jefferies investor day presentation
TRANSCRIPT
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Jefferies LLC
Member SIPC
Jefferies Group 2014 Investor DayOctober 9, 2014
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Note on Forward Looking Statements
This document contains “forward looking statements” within the meaning of the safe harborprovisions 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 andstatements that are not historical facts. These forward looking statements are usually precededby the words “should,” “expect,” “intend,” “may,” “will,” or similar expressions. Forwardlooking statements may contain expectations regarding revenues, earnings, operations, andother results, and may include statements of future performance, plans, and objectives.Forward looking statements also include statements pertaining to our strategies for futuredevelopment of our business and products. Forward looking statements represent only ourbelief 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 resultsindicated in these forward-looking statements. Information regarding important factors,including our Risk Factors, that could cause actual results to differ, perhaps materially, fromthose in our forward looking statements is contained in reports we file with the SEC. You shouldread and interpret any forward looking statement together with reports we file with the SEC.
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Agenda
Jefferies Overview 1
Jefferies Operating Results 2
Jefferies Business Review 3
Investment Banking
Equities
Fixed Income, Futures & Commodities
Risk Management 4Capital and Liquidity Management 5
Section
1
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Jefferies Overview
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Leucadia – Jefferies Merger
Leucadia – Jefferies merger closed on March 1, 2013
Jefferies continues to operate in a manner consistent with its historical business
model and remains a client-focused, conservatively capitalized and full-serviceglobal investment banking firm
Leucadia continues to pursue compelling value opportunities, consistent with itstrack record established over more than three decades as one of the world’s leadinglong-term investors
─ Investment criteria are consistent with the disciplined approach to risk thatLeucadia has publicly affirmed
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Conwed (100%)$77 Million
National Beef (79%)$775 Million
Juneau Energy (98%)(8)
$104 Million
Jefferies Finance (50%)$343 Million
KCG Holdings (19%)$269 Million
Idaho Timber (100%)$72 Million
Harbinger (20%)$528 Million
Vitesse Energy (96%)
(5)
$239 Million
Financial Services$6.2 Billion
Merchant Banking$2.4 Billion
Corporate / Liquidity$2.9 Billion
Jefferies LoanCore (49%) $158 Million
Jefferies (100%)$5.5 Billion
Berkadia (50%)$203 Million
Foursight (90%) andChrome (53%)
$49 Million
Parent CompanyCash & Investments
$1.6 Billion (1, 5, 8, 9, 10)
Deferred Tax Asset
$1.3 Billion (11)
Common Equity – $10.4 Billion (2)
Preferred Equity – $0.125 BillionParent Debt – $1.0 Billion (1)
Leucadia National CorporationParent Capital – $11.5 Billion (1)
Topwater Capital$93 Million
Mazama Capital$255 Million
Structured Alpha$84 Million (3)
Leucadia Asset Mgmt$479 Million
Global Equity Events $26 Million
Leucadia Overview
Linkem (53%)$162 Million
Garcadia (~75%) (7) $141 Million
HomeFed (64%) (6)
$227 Million
Folger Hill (4)
CoreCommodity
$22 Million
See page 57 and 58 for footnotes and additional disclosures.
Oregon LNG
Golden Queen (34%) (9)
$71 Million
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Jefferies Group
Full-Service Capital Markets Platform: expertise and depth across equities, fixedincome, commodities and investment banking
Client-Focused: providing investor and issuer clients with the highest qualityadvice and execution
Global Footprint: sales & trading and investment banking presence across theUnited States, Europe and Asia
Strong, Stable Foundation: robust long-term capital base, comparatively lowleverage and free from dependence upon government support
Positioned to Seize Market Share: having broadened our product offering andhired additional key talent during the downturn, Jefferies is positioned tocontinue to grow rapidly
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Global Full-Service Capabilities
Derivatives
CashEquities
ElectronicTrading
PrimeBrokerage /Securities
Finance
ETFs Convertibles
WealthManagement
MBS / ABS /CMBS
EmergingMarkets
InvestmentGrade
Rates MunicipalsPreciousMetals
Base Metals
ForeignExchange
TMTIndustrials
HealthcareFinancials
FinancialSponsors
REGAL
EquityCapitalMarkets
EnergyConsumer
Debt CapitalMarkets
M&A
PublicFinance
EquitiesFixed Income, Futures
& CommoditiesInvestment Banking
Restructuring Research ETFs Research
ListedFutures
LeveragedCredit
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Over 3,800 employees in over 30 cities worldwide
New York(Global Headquarters) Hong Kong
(Asian Headquarters)
London
(EuropeanHeadquarters)
(1) Jefferies distributes on a co-branded basis research issued by third-parties headquartered in the identified locations.
