Jefferies Financial : 2021 Investor Meeting Transcript

Jefferies Financial Group Investor Meeting

October 12, 2021

PARTICIPANTS:

Richard B. Handler, Chief Executive Officer

Brian P. Friedman, President

Matt Larson, Chief Financial Officer, Jefferies Group

Teri Gendron, Chief Financial Officer

Chris Kanoff, Global Head of Investment Banking

Peter Forlenza, Global Head of Equities

Fred Orlan, Global Head of Fixed Income

Nick Daraviras, Co-President, Leucadia Asset Management

Sol Kumin, Co-President, Leucadia Asset Management

Mike Sharp, General Counsel

Operator: Before introducing today's first speaker, we are required to remind you of the following. Certain statements made during the course of today's meeting or contained in the accompanying presentation materials may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and/or the Private Securities Litigation Reform Act of 1995 regarding Jefferies Financial Group, Inc., Jefferies Group LLC, and the respective subsidiaries. These forward-looking statements reflect the respective issuer's current views relating to among other things, future revenues, earnings, operations, and other financial results. It may include statements of future performance, plans and objectives. Forward- looking statements may all also includes statements pertaining to an issuer, strategies for the future development of its business and products.

These forward-looking statements are not historical facts and are based on the respective issuer's management expectations, estimates, projections, beliefs, and certain other assumptions. Many of which by their nature are inherently uncertain and beyond management's control. It is possible that the actual results may differ possibly materially from the anticipated results indicated in these forward-looking statements. Accordingly, readers and participants are cautioned that

1 of 59

any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict, including without limitation, the cautionary statements and risks set forth in the respective issuers annual and quarterly reports and other reports or documents filed with or furnished to the SEC from time to time, which are accessible on the SEC website at sec.gov.

This information should also be read in conjunction with each respective issuer's consolidated financial statements and the notes there too contained in the annual, quarterly and periodic reports filed by such issuer that are also accessible on the SEC website at sec.gov. Any forward-looking statements made by an issuer herein are unique to that issuer and not to be attributed as statements made or endorsed by any other issuer.

It is now my distinct pleasure to introduce Mr. Rich Handler, Chief Executive Officer of Jefferies Financial Group. Mr. Handler, you may begin.

<>

Good morning and welcome to Jefferies Financial Group's 2021 Investor Day. My name is Rich Handler. I'm proud to be the CEO and I'm looking forward to our management team showing all of you what Jefferies looks like today and what we believe the opportunity is going forward. We're entering our 60th year this month of Jefferies as a company. And I've been around for half of that period, believe it or not, and our team has managed the company for over one third of our company's life, kind of crazy. The last seven quarter results are outstanding and show we are at yet another level, but this is mostly a testament I'd like to thank the decades of hard work and commitment by thousands of our folks. I really appreciate a lot of people took our company to the point where it is today and this is a huge milestone.

In fact, in my thirty-one and a half years, Jefferies has never been in a stronger nor more exciting place or position of strength and opportunity and I mean that in terms of talent, culture, our competitive position, diversification, our client base, our capital and our brand. I particularly like to thank our shareholders for allowing us to be both long-term and strategy while knowing and

2 of 59

acknowledging we have always had a keen sense of urgency when it comes to execution. Building a world-class full service, global investment bank is not easy. Many people have tried, many people have had it and lost their way, very few had the consistency drive, talent, humility, and perseverance to succeed. It not only takes the right team, but it also takes the right shareholder base, bondholder support and board of directors to allow a company like ours to be built. Fortunately, we have all three and that has allowed us to navigate and weather the volatility and cross currents that permeate our complicated industry.

The result we believe is an incredibly valuable, exceptionally unique and important company that is in the very early stages of being recognized in terms of value. One promise I can make to all of you is that the entire management team will always think like owners. This means we must be heavily staked alongside of you as we are. It means our strategy must be well articulated and be executed every day while staying true to our long-term vision. We are determined to build the best world-class global investment bank. We're going to further simplify and eventually optimize all of our non-strategic assets. We're always going to prioritize and serve our clients that will always come first. We will maintain the most secure and robust capital base that is required for all types of market environments. We'll be keenly focused on the appropriate risk adjusted return on equity and we'll return capital to shareholders will never prudent and available.

Our firm is very different today than it was pre-COVID, but COVID is not the only reason why we have blossom, is even the major reason why we have blossomed. We spent the past three to five years before COVID investing heavily in our platform and setting ourselves up for where we are today. In 2015-16, we have repositioned our equity and fixed income businesses to align them more fully with our investment banking business. This meant further improving our ability to distribute and provide liquidity and quality research for all investors who look for alpha in our broad array of banking clients.

