-trust issues is creating a unique opportunity to acquire attractive assets outside a traditional auction process. In the U.S., divestitures from the spate of multi-billion-dollar transactions announced over the past eighteen months are expected to be significant contributors to mid-market M&A activity, particularly in the media and healthcare sectors. Domestic regulators are also influencing deal activity. In China, the regulatory takeover of Anbang Insurance in January is expected to result in significant real estate divestitures in Europe and the U.S. In the U.S., the relaxation of certain aspects of the U.S. financial regulation laws is expected to spur U.S. bank M&A. And in the European Union, expansively-defined personal information data privacy regulations will result in increased M&A activity in data security, data hosting and personal information monitoring software. On the cautionary side of this environment, considerations beyond price need to be even more carefully evaluated by clients. Government scrutiny of perceived reduction in competition, eroded domestic tax base, and national security implications, will require sellers and buyers to rethink who are the right counterparties for any potential transaction, and for clients to be even more astute in negotiating deal certainty provisions. Corporations Growing Use of Hostile Approaches for Strategic Targets The corporate raider stigma is no longer holding back corporate buyers from pursuing aggressive tactics to acquire highly important strategic targets. In 2017, there were 19 hostile deal approaches by strategic buyers, and through early March 2018, there already have been five such approaches. Broadcom/Qualcomm, Comcast/Sky PLC and Melrose/GKN Plc are all recent examples of this trend. The reasons for this change in approach are (1) the need for growth through acquisition continues unabated, (2) the threat to growth and survival from technology disruption is increasing and (3) the dramatic rise in corporate activism is causing Boards to be far more aggressive in their acquisition strategies. Consequently, companies should revisit their approach to using hostile takeovers, reevaluate potential targets that have been reluctant to engage historically in friendly transactions, and more carefully evaluate their own defense profile.

11 APRIL Technology Disruption Accelerating M&A Between Technology and Non-Technology Companies Technology is strategically disrupting virtually every industry and most every subsector within each industry. As a result, strategic M&A activity has rapidly moved to non-technology companies acquiring technology companies to either improve their growth or simply to survive. In the last 12 months, 67% of technology acquisition deals and 58% of technology acquisition volume, which was $315 billion of technology deals, were consummated by non-technology companies, and we believe this activity will significantly escalate. Jefferies global technology team, which comprises 100 professionals, has proven effective in working with non-technology buyers to identify transformative technology targets in the areas of omnicommerce, industrial technology, fintech, mobility and digital media and we have organized ourselves across industry verticals to provide strategic collaboration among our teams in technology, consumer, media, industrials, transportation and financials. EQUITY CAPITAL MARKETS Rapid Growth in SPAC Issuance Expected to Continue 2017 was the most active year in SPAC issuance in over a decade, and 2018 SPAC issuance continues to be strong, with SPAC issuers completing 11 IPOs raising $2.2 billion in proceeds. The high SPAC issuance level demonstrates the increasing attractiveness of SPACs as a viable acquiror and as a listing vehicle versus a traditional IPO, as sellers are often attracted to retaining potential upside compared to an outright sale. SPAC activity is expected to continue, as most SPACs are successfully consummating business combinations. In addition, SPAC issuers have broadened from executives with sector and public market expertise to financial sponsors and other asset management firms, which represented over 50% of the issuers in 2017 and YTD In 2018 year-to-date, four SPACs have completed acquisitions following 13 in 2017, and currently, three acquisitions are pending representing over $4 billion in total enterprise value. In addition, the average acquisition enterprise value has grown from approximately $360 million in 2015 to $1.5 billion in 2018, another trend reflective of the maturity of the product and its growing popularity. Convertible Bond Costs at Historic Lows in the U.S. and Europe Due to ongoing redemptions and conversions in both the U.S. and Europe, net supply remains low and issuers are benefiting from attractive terms and achieving historically low financing costs. More importantly, an increasing number of unrated issuers with volatile stock prices have capitalized on low rates and tight credit spreads to fund growth or refinance existing debt with coupons as low as 0%. We expect this pricing backdrop to remain very positive, as convertible pricing is less sensitive to rising rates. In the U.S., despite rising interest rates, coupons remain exceptionally low, with 41% of transactions pricing at 1% or below. Nearly half of issuers have incorporated a call spread to enhance premiums to as high as 100%. As technology and healthcare have accounted for over 70% of total 2018 convertible debt issuance of $9.3 billion, issuance in sectors that provide diversifying opportunities for investors will be met with particularly strong demand from the buyside. In Europe, since the beginning of 2018, 50% of European equity-linked transactions have priced with a 0% coupon or negative yield, while conversion premiums are as high as 70%. Transaction volume has already exceeded $5 billion year-todate. Industrials and TMT have been the most active sectors, representing approximately 55% of issuance. New Hong Kong Listing Rules Will Open Market to More Technology, Biotech and Dual Class Share Issuance In late, the Hong Kong Stock Exchange (HKSE) introduced an overhaul to its listing regulations to make the market more competitive with other global exchanges. Specifically, the HKSE has targeted the technology and life sciences sectors and the dual-class share structure with new listing regulations.