(1)
(1)
(1)
(1)
(1)
Global Footprint
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Revenue and Earnings Growth Post-Financial Crisis
Net Revenues (1)
1,4582,192
2,5773,062 3,040
3,416
$0
$1,000
$2,000$3,000
$4,000
Net Earnings to Common Shareholders (1)
Note: All results as reported in Jefferies’ public filings.
(1) Excludes predecessor first quarter ending 2/28/13. Net Revenue and Net Earnings to Common Shareholders for the excluded quarter total $819 million and$80 million, respectively.
Predecessor Successor
206 224285 282 274
367
$0
$100
$200
$300
$400
Predecessor SuccessorPre-Financial
Crisis
Pre-FinancialCrisis
($ Millions)
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Revenue and Earnings Growth Since 1990
Net Revenues (1)
144 365617
1,205
2,192
3,416
$0$500
$1,000$1,500$2,000$2,500$3,000$3,500$4,000
Net Earnings to Common Shareholders (1)
7 2955
157 224367
($600)($400)
($200)
$0
$200
$400
Note: All results as reported in Jefferies’ public filings. (1) Excludes predecessor first quarter ending 2/28/13. Net Revenue and Net Earnings to Common Shareholders for the excluded quarter total $819 million and
$80 million, respectively.
(2) Includes post-tax losses of $427 million related to the modification of the terms of Jefferies’ employee stock awards in Q4 2008, such that previouslygranted awards were written off and current year employee stock compensation awards were expensed in the year in which service was provided, and costsassociated with the restructuring activities in the fourth quarter of 2008.
Predecessor Successor
Predecessor Successor
($ Millions)
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Consistent Tangible Common Equity Growth
Jefferies has significantly and consistently grown tangible common equity
Jefferies’ proactive equity capital raises helped the firm navigate the globalfinancial crisis and capitalize on growth opportunities
Source: Jefferies.
(1) Tangible member's / common stockholders’ equity (a non-GAAP financial measure) represents total member's / common stockholders’ equity less goodwill andidentifiable intangible assets.(2) Decrease primarily due to significant stock buyback in Q1 2013.
Tangible Common Equity (1)
$1,386
$3,593
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
Q112
Q212
Q312
Q412
Q113
Q213
Q313
Q413
Q114
Q214
Q314
$434 mmEquity
Issuance
$500 mmEquity
Issuance
(2)
Predecessor Successor
($ Millions)
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Jefferies’ Momentum and Ongoing Opportunity
Record revenues and earnings for the first nine months of the fiscal year
demonstrate the strength of Jefferies' operating model:
─ Significant growth across Investment Banking reflects the quality and increasingmomentum of Jefferies’ full service global platform
─ Ongoing growth and expansion of Jefferies Finance corporate lending platform
─ Solid growth in Equities revenues and market share
─ Durable Fixed Income, Futures and Commodities effort, despite less volatilemarkets
Jefferies’ position as the only pure global investment banking and capital marketsfirm headquartered in the U.S. creates a unique ongoing growth opportunity
Continued emphasis on margin expansion and earnings growth through investmentbanking hiring, cross-product client penetration and increased employeeproductivity
Jefferies continues to prudently manage risk, maintaining a disciplined approach toleverage, funding and asset quality
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Jefferies Operating Results
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Earnings Update – Third Quarter 2014
Nine months ending August 31, 2014 performance:
Net Revenues: $2,465 million
Pre-Tax Earnings: $417 million
Net Earnings: $257 million
Revenues by Source:
Equities$172
Fixed
Income$195
AssetMgmt. and
Other$8
InvestmentBanking:CapitalMarkets
$269
InvestmentBanking:Advisory
$199
Equities$538
Fixed Income$699
Asset Mgmt.and Other
$15
InvestmentBanking:CapitalMarkets$767
Investment
Banking:Advisory$446
($ Millions)
Third quarter ending August 31, 2014 performance:
Net Revenues: $843 million
Pre-Tax Earnings: $136 million
Net Earnings: $84 million
Revenues by Source:
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Earnings Update – LTM Ending Q3 2014
Equities$828
Fixed Income$926
Asset Mgmt.and Other
$32
InvestmentBanking:
Capital Markets$1,048
InvestmentBanking:Advisory
$583
($ Millions)
Last twelve months ending August 31, 2014 performance:
Net Revenues: $3,416 million
Pre-Tax Earnings: $593 million
Net Earnings: $367 million
Revenues by Source:
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Balance Sheet
(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 $42 million on assets recognized at fair value in acquisition accounting divided by the sum of total equity less $1,359 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 byLeucadia, and less the impact on equity due to amortization to date of $58 million on assets and liabilities recognized at fair value in acquisition accounting.
(3) Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets divided by tangible member’s equity.Tangible member's equity (a non-GAAP financial measure) represents total member's equity less goodwill and identifiable intangible assets.
