Jefferies A Global Investment Banking Firm April 2015 Jefferies LLC Member SIPC
Notes on Forward Looking Statements This document 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 1934. 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 expect, intend, may, will, or similar expressions. Forward looking statements may contain expectations regarding revenues, earnings, operations, and other results, and may include statements of future performance, plans, and objectives. Forward looking statements also include statements pertaining to our strategies for future development of our business and products. Forward looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain. It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forwardlooking statements. Information regarding important 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. i
Jefferies A Global Investment Banking Firm Full-Service Capital Markets Platform: expertise and depth across equities, fixed income, commodities and investment banking Client-Focused: providing investor and issuer clients with the highest quality advice and execution Global Footprint: sales & trading and investment banking presence across the United States, Europe and Asia Strong, Stable Foundation: robust long-term capital base, comparatively low leverage and free from dependence upon government support Positioned to Seize Market Share: having broadened our product offering and hired additional key talent during the downturn, Jefferies is positioned to continue to grow rapidly 1
Earnings Update Q1 2015 First quarter ending February 28, 2015 performance: Net Revenues: $592 million ($536 million excl. Bache) Pre-Tax Earnings: $13 million ($26 million excl. Bache) Net Earnings: $13 million ($20 million excl. Bache) Revenues by Source: Investment Banking: Advisory $132 Equities $203 Investment Banking: Capital Markets $140 Fixed Income $126 *Asset Mgmt. and Other $(10) 2
Liquidity and Funding Principles Jefferies long-standing liquidity and funding principles have maintained the strength and soundness of our platform across market cycles: Owning inventory that is composed of liquid assets that turn over regularly, with a minimal amount of Level 3 Assets Maintaining a sound, long-term capital base and reasonable leverage relative to our business activity No material reliance on short-term unsecured funding or customer balances. No commercial paper program Short-term secured funding that is readily and consistently available through clearing houses, or fixed for periods of time that exceed the expected tenure of the inventory they are funding Assessing capital reserves and maintaining liquidity (including intraday liquidity) to withstand adverse changes in the trading or financing markets Where appropriate, entering into partnerships and joint ventures with complementary long-term partners to pursue business opportunities that otherwise will exceed our capital capacity or risk tolerance (Jefferies Finance, Jefferies LoanCore) 3
Core Operating Principles Jefferies is focused on the following core principles to manage risk and deliver across-the-cycle revenue and earnings growth: Strong Liquidity Jefferies maintains a very liquid, financeable and low-risk balance sheet Limited Leverage Jefferies maintains a consistent, carefully managed leverage ratio, and has demonstrated the operational and financial flexibility to reduce leverage in times of stress Consistent Profitability Jefferies has remained solidly profitable despite the volatile trading environment in global markets since 2009 Driving Productivity Jefferies continues to increase investment banker productivity Recent hires have begun reaching targeted productivity levels Aside from recent hires, investment banker productivity continues to improve due to Jefferies increasingly prominent market presence Taking Market Share Since 2008, Jefferies has grown market share by: Taking advantage of market dislocation and our competitors ongoing struggles to enter new businesses and regions and expand existing capabilities Delivering broader and better capabilities to our clients Culture Jefferies is transparent, not arrogant, client focused and creditor friendly 4