12 APRIL In the technology sector, the HKSE has proposed that eligible applicants with dual-class shares need to be innovative by nature, along with a track record of high business growth and a market cap of no less than HK$10 billion. In the biotechnology sector, to attract pre-revenue/pre-profit biotech companies, the HKSE has proposed removing the existing financial requirements and introducing specific guidance for biotech companies. Key requirements include successful completion of their Phase I clinical trial, investment from key recognizable investors at least six months prior to IPO, and a minimum market cap of at least HK$1.5 billion at listing. Finally, the HKSE plans to allow firms in Greater China that listed on the New York Stock Exchange, Nasdaq or the main board of the London Stock Exchange on or before December 15, 2017, to list in Hong Kong with their existing share voting structure. As a result of these changes, we estimate that the first wave of biotech companies meeting the new criteria could be as much as $2 billion of new capital raised in Medium term, we expect Chinese technology companies to avail themselves of the dual class structure, and longer term we expect the portability of existing share voting structures will result in dual listing and additional funds raised on the HKSE. DEBT CAPITAL MARKETS Increased Use of Unsecured Bonds in Lieu of 2nd Lien Term Loans As LIBOR continues to climb, we have seen issuers increasingly decide to issue unsecured bonds as junior debt instead of 2nd lien term loans. The switch is being driven by the lower cost of capital and fixed rate structure. Historically, issuers have favored 2nd lien term loans due to less burdensome call protection, but currently LIBOR has increased more than spreads have contracted in the 2nd lien market, thus making bonds the cheaper alternative. Recently we saw National Veterinary Associates refinance their existing 2nd lien term loan (existing is L+700 or ~9%) with $500 million unsecured notes offering which priced at 6.875%. Jefferies acted as Joint Bookrunner to National Veterinary Associates. Triple Credit Ratings Enhancing Issuer Access to CLOs We have seen an uptick in loans being rated by three rating agencies instead of the traditional two agency market requirement, and the new third rating is often from Fitch. The reason is that Fitch has made significant inroads in rating Collateralized Loan Obligations (CLOs), which represent the fastest growing pool of assets investing in leverage loans. CLO vehicles are highly structured funding arrangements whose proceeds are then invested into the loan market, and these vehicles are controlled by various rules regarding credit ratings of the underlying assets. Today approximately half of all CLOs are rated by Moody s and S&P, and approximately half are rated by Moody s and Fitch. As a result, issuers seeking to maximize their access to loan demand are seeking ratings from all three agencies, which allows CLOs to deploy more capital. Issuers Using Repricings to Remove Financial Covenants As borrowers improve their credit profile, they often look to amend their term loans, the most common amendment being to reprice their interest rate down. However, recently we have seen issuers ask for other adjustments, such as removing financial covenants, including either the total leverage covenant or the fixed charge coverage covenant. Recently we saw Cypress Semiconductor remove their fixed-charge coverage covenant, while also repricing their term loan to L+225 from L+275. In addition, the recently launched repricing for Freedom Mortgage is looking to remove its corporate debt to tangible equity covenant, while also repricing their term loan to L+475 from L+550. RESTRUCTURING AND RECAPITALIZATION Leveraging Intellectual Property Companies across challenged segments of the consumer and retail universe are finding new ways to leverage their intellectual property to capture value and enhance capital structure flexibility. To date, several branded consumer retailers have employed strategies to facilitate the use of intellectual property as collateral for new borrowings and to enhance their

13 APRIL liquidity runway. Other companies have maximized value through M&A that unlocks the IP value embedded in their core business. Jefferies advised BCBG on its Chapter 11 restructuring, which included a sale of the company s IP to a brand buyer, the sale of certain other operations to another purchaser (who entered into a license agreement with the brand buyer), and the disposition of other non-core assets to a liquidation buyer. In a similar vein, certain restaurant franchisor businesses have also been active in securitizing future franchise fees payable to them. In each case, these strategies are facilitated by today s market conditions which have enhanced the ability of companies to monetize the long-term value of their business. MUNICIPAL FINANCE Municipal Issuers Should Issue Shorter Call Bonds The Tax and Jobs act eliminated the ability of municipal governments to issue tax-exempt bonds for advance refunding outstanding bonds. This now constrains an issuer s ability to capture savings from refinancings in advance of the optional call date and to cost effectively restructure near term debt, when necessary. Municipal issuers should now seek to replace refinancing flexibility by incorporating shorter call options into their new bond offerings. Most municipal securities are sold with a 10-year optional call or lock-out period. Shorter calls in the two- to five-year range will allow issuers to recover some of the lost flexibility. In the current market, the bonds have the added benefit of a lower yield-to-call versus non-callable bonds or bonds with longer call dates. Since the beginning of 2018, a diverse group of issuers, including the States of California, Michigan, and Wisconsin have issued bonds with five-year par calls. Most recently Jefferies was bookrunner for the City of New York for bonds with 5% coupons callable at par in three and a half years (July 2021). Best Research Ideas AMERICAS U.S. Insights Finding Fresh Arms in the Bottom of the 12th: Stocks That Can Still Work Jefferies U.S. Equity Research published a report examining potential investment opportunities amidst a market many have classified as richly valued. The analysis highlights stocks with either 2018 estimated earnings growth acceleration, 2018 expected margin expansion that s better than the respective sector, 2017 underperformance vs. the sector or all three. All of the selected stocks have one thing in common as far as Jefferies analysts are concerned: operationally, things can get better from here. Some companies have seen recent improvements, some have seen recent setbacks, but in all cases, there is a path to greater things driven by factors other than just tax. 33 stocks were highlighted in this report. FULL REPORT Jefferies U.S. Equity Research Food Products Brands Still Matter to Consumers, Do They to Investors? Jefferies collaborated with Accenture and Barkley to understand if consumer preferences around brands had changed. The analysis found that leading brands are still highly-valued by consumers, and Jefferies brand analysis suggests that packaged food companies will be able to grow sales organically at 2% and EBIT by 5-8% vs. consensus EBIT forecasts for 3%. Jefferies also found that the cost savings opportunity for these companies is significant and believe emerging technologies such as AI and blockchain could help to unlock incremental savings at a faster rate. Jefferies upgraded GIS and HRL to Buy in conjunction with this report and they find that HRL and PF skew the most positively towards the Brands Matter thesis. FULL REPORT Akshay Jagdale, Equity Research Analyst, Food Products

14 APRIL Software 2018 Outlook: Still Room for Appreciation Despite Rich Valuations Jefferies believes the secular forces in software are the best seen in nearly two decades due to performance improvements and price declines of foundational computing technology over the past years. Jefferies sees regulations such as GDPR supplementing positive security trends, especially for solutions that are not widely deployed, benefiting VRNS and SAIL. Jefferies also believes the set-up for M&A in 2018 will rebound from the decline in 2017, driven by increased repatriation of funds, the continuation of relatively low interest rates and lower taxes which increase the base value of recurring revenue. Jefferies top pick names in 2018 are ORCL, PANW, APTI and CRM, which was upgraded to Buy in February. FULL REPORT John DiFucci, Equity Research Analyst, Software EMEA Autos - The Return of Small(er) is Beautiful The near-term market focus may be on truck IPOs, but Jefferies anticipates a major shift in OEM strategic thinking away from big towards smaller entities. In this note, Jefferies reviews the potential IPO or spin-off of Aston Martin, Volvo Cars, Porsche, Alfa-Maserati and of course trucks. Together, these account for 100+ billion of value and could add 65 billion of value through the potential re-rating of parents. For now, Jefferies sees better returns from undoing old auto business models than creating new ones. FULL REPORT Philippe Houchois, Equity Research Analyst, Autos Anglo American A Combination of Catalysts to Unlock Trapped Value Jefferies believes that Anglo is in a strong financial position as its balance sheet and FCF have greatly improved and the company is once again returning capital to shareholders. However, the Anglo story does not end there. Its discount valuation relative to other miners and its own SOTP are issues that must be addressed, and Anil Agarwal will likely become a less passive shareholder over time. Anglo is now Jefferies top pick of the major miners. FULL REPORT Chris LaFemina, Equity Research Analyst, Metals & Mining ASIA Basic Materials Initiating on Titanium Industry: Investors, Prepare for Take-Off Jefferies believes the cycle is turning for titanium, with multi-year inventory adjustments concluding and secular growth from the aerospace industry raising ASP. Operational leverage is huge and the potential upside could be +3-4x above current share prices. Jefferies initiates coverage with a Buy rating on Osaka Titanium (5726 JP, 3,400 PT), and Toho Titanium (5727 JP, 1,700 PT). FULL REPORT Thanh Ha Pham, Equity Research Analyst, Japan Basic Materials Technology Optical Transceiver: How It Differs in 5G and Cloud Jefferies expects to see fundamental changes in the architecture of 5G optical transport network and data center design. These will be driven by new applications for unlimited bandwidth, including 4K video, self-driving autos, and AR/VR. This transition will accelerate high-speed 100G & above transceiver upgrades and also significantly increase the volume level of transceivers. Jefferies views O-Net (877 HK) as a beneficiary and likes Luxshare ( CH) diversifying into data center cabling. FULL REPORT Rex Wu, Equity Research Analyst, China Technology

15 APRIL Jefferies, the world's only independent full-service global investment banking firm focused on serving clients for over 50 years, is a leader in providing insight, expertise and execution to investors, companies and governments. Our firm provides a full range of investment banking, sales, trading, research and strategy across the spectrum of equities, fixed income and foreign exchange, as well as wealth management, in the Americas, Europe and Asia. Jefferies Group LLC is a wholly-owned subsidiary of Leucadia National Corporation (NYSE: LUK), a diversified holding company. NOTABLE RECENT TRANSACTIONS Technology March 2018 Pending Healthcare Consumer Pending Energy JEFFERIES KEY FACTS & STATISTICS (as of February 28, 2018) Founded: 1962 Total Long-Term Capital: $12.0 billion $1,800,000,000 Sale to Lumentum Holdings, Inc. Sole Financial Advisor $1,025,000,000 Credit Facility to Finance Acquisition by KKR & Co. L.P. Joint Lead Arranger $10,000,000,000 Merger with Spectrum Brands Joint Financial Advisor $1,600,000,000 Sale to Riverstone Holdings and Goldman Sachs Merchant Banking Division Sole Financial Advisor $1,000,000,000 Credit Facility to Finance Acquisition by Riverstone Holdings and Goldman Sachs Merchant Banking Division Sole Lead Arranger Number of Employees: 3,438 Companies under Global Equity Research Coverage: 2,000+ Automotive Aftermarket March 2018 Technology March 2018 Energy Pending Business Services $1,910,000,000 Credit Facility to Finance Merger with Express Oil Change & Tire Engineers Joint Lead Arranger Healthcare Undisclosed Merger with Express Oil Change & Tire Engineers Sole Financial Advisor Energy $869,000,000 Initial Public Offering Joint Bookrunner $1,800,000,000 Acquisition of CDM Resources from Energy Transfer Partners and Elimination of IDRs Sole Financial Advisor to the Conflicts Committee AeroDefense March 2018 $1,010,000,000 Municipals Credit Facility Joint Lead Arranger GLOBAL HEADQUARTERS 520 Madison Avenue New York, NY $460,000,000 Technology Common Stock Offering Joint Bookrunner $7,200,000,000 Conversion of Enbridge Inc. s IDRs and GP Economic Interest Sole Financial Advisor to the Conflicts Committee Healthcare March 2018 Pending Consumer $615,000,000 Credit Facility to Finance Acquisition by GTCR Joint Lead Arranger Commonwealth Financing Authority (CFA) $1,487,000,000 Tobacco Master Settlement Payment Revenue Bonds Joint Bookrunner Healthcare EUROPEAN HEADQUARTERS 68 Upper Thames Street London EC4V 3BJ UK ASIAN HEADQUARTERS 2 Queen s Road Central Central, Hong Kong China $2,593,000,000 Credit Facility to Finance Acquisition by CVC Capital Partners Limited and Blackstone Group L.P. Joint Lead Arranger Undisclosed Sale of a Majority Stake to KKR & Co. L.P. Sole Financial Advisor 360,000,000 Senior Secured Notes Offering Joint Bookrunner $705,000,000 Credit Facility to Finance Acquisition by The Carlyle Group Joint Lead Arranger Jefferies.com Consumer Pending Technology Healthcare March 2018 Municipals The City of New York $560,000,000 Sale to Rhône Capital Sole Financial Advisor $700,000,000 Credit Facility Sole Lead Arranger $403,000,000 Convertible Notes Offering Joint Bookrunner $894,000,000 General Obligation Bonds Sole Bookrunner Media Real Estate Energy Finance $650,000,000 Credit Facility to Finance Acquisition by Onex Joint Lead Arranger $600,000,000 Senior Secured Notes Offering Joint Bookrunner $840,000,000 Credit Facility Joint Lead Arranger $500,000,000 Private Placement of Equity to an Investor Group led by Aquiline Capital Partners LLC Sole Financial Advisor