($ Millions)
Jefferies Group LLC
Balance Sheet as of 08/31/14
Assets Liabilities and EquityCash & Cash Equivalents 4,035$ Short-term Borrowing 92$Cash & Securities Segregated 3,301 Financial Instruments Sold, Not Yet Purchased 9,723
Financial Instruments Owned 18,420 Securities Loaned 2,469 Investments in Managed Funds 78 Securities Sold Under Agreements to Repurchase 10,532 Loans to and Investments in Related Parties 632 Other Secured Financings 617 Securities Borrowed 6,270 Obligation to Return Securities Received as Collateral 8 Securities Purchased Under Agreements to Resell 4,571 Payables to Brokers, Dealers and Clearing Organizations 1,919 Securities Received as Collateral 8 Payables to Customers 5,943 Receivables from Brokers, Dealers and Clearing Organizations 2,413 Accrued Expenses and Other Liabilities 1,232 Receivables from Customers 1,660 Long-term Debt 6,626 Fees, Interest and Other Receivables 258 Total Liabilities 39,162$Premises and Equipment 242 Goodwill 1,724 Member's Equity 5,571
Other Assets 1,152 Noncontrolling Interests 31 Total Equity 5,602$
Total Assets 44,764$ Total Liabilities and Equity 44,764$
Leverage:(1)
8.0x
Leverage (excluding merger impacts):(2)
10.1x
Tangible Gross Leverage:(3)
11.9x
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Compensation Overview
Jefferies has taken advantage of the challenges faced by our competitors byupgrading talent across our firm
Our new professionals have been a key driver of growth
Lag between hiring senior employees and their achieving run-rate revenueproduction has impacted Jefferies’ compensation ratio
─ This lag is particularly pronounced with senior investment bankers, who havecomprised a meaningful portion of Jefferies’ senior hiring since 2010
Although Jefferies has successfully remained within our stated upper-bound 60%compensation ratio, we expect the ratio to decline over time as our hires reachtheir targeted productivity, overall net revenue grows and start-up amortizationdeclines
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Jefferies Business Review
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Investment Banking
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Net Revenues (1)
Investment Banking Revenues Since 1990
9 72 91
495
890
1,630
$0
$250
$500
$750
$1,000
$1,250
$1,500
$1,750
Predecessor Successor
Note: All results as reported in Jefferies’ public filings. (1) Excludes predecessor first quarter ending 2/28/13. Investment Banking Net Revenues for the excluded quarter totaled $288 million.
($ Millions)
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Jefferies Investment Banking is a leading advisor and underwriter to our clients globally
─ 741 investment bankers with deep sector expertise and extensive experience across all majorindustry verticals
─ On the ground presence in eleven countries across the world
25% of our transactions in the last twelve months have been for clients domiciled outside of theUnited States (1)
─ 540 advisory or bookrun transactions executed in the last twelve months (1)
Well balanced mix across advisory, debt capital markets and equity capital markets
─ 62% of our transactions in the last twelve months were on behalf of repeat clients (1)
Investment Banking Overview
Sector Focus
Consumer
Investment Banking & Capital Markets
Energy
Financials Healthcare
Industrials
REGAL
TMT
PublicFinance
(1) Excludes public finance, mortgage and asset-backed capital markets transactions.
Regions
Americas
Europe
Asia
ProductCapabilities
Debt CapitalMarkets
Equity CapitalMarkets
Mergers &Acquisitions
Restructuring
Consumer Products, Restaurants,Retailing
Banks, Broker / Dealers, Insurance,Specialty Finance
Aerospace & Defense, BusinessServices, Capital Goods, Chemicals,Construction & Building Materials,Maritime, Metals & Mining, Paper &Packaging, Power & Utilities,Transportation & Logistics
Oil & Gas Exploration, Oil & GasMidstream, Oil Field Services
Real Estate, Gaming, Leisure &Lodging
Biotechnology, Healthcare Services,Managed Care, Medical Devices,Pharmaceuticals
Software, Internet, Semiconductors,Wireless & Wireline, FinancialTechnology, Technology Services,Entertainment, Broadcasting,Information Services & Publishing,Communications Equipment, TelecomInfrastructure
United States, Canada,Brazil
U.K., Germany, France,Sweden, Russia
China, India, Singapore
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Investment Banking – Performance Update
Note: All results as reported in Jefferies’ public filings. (1) Excludes predecessor first quarter ending 2/28/13. Investment Banking Net Revenues for the excluded quarter totaled $288 million.