As an aside, I think, we have a large prop trading, but we also sought to further minimize prop trading. We've put a flag in the ground and cleared that we were going to devote most of our time, energy and resources into scaling and diversifying our investment bank. It's fee- based 70%, repeat clients, so it's recurring, it's scalable and is higher quality of revenues and earnings. And that meant hiring world- class bankers, building up Europe and Asia and strengthening our global research capabilities.

3 of 59

We also began aggressively shrinking our merchant bank to the point where it is now the tail and no longer the complicated dog. And we deployed that capital into Jefferies as well as return to shareholders. Back to thinking like owners, in the last three years we have returned $3.7 billion or 47% of Jefferies tangible equity to shareholders. And our remaining tangible equity is still $650 million higher than we started. This includes repurchasing 125 billion shares for $2.64 billion at a now attractive looking price of $21.20, decreasing our share count by 27% over the same period. Basically, the market gave us an incredible opportunity and we pounced for the benefit of our long-term shareholders.

Basically, we significantly simplified Jefferies, invested heavily in our core business, returned a large amount of capital and scaled our business to point, but we feel confident we're very well positioned to earn more than an acceptable return on equity at Jefferies for our shareholders. Our plan is to continue what we started. This was all set up before COVID and then the world changed. And for many reasons, our firm was able to pivot quickly and perform exceptionally for our clients, which in turn resulted in perhaps accelerating the benefits of our hard work we all did pre-COVID.

There are a handful of important reasons why we were able to flourish during COVID. First, second, third, and fourth (and keep going) are our people and our culture. We value our people greatly. We trust them and more importantly they trust each other. They're highly confident in what they do. They're committed to their clients and to Jefferies and they truly care. We're flat, non-bureaucratic, and our people are nimble, humble and have a passion to build their company. This is very rare in our industry today.

After many years of hard work and dedication, we have hit critical mass at almost all of our core businesses and the breadth of diversification and capabilities rival firms much larger than ours in mass and people. Our technology is spectacular and our support and infrastructure capabilities are as effective if not more so than many of our larger competitors, all you have to do is ask our clients. And not only is our technologies serving our clients, but internally we're using it to drive efficiency and productivity. Our depth and breadth of management is incredibly robust with people who know our mission, understand our risk profile, command loyalty with respect from their teams as on a mission alongside us to build a company they're exceptionally proud of. Some of our competitors have stumbled and we have been always aggressive and opportunistic and that is right and that is one of the reasons why we've also been successful during

4 of 59

COVID. Finally, we will never get arrogant, complacent or lose our sense of purpose and drive.

There are many reasons why I'm excited about the future more so than ever in my history with the firm. And before I get there, let me just stress that the market changes often and there are always risks, setbacks and challenges. Nothing goes up in a straight line and one must always be prepared for adversity as it comes when you least expect it. Some of our best moves have been accomplished when the markets are upside down and it's going to happen again. We need to stay healthy whenever that occurs. With all those disclaimers, let me explain why I'm really so excited about our future.

Even with our exceptional growth these past two years, there is substantial room for growth and market share gains in 100% of our businesses at Jefferies. There are many subsectors of our banking industry groups that are wide open to us. There are adjacent products we just entered or are about to enter. There is regional expansion, for example, we are opening an office in Spain for banking and fixed income. We're about to go to the Persian Gulf in Dubai for equities and a view towards banking. We're going to build upon our tremendous foundation in Israel. We're also going to build upon our solid foundation that we have now in asset management.

Our people want to be at Jefferies for all the right reasons and more than ever before. Other great people in our industry also want to be here now, and their clients want them to come. The depth and breadth and management of our team continues to evolve. In the last 12 months, we hired a new CFO and by the way I know Peg is looking down on us with very tremendous pride and we miss him every day. We've hired a Chief Risk Officer, a Chief Technology Officer, a Branding and Marketing Leader, and we've transformed our HR offering and integrated it into all of our businesses. We've transformed our board of directors to a super talented, diverse slate that more closely reflects society, and will provide us with a range of voices and support. Our brand while always capable of improving has become an asset and one that we will continue to invest in.

Reaching critical mass and size and ability to deliver ROE allows us more freedom to invest in our people from a career training, skill enhancement, ESG, diversity inclusion, quality of life, and long-term partnership perspective. We're clearly a top 10 firm and top five in so many of the things we compete in led by investment banking, but we

5 of 59