Revenue and Earnings Growth Since 1990 Net Revenues (1) $3,500 Predecessor Successor $3,000 $2,500 $2,000 2,192 2,815 (3) $1,500 $1,000 $500 $0 144 365 617 1,205 Net Earnings to Common Shareholders (1) Predecessor Successor $400 $200 $0 7 29 55 157 224 314 (3) ($200) ($400) ($600) Note: All results as reported in Jefferies public filings. (1) Excludes predecessor first quarter ending 02/28/13. Net Revenues and Net Earnings to Common Shareholders for the excluded quarter total $819 million and $80 million, respectively. (2) Includes post-tax losses of $427 million related to the modification of the terms of Jefferies employee stock awards in Q4 2008, such that previously granted awards were written off and current year employee stock compensation awards were expensed in the year in which service was provided, and costs associated with the restructuring activities in the fourth quarter of 2008. (3) Adjusted Net Revenues and Net Earnings to Common Shareholders of $2,815 million and $314 million, respectively, are non-gaap measures and represent Jefferies FY 2014 results excluding the impact of the results of the Bache business (as detailed in Jefferies Q4 2014 earnings release, filed as Form 8-K). Management believes such measures provide meaningful information as it enables investors to evaluate results in the context of the announced sale of certain client activities and exit of the Bache business. 5
Consistent Profitability Across the Cycle Jefferies has generated pre-tax earnings of $2.6 billion since 2009 Average pre-tax margin of 16% Pre-Tax Earnings and Margin $200 $175 $150 $125 $100 $75 $50 $25 $0 ($25) ($50) ($75) ($100) ($125) ($150) $49 $119 $172 $167 Predecessor $144 $163 $122 $76 $124 $130 $55 $71 Successor $176 $149 $107 $122 $114 $139 $182 $136 (1) $99 (1) $65 $23 $18 $26 $13 ($114) 30.0% 20.0% 10.0% 0.0% (10.0%) (20.0%) (30.0%) Pre-Tax Earnings Pre-Tax Margin Source: Jefferies. (1) Adjusted Pre-tax Earnings of $18 million and $26 is a non-gaap measure and represents Jefferies Q4 2014 and Q1 2015 results excluding the impact of the results of the Bache business (as detailed in Jefferies Q4 2014 and Q1 2015 earnings releases, filed as Form 8-K). Management believes such measures provide meaningful information as it enables investors to evaluate results in the context of the announced sale of certain client activities and exit of the Bache business. 6
Strong Capital Structure and Ample Liquidity Jefferies maintains a highly liquid balance sheet, with low gross leverage and exposure to illiquid assets, and significant structural liquidity Jefferies continues to manage the size of its balance sheet in response to market conditions and volatility Total assets: $43.8 billion Leverage: 8.0x (1) Leverage (excluding merger impacts): 10.1x (2) Tangible gross leverage: 11.9x (3) Long-term capital of $11.2 billion Source: Jefferies. (1) Leverage ratio equals total assets divided by total equity. (2) Leverage ratio (excluding merger impacts) (a non-gaap financial measure) equals total assets less the increase in goodwill and asset fair values in acquisition accounting of $1,957 million less amortization to date of $112 million on assets recognized at fair value in acquisition accounting divided by the sum of total equity less $1,321 million, being the increase in equity arising from merger consideration of $1,426 million excluding the $125 million attributable to the assumption of Jefferies preferred stock by Leucadia, and less the impact on equity due to amortization to date of $20 million on assets and liabilities recognized at fair value in acquisition accounting. (3) Tangible gross leverage ratio (a non-gaap financial measure) equals total assets of $43,787 million less goodwill and identifiable intangible assets of $1,900 million divided by tangible member's equity of $3,527 million. Tangible member's equity represents total member's equity of $5,427 million less goodwill and identifiable intangible assets of $1,900 million. 7
Consistent Tangible Common Equity Growth Jefferies has significantly and consistently grown tangible common equity Jefferies proactive equity capital raises helped the firm navigate the global financial crisis and capitalize on growth opportunities Tangible Common Equity (1) $4,000 $3,500 $500 mm Equity Issuance Predecessor Successor $3,527 $3,000 $2,500 $434 mm Equity Issuance $2,000 $1,500 $1,386 $1,000 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 (2) Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Source: Jefferies. (1) Tangible member's / common stockholders equity (a non-gaap financial measure) represents total member's / common stockholders equity less goodwill and identifiable intangible assets. (2) Decrease primarily due to significant stock buyback in Q1 2013. 8
Limited Leverage Jefferies has a long-standing policy of carefully managing balance sheet leverage In periods of stress, Jefferies has demonstrated the ability to rapidly reduce leverage without unduly impacting our business Historical Quarterly Leverage Predecessor Successor $50,000 17.0x $40,000 $30,000 15.0x 13.0x 11.0x $20,000 $10,000 9.0x 7.0x $- 5.0x Total Capital Gross Assets Leverage (1) Source: Jefferies. (1) Total assets divided by total equity. Q2 2013 through Q1 2015 exclude merger impacts. See page 18 for further detail. 9
Strong Liquidity Jefferies trading inventory is liquid and low-risk, rapidly turning in order to serve client flow Very liquid inventory 76% of financial instruments owned are readily and consistently financeable at haircuts of 10% or less Level 3 Trading Assets represent only 3% of long inventory consistent over past 21 quarters Reliable secured funding 78% of Jefferies assets financed through repos are eligible for central clearing No reliance on short-term unsecured funding or customer balances. No commercial paper program Client-focused Fee and flow based businesses represent preponderance of net revenues Source: Jefferies. Note: All figures are as of February 28, 2015. 10
Level 3 Trading Assets Overview 97% of inventory is Levels 1 and 2, with a minimal amount of Level 3 Trading Assets Level 3 Trading Assets (1) represent only 16% of tangible common equity Level 3 Financial Instruments Owned (1) as a Percentage of Financial Instruments Owned $24,000 Predecessor Successor $20,000 $16,000 $12,000 $8,000 $4,000 7% 6% 5% 5% 5% 3% 3% 3% 2% 2% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% $- 4Q 081Q 092Q 093Q 094Q 091Q 102Q 103Q 104Q 101Q 112Q 113Q 114Q 111Q 122Q 123Q 124Q 121Q 132Q 133Q 134Q 131Q 142Q 143Q 144Q 141Q 15 Level 1 and 2 Inventory Level 3 Inventory Level 3 Financial Instruments Owned (1) as a Percentage of Tangible Common Equity $5,000 Predecessor Successor $4,000 $3,000 $2,000 13% 17% 20% 16% 15% 16% 14% 15% 15% 16% 13% 14% 14% 14% 14% 15% 16% 19% 22% 23% 24% 26% 22% 18% 18% 17% $1,000 $- 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 Tangible Common Equity Level 3 Assets (1) Excludes Level 3 trading inventory assets attributable to third party or employee noncontrolling and nonrecourse secured financings interests in certain consolidated entities. 11
Value-at-Risk (VaR) Daily VaR Risk Category Average VaR for the Quarter Ended 02/28/15 Adjusted Firmwide (1) $9.29 Interest Rates 5.60 Equity Prices 11.40 Currency Rates 0.70 Commodity Prices 0.35 Diversification Effect (4.78) Firmwide $13.27 Source: Jefferies. (1) Excluding our investment in Knight Capital, the average VaR for the quarter ended February 28, 2015 was $9.29 million. 12
Liquidity Pool Jefferies maintains significant excess liquidity on hand Total Liquidity Pool Predecessor Successor $6,000 $5,000 $4,000 $3,441 $3,571 $3,379 $4,726 $4,423 $4,229 12.3% 12.2% 12.5% $5,187 13.3% $5,574 $5,282 14.4% 13.1% $4,467 $5,824 $5,913 $5,500 13.4% 13.2% 12.4% $4,647 18.0% 15.0% 12.0% $3,000 9.8% 10.2% 9.4% 10.3% 10.6% 9.0% $2,000 6.0% $1,000 3.0% $0 0.0% (1) (2) Cash & Cash Equivalents Other Liquidity Sources Liquidity Pool as % of Total Assets Source: Jefferies. (1) Consists primarily of securities purchased under agreements to resell, our U.K. liquidity pool, unencumbered inventory representing an estimate of the amount of additional secured financing that could be reasonably obtained and funds available under our senior secured revolving credit facility. (2) Cash & Cash Equivalents plus Other Liquidity Sources, divided by Total Assets. 13
Long-Term Debt Profile As of 02/28/15, our $6.2 billion notional of long-term debt had a weighted average maturity of approximately 8 years No maturity of long-term debt in a single year is greater than 20% of outstanding long-term debt Debt Maturity Schedule (Notional) $1,000 $800 $600 $400 $200 $0 14
Credit Ratings Jefferies Group LLC Credit Ratings Agency Rating Outlook Standard & Poor s BBB- Stable Moody s Baa3 Negative Fitch BBB- Stable Note: As of February 28, 2015. 15
Appendix 16
Balance Sheet As of February 28, 2015 Jefferies Group LLC Balance Sheet as of 2/28/2015 Assets Liabilities and Equity Cash & Cash Equivalents $ 3,340 Bank Loans $ 412 Cash & Securities Segregated 3,186 Financial Instruments Sold, Not Yet Purchased 7,911 Financial Instruments Owned 19,099 Securities Loaned 3,174 Investments in Managed Funds 55 Securities Sold Under Agreements to Repurchase 11,323 Loans to and Investments in Related Parties 827 Other Secured Financings 861 Securities Borrowed 6,566 Obligation to Return Securities Received as Collateral 5 Securities Purchased Under Agreements to Resell 3,746 Payables to Brokers, Dealers and Clearing Organizations 2,663 Securities Received as Collateral 5 Payables to Customers 4,758 Receivables from Brokers, Dealers and Clearing Organizations 2,200 Accrued Expenses and Other Liabilities 778 Receivables from Customers 1,344 Long-term Debt 6,437 Fees, Interest and Other Receivables 277 Total Liabilities $ 38,320 Premises and Equipment 250 Goodwill 1,661 Member's Equity 5,427 Other Assets 1,232 Noncontrolling Interests 40 Total Equity $ 5,466 Total Assets $ 43,787 Total Liabilities and Equity $ 43,787 Leverage: (1) 8.0x Leverage (excluding merger impacts): (2) 10.1x Tangible Gross Leverage: (3) 11.9x Source: Jefferies. (1) Leverage ratio equals total assets divided by total equity. (2) Leverage ratio (excluding merger impacts) (a non-gaap financial measure) equals total assets less the increase in goodwill and asset fair values in acquisition accounting of $1,957 million less amortization to date of $112 million on assets recognized at fair value in acquisition accounting divided by the sum of total equity less $1,321 million, being the increase in equity arising from merger consideration of $1,426 million excluding the $125 million attributable to the assumption of Jefferies preferred stock by Leucadia, and less the impact on equity due to amortization to date of $20 million on assets and liabilities recognized at fair value in acquisition accounting. (3) Tangible gross leverage ratio (a non-gaap financial measure) equals total assets of $43,787 million less goodwill and identifiable intangible assets of $1,900 million divided by tangible member's equity of $3,527 million. Tangible member's equity represents total member's equity of $5,427 million less goodwill and identifiable intangible assets of $1,900 million. 17
GAAP Reconciliation Leverage Excluding Merger Impacts Leverage Ratio - Excluding Merger Impacts May 31, August 31, November 30, February 28, May 31, August 31, November 30, February 28, 2013 2013 2013 2014 2014 2014 2014 2015 Total Assets $ 38,938 $ 38,830 $ 40,177 $ 43,440 $ 43,610 $ 44,764 $ 44,518 $ 43,787 Goodwill and Acquisition Accounting Fair Value Adjustments on the Merger with Leucadia (1,957) (1,957) (1,957) (1,957) (1,957) (1,957) (1,957) (1,957) Net Amortization to Date on Asset Related Purchase Accounting Adjustments 9 18 27 32 37 49 108 112 Total Assets Excluding the Impact of the Merger $ 36,990 $ 36,891 $ 38,247 $ 41,515 $ 41,690 $ 42,856 $ 42,669 $ 41,942 Total Equity $ 5,183 $ 5,241 $ 5,422 $ 5,462 $ 5,527 $ 5,602 $ 5,463 $ 5,466 Equity Arising from Merger Consideration (1,426) (1,426) (1,426) (1,426) (1,426) (1,426) (1,426) (1,426) Preferred Stock Assumed by Leucadia 125 125 125 125 125 125 125 125 Net Amortization to Date of Purchase Accounting Adjustments, net of tax (8) (17) (25) (36) (48) (58) (9) (20) Total Equity Excluding the Impact of the Merger $ 3,874 $ 3,923 $ 4,096 $ 4,125 $ 4,178 $ 4,243 $ 4,154 $ 4,145 Leverage Ratio - Excluding Merger Impacts 9.5x 9.4x 9.3x 10.0x 10.0x 10.1x 10.3x 10.1x 18