Investment Banking Net Revenues (1)
890
1,123 1,126
1,4281,630
$0
$500
$1,000
$1,500
$2,000
Equity Capital Markets
Debt Capital Markets
Advisory
Predecessor Successor
Net revenues have grown at a compounded rate of 15% per year since 2010
─ Recent performance strong across all major products, sectors and regions
─ Well balanced mix across advisory, debt capital markets and equity capital markets
Increased revenue per Managing Director in each of the last 5 years
─ Significant increase in the last twelve months
($ Millions)
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Jefferies Finance Update
Jefferies Finance, our corporate lending joint venture with Massachusetts Mutual LifeInsurance Company, has grown rapidly since 2010
─ Established in 2004, Jefferies Finance has demonstrated growth and resilience acrossmultiple business cycles
Jefferies Finance has successfully built a leading franchise arranging leveraged loans fordistribution to the capital markets
─ Significant growth in arranged loans, with modest balance sheet expansion
Significant opportunities for expansion in core business and in complementary products
Total Arranged Deal Volume by Fiscal Year
$3,816$7,689
$11,638
$21,136$24,951
40
6469
118
138
0
20
40
60
80
100
120
140
FY 2010 FY 2011 FY 2012 FY 2013 LTM 8/31/14
Arranged Volume
# of Deals
($ Millions)
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Increased the average size of both our bookrun leveraged finance and equity transactions forthe third consecutive year, now at approximately $474 million and $218 million,respectively
Continued to increase the number of both bookrun leveraged finance and equity transactionsover $500 million in value
─ 15 equity offerings greater than $500 million in 2014 including 5 offerings executed inEurope
Jefferies Bookrun Equity Offerings over $500 million
24 4
8
15
0369
1215
2010 2011 2012 2013 LTM 9/30/14 N u m b e r o f D e a l s
Selected Milestones in 2014
Jefferies Bookrun Leveraged Finance Transactions over $500 million
11 6
3450
67
0
25
50
75
2010 2011 2012 2013 LTM 9/30/14
N u m b e r o f D e a l s
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Our track record in winning M&A transactions exceeding $1 billion continued, with 19transactions completed in the last twelve months, including marquis transactions forDeutsche Telekom and Kinder Morgan
The strength of our M&A sell-side franchise continued, with a greater percentage of our totalM&A revenue derived from sell-side transactions than any major investment bank
We made significant progress in penetrating the top tier of financial sponsors. In 2014, wewon or executed important “first-time” mandates with 10 of the largest 20 global sponsors
Since acquiring Hoare Govett in February 2012, we have added 21 U.K. corporate brokingclients (12 in 2014), including 15 clients with market caps greater than $1.5 billion. TheHoare Govett franchise has been important to our winning and executing over 80 Europeanbookrun equity offerings since the acquisition
In the last 12 months, we have completed 15 bookrun equity offerings for China clients,including 3 of the largest IPO’s in China (Huishan Dairy, Cinda Asset Management and
JD.com)
Selected Milestones in 2014 (Continued)
Jefferies Completed M&A Transactions over $1 billion
814
19 21 19
05
10152025
2010 2011 2012 2013 LTM 9/30/14 N u m b e r o f D e a l s
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Select Jefferies Investment Banking Clients
02/14 Sole advisor on $1.1bnsale of China assets toBrightoil PetroleumHoldings Ltd.
03/11 Joint advisor on $1.6bnMaverick Basin JointVenture with KoreaNational Oil Corp.
Enterprise Value: $60bn
Description:
One of the world’s largestindependent oil and natural gascompanies
Recent Transactions:
Enterprise Value: $160bn
Description:
5th largest Super Major oilcompany in the world
Recent Transactions:
Enterprise Value: $190bn
Description:
Largest pharmaceutical companyin the world
Recent Transactions:01/13 Joint bookrunner on
$2.6bn initial publicoffering of Zoetis
10/12 Sole advisor on $700mmacquisition of NextWavePharmaceuticals
Enterprise Value: $15bn
Description:
Leading global independentcopper producer
Recent Transactions:
12/12 Joint advisor on $5.1bnacquisition of InmetMining Corporation
10/12 Joint bookrunner on$350mm seniorunsecured notes offering
Enterprise Value: $70bn
Description:
3rd largest energy company inNorth America
Recent Transactions:
08/14 Sole financial advisor toKinder Morgan EnergyPartners, L.P. andKinder MorganManagement, LLC intheir $60bn sale toKinder Morgan, Inc.
Enterprise Value: $240bn
Description:
3rd Largest pharmaceuticalcompany in the world
Recent Transactions:
05/12 Sole advisor on $1.5bnacquisition of FougeraPharmaceuticals
Total Liabilities : $30bn
Description:
Operator of one of the top 5airlines in the world
Recent Transactions:12/13 Financial advisor to
Association ofProfessional FlightAttendants on $29.6bnrestructuring
Enterprise Value: $115bn
Description:
One of the world's largest mobilecommunications companies
Recent Transactions:05/12 Sole advisor on sale of
Vodacom's Gateway CarrierServices division to PCCWGlobal Ltd.
09/14 Sole advisor on $295mmsale of ChevronPetrochemical Pipeline toBoardwalk Pipeline Partners
09/14 Sole advisor on $235mmsale of Gulf Coast NaturalGas Pipeline Systems toEnLink Midstream
12/12 Sole advisor on $288mmsale of interest in the Seanfield to SSE plc
11/12 Sole advisor on $1.1bn(plus $250mm contingentpayments) Central NorthSea assets to TAQA
Enterprise Value: $130bn
Description:
One of the world’s leadingtelecom and information
technology service companies
Recent Transactions:11/13 Joint advisor on $2.7bn
sale of 70% Stake inScout24 to Hellman &Friedman LLC
Enterprise Value: $30bn
Description:
7th largest REIT in the UnitedStates
Recent Transactions:
12/12 Joint bookrunner on$225mm seniorunsecured notes offering
10/10 Joint advisor on $3.1bnacquisition of Real EstateAssets from Atria SeniorLiving Group
Market Cap.: $25bn
Description:
One of the largest financialservices holding companies inthe US
Recent Transactions:
11/12 Joint bookrunner on$500mm seniorunsecured notes offering
10/12 Sole advisor on $9.8bnvoluntary share exchangeoffer with Coca-Cola HBCAG
Enterprise Value: $10bn
Description:
One of the largest bottlers andvendors of The Coca-Cola
Company’s products in the world
Recent Transactions:
Enterprise Value: $85bn
Description:
One of the largest pharmaceuticalcompanies in the world
Recent Transactions:
02/13 Sole advisor on $482mmsale of Latin AmericanOTC business to ReckittBenckiser Group plc
09/13 Sole advisor in the$473mm sale of E&Passets in Trinidad to TheNational Gas Company ofTrinidad &Tobago
Deutsche Telekom
Enterprise Value: $235bn
Description:
2nd largest integrated energycompanies in the United States
Recent Transactions:
Enterprise Value: $20bn
Description:
Largest independent animalhealth company
Recent Transactions:
01/13 Joint bookrunner on$2.6bn initial publicoffering
Enterprise Value: $285bn
Description:
Largest healthcare company inthe world
Recent Transactions:
06/13 Sole placement agent on$311mm sale of ElanCorp, plc common stock
Enterprise Value: $180bn
Description:
4th largest Super Major oilcompany in the world
Recent Transactions:
Enterprise Value: $35bn
Description:
Largest pharmaceutical companyin Japan
Recent Transactions:
10/13 Sole placement agent on$245mm sale of NPSPharmaceuticals, Inc.common stock
05/14 Joint bookrunner on$2.0bn initial publicoffering
Enterprise Value: $30bn
Description:
Largest online direct salescompany in China
Recent Transactions:
Enterprise Value: $35bn
Description:
12th largest REIT in the worldand 6th largest in the UnitedStates
Recent Transactions:
06/14 Joint bookrunner on$1.2bn seniorunsecured notes offering
Enterprise Value: $20bn
Description:
Largest paints and coatingscompany in the world
Recent Transactions:
07/14 Sole financial advisor on$208mm sale of paperchemicals business toKemira Oyj
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Top 20 Reported Investment Banking Revenues
Note: LTM Revenue, Total Assets and Exchange Rates for Competitors as of 6/30/14, except RBC through 7/31/14 and Macquarie through 3/31/14.
(1) Jefferies reported investment banking revenue plus $190 million Jefferies Finance fee income for LTM 8/31/14.Source: Earnings reports. Where IB revenue is not broken out, Dealogic is used.
Since 2010, our revenue growth has significantly exceeded the composite revenue growthof our nine largest competitors
IB Revenue for Top 20 LTM Rev. Total Assets($mm) ($bn)
1 Goldman Sachs 6,444 860
2 JP Morgan 6,398 2,520
3 Bank of America 6,208 2,171
4 Morgan Stanley 4,922 835
5 Citi 4,478 1,910
6 Barclays 3,867 2,239
7 Deutsche Bank 3,812 2,272
8 Credit Suisse 3,810 1,000
9 UBS 2,791 1,102
10 Jefferies(1)
1,820 45
11 Wells Fargo 1,673 1,599
12 RBC 1,632 840
13 HSBC 1,555 2,754
14 BNP Paribas 1,265 2,602
15 Lazard 1,105 3 16 RBS 952 1,722
17 Nomura 844 433
18 Mizuho 831 1,794
19 BMO Capital Markets 798 540
20 Macquarie 762 145
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Investment Banking Net Revenues (1)
$862
$1,257
$1,820 $1,824
$2,118
LTM 6/30/97 LTM 2/29/08 LTM 8/31/14 LTM 12/31/00 LTM 12/31/97
Our Business Today Compared to Other Former MajorIndependent Investment Banking Firms
(1) With the exception of Jefferies, represents investment banking revenues for last twelve month period as an independent firm.
(2) Jefferies reported investment banking revenue plus $190 million Jefferies Finance fee income for LTM 8/31/14.Source: Public Company Filings.
(2)
($ Millions)
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Investment Banking – Growth Initiatives
Continue to increase productivity
─ Further increases in revenue per Managing Director expected as senior hires from 2011 through 2013reach targeted productivity levels and as recent hires begin to gain traction
─ Continued increases in transaction size will help to drive overall productivity
Increase U.S. market share across entire platform
─ Significant growth opportunities across all major sector verticals and products
─ Recent entry into several new subsectors
Capitalize on footprint, full-service capabilities and momentum in Europe and Asia
─ 192 investment bankers in Europe and Asia
─ Expand business in Continental Europe and capitalize on our momentum in China
Financial Sponsor Coverage
─ Mid-Cap Sponsors
Expand the number of existing mid-cap sponsor clients with whom we do M&A sell-side business
Broaden our overall coverage universe of mid-cap sponsors ─ Large-Cap Sponsors
Expand market share with top 25 financial sponsors in both ECM and Leveraged Finance
Continue to drive growth of Jefferies Finance corporate lending platform
─ Opportunities for growth in targeted corporate lending areas (middle-market, asset based, Europe,distressed) as well as incremental opportunities in core U.S. acquisition finance practice
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Equities
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Equities Overview
Jefferies is a leading global institutional equities franchise
─ Sales and trading across North America, EMEA and Asia Pacific, with major trading hubs in NewYork, London and Hong Kong
─ 255 research professionals covering over 1,800 companies ─ Leading client-offerings across cash equities, electronic trading, equity derivatives, convertible
bonds, ETFs, prime brokerage, securities finance and equity capital markets
Core U.S. equity sales & trading business pioneered block trading more than 50 years ago
Focused on providing best-in-class ideas, execution and service to our clients
Asia Pacific
Cash Equities
Americas
Equity Derivatives
EMEA
Global Equities
Electronic Trading
Capital Markets
Equity Derivatives
Electronic Trading
Capital Markets
Electronic Trading
ConvertiblesResearch
Research Research
Convertibles Convertibles
Securities FinancePrime Services
Securities FinanceInvestmentCompanies
Capital Markets
Cash Equities Cash Equities
30
E i i M k U d
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Equities – Market UpdateMarket Environment (1)
Global equity turnover is up 4% YTD 2014, however, down 38% from its peak in 2008
─ Global turnover breakdown: Americas 52%, Asia 24% and Europe 24%
Jefferies Change in Market Share (2) vs. Market Turnover (1)
Global Market Wallets – Cash Equities (2)
Global market wallet up $962 million from CY 2013 to annualized 1H 2014 (+4%)
─ Americas market wallet has increased $149 million from CY 2013 to annualized 1H 2014 (+1%)
─ EMEA market wallet has increased $1.1 billion from CY 2013 to annualized 1H 2014 (+17%)
U.K. market wallet has increased $367 million during the same period ─ Asia market wallet has decreased $257 million from CY 2013 to annualized 1H 2014 (-4%)
Equity Derivatives (3)
Demand for U.S. listed options remains strong despite low volatility
Year to date ADV is tracking at 16.6 million contracts through August, surpassed only by 2011 volumes in the history of U.S.options trading
Jefferies ranks 5th in U.S. Convertible Trading market share at 8.6% for 1H 2014 (2)
Note: Turnover measured in $ Notional Value Traded for Calendar 2014 through August 31.(1) Thomson.
(2) Third Party Market Surveys conducted in the first half of 2014 (includes cash, algorithms and program trading).(3) The Options Clearing Corporation, www.theocc.com.
12%
4%
0%
10%
20%8%
-3%-4%
-2%
0%
2%
4%
6%
8%
10% 33%
-21%-30%
-20%
-10%
0%
10%
20%
30%
40%34%
8%
0%
5%
10%
15%
20%
25%
30%
35%
Asia U.K. Americas Global
Jefferies’ Market Share Growth (% ∆)
YTD Market Turnover (% ∆)
31
E iti P f U d t
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Equities – Performance Update
Jefferies has significantly grown revenues and market share post-financial crisis
Major ongoing growth opportunities: momentum in Europe and Asia; further client penetration and
cross-selling globally; electronic trading; prime brokerage
Note: All results as reported in Jefferies’ public filings. 2012, LTM Q1 2014 and LTM Q3 2014 exclude gains and losses from holdings in Knight Capitaland Harbinger Group.
(1) Excludes predecessor first quarter ending 2/28/13. Equities Net Revenues for the excluded quarter totaled $141 million (excluding gains from holdingsin Knight Capital).
Equities Net Revenues (1)
557 594490
699 697
$0
$250
$500
$750
Predecessor Successor
($ Millions)
32
E iti St t i P i iti
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Equities – Strategic Priorities
Continue to drive market share growth, leveraging Jefferies’ global capabilities
─ Leading U.S. franchise
─ Full service trading, research and capital markets offering across the Americas, EMEA and
Asia Pacific ─ Unique value offering to our clients through Asia research alliances
Ongoing expansion of equities products that leverage Jefferies’ status as a leading global cash
equities franchise
─ Capitalize on advantage of having no legacy dark pool and utilizing our strong, liquidity-seeking algorithms and execution transparency
─ Opportunities to serve mid-sized prime brokerage clients that are increasingly underserved bythe large bank holding companies
─ Continued growth in our options trading platform and expansion opportunities in low riskstructured products
Leverage Jefferies’ global research platform to serve clients and win market share
─ Jefferies’ research platform provides our clients with insight and expertise across the U.S.,EMEA and Asia Pacific
─ Ongoing elevation and enhancement of Jefferies’ global research offering has providedsignificant momentum to our market share drive
33
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Fixed Income, Futures & Commodities
34
Fi d I F t & C diti O i
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Fixed Income, Futures & Commodities Overview
Jefferies serves clients across all major cash and futures products in the U.S. and Europe
─ 860 sales, trading, research and strategy professionals globally
─ Primary Dealer or equivalent in U.S., U.K., Germany, Netherlands, Portugal, Slovenia and
Belgium
─ Focused on providing best-in-class ideas, facilitation and execution to our clients
─ Minimal exposure to OTC swaps or illiquid, hard-to-value securities; over 99% of ourtrading is in cash or exchange traded products
Fixed Income, Futures & Commodities
EmergingMarkets
Capital Markets
Global Sales &Trading
MunicipalSecurities
Public Finance
Sales & Trading
Capital Markets
InvestmentGrade
Capital Markets
U.S. CorporatesSales & Trading
InternationalSales & Trading
LeveragedCredit
Research
U.S. Sales &Trading
InternationalSales & Trading
Capital Markets
Rates
U.S. Treasuries
U.S. Agencies
EuropeanGovernment Bonds
U.S. & EuroRepo Financing
European Supras& Agencies
Covered Bonds
MBS / ABS /CMBS
Global CDO/CLO
Global ABS
Global MBS
Global CMBS
Project Finance
Global CapitalMarkets
Futures &Commodities
ForeignExchange
Listed Futures
Base Metals
Precious Metals
35
Fi d I M k t U d t
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Fixed Income – Market Update
Markets are currently being driven by central bank intervention and balancesheet deleveraging
Since 1H 2013, global fixed income markets have seen low volatility, moderatesecondary market volumes and tightening yields and spreads
─ This has been offset by robust capital market activity across all credit products
Significant regulation has also come into force; most notably Dodd Frank, theVolcker Rule and additional capital requirements
─ This has resulted in a decrease in RWA, reduced products offerings and
increased capital and compliance costs across bank holding company tradingplatforms
Given Jefferies’ relatively smaller balance sheet and minimal legacy activity,these trends have been less severe
─ Narrowed the gap with our competitors in available balance sheet to facilitate
client flow ─ Leaves us in a relatively stronger and more competitive position
36
Fi d I P f a U dat
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Fixed Income – Performance Update
Fixed Income Net Revenues (1)
245
728 743
1,253
790926
$0
$500
$1,000
$1,500
Predecessor Successor
2008 financial crisis and subsequent downturn across the financial sector allowed Jefferies toexpand its fixed income capabilities significantly
─ Pre-crisis, Jefferies Fixed Income was a niche U.S. High Yield focused trading and new issue
platform, with modest credit and MBS/ABS offerings ─ Jefferies Fixed Income is now a global franchise with highly competitive capabilities across
credit, rates and MBS/ABS
The consistency of our revenues demonstrates the strength, quality and diversification of ourglobal franchise, despite the reduction of activity in fixed income markets since 2012
Pre-FinancialCrisis
Note: All results as reported in Jefferies’ public filings. (1) Excludes predecessor first quarter ending 2/28/13. Fixed Income Net Revenues for the excluded quarter totaled $352 million.
($ Millions)
37
Fixed Income Futures & Commodities Strategic Priorities
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Fixed Income, Futures & Commodities – Strategic Priorities
Continue to execute our proven strategy
─ Client focused ideas and execution, providing leading solutions and service
Continue to drive our performance by leveraging existing platform to selectively target opportunities ─ Opportunistically add top-tier talent to our firm
─ Selectively grow in complementary areas and products based on market opportunities
Increased global coordination
─ Leverage global footprint and relationships across Jefferies to grow market and client penetration
─ Think globally to match our clients and their opportunities
Leverage existing areas of new issue strength
─ Leverage existing strengths to grow new issue capabilities in other products and regions
─ Grow average transaction size for increased profitability
Take advantage of increased market volatility and resultant volume growth
─ Opportunities in rates, futures and foreign exchange
Capitalize on changing landscape driven by regulation and new technology developments ─ Implementation of Dodd-Frank will drive OTC securities increasingly onto exchange
─ Rates and credit derivatives – products we could not previously offer competitively, but mandatoryclearing will ‘level the playing field’
─ eTrading in credit and rates
─ New issue structured notes – as our competitors look to decrease RWA and exit more capital
intensive products, we will look to grow our low risk new issue structured notes activity38
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Risk Management
39
Risk Principles
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Risk Principles
Jefferies' comprehensive risk management framework has been a foundation for our successacross market cycles
Culture
─ We are all risk managers. Our firm is built on every individual taking responsibility for riskmanagement, including our senior management
Hands-on
─ Our senior management and Board are deeply involved in the “nuts and bolts” of how andwhere we are taking risks across the firm
Integrated
─ Our independent risk management group and our business leaders are deeply integratedinto our trading desks, ensuring a clear and comprehensive view of the firm’s risk
Asset Quality
─ Jefferies is dedicated to serving our clients in liquid, transparent products. We limitilliquid assets and derivatives to ensure the overall liquidity and health of our balancesheet
40
Risk Management Governance and Structure
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Risk Management Governance and Structure
Board of Directors and Audit Committee of the Board of Directors
─ Board of Directors comprised of three executive officers and four independent outside directors
Our Chief Risk Officer and Global Treasurer meet with the Board of Directors on at least a
quarterly basis to present our risk profile and liquidity profile
─ Audit Committee of the Board of Directors comprised of four independent outside directors
Responsible for discussing with management Jefferies’ major financial risk exposures and steps
management has taken to monitor and control such exposures, including Jefferies’ riskassessment and risk management policies (from the Charter of the Audit Committee)
─ Our Board of Directors and its Audit Committee play an important role in reviewing risk
management and risk tolerance, reviewing risk-related data at each regular meeting
Jefferies has a comprehensive risk management approach, with a formal governancestructure and processes to identify, assess, monitor, and manage risk
Risk Oversight Structure (Committees)
─ Risk Management
─ Executive
─ Operating
─ Market Risk Management
─ Credit Risk Management
─ Operational Risk Management
─ Capital and Liquidity
─ Asset / Liability
─ Margin Oversight
─ Underwriting Acceptance
─ New Business
─
Independent Price Verification41
Risk Management Summary Framework
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Risk Management Summary Framework
Note: Dotted lines represent communication lines.
Jefferies GroupBoard of Directors
Firmwide
Committees
IndependentPrice
VerificationNew Business
Business Line
Committees
Market RiskManagement
Credit RiskManagement
OperationalRisk
Management
UnderwritingAcceptance
Audit Firm ManagementCompensationCorporate
Governance andNominating
ExecutiveOperatingRisk
Management
Asset / Liability
Chief Risk Officer /Global Treasurer
Capital andLiquidity
MarginOversight
42
Key Risk Areas
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Key Risk Areas
Market
Credit
Liquidity and capital
Operational
Legal and compliance
New business
Reputational
43
Key Risk Practices
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Key Risk Practices
Comprehensive risk framework across risk types and across the firm
Sophistication and granularity of risk quantification
Control through detailed limits and strong breach procedures
Conservative limit setting relative to available capital and liquidity
Ongoing holistic assessment of risk interdependence and contagion risk acrossthe firm
Formal contingency planning
Rapid upward visibility to management by means of a culture of rapid escalationand short lines of communication
History of demonstrated management actions ahead of and during times ofmarket stress and external events
44
VaR Report
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Quarterly VaR Average($ Millions)
Annual VaR Average($ Millions)
VaR Report
$0
$5
$10
$15
$20Avg. VaR related to KCG & HRG
Avg. Firmwide VaR Excl. KCG & HRG
$0
$5
$10
$15
$20
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD
Avg. VaR related to KCG & HRG
Avg. Firmwide VaR Excl. KCG & HRG
45
VaR Report and Trading Revenues
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Distribution of Daily Net Trading Revenues
0
20
40
60
80
100
120
140
20
#
o f D a y s
2011 2012 2013 LTM 8/31/14
VaR Report and Trading Revenues
(1) Number of Breaches represents the number of days during a given period where net trading losses were greater than VaR estimates.
Historical Negative Trading Revenues Days
2011 2012 2013 2014
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Number of Negative
Trading Revenues Days: 10 10 26 6 2 - 1 1 1 5 18 7 7 11 9
Excluding Knight and Harbinger na na na na na na na na na 1 11 4 1 6 2
Number of Breaches (1) - - 2 - - - - - - 1 1 - - 1 -
$ Millions
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Capital and Liquidity Management
47
Liquidity and Funding Principles
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Liquidity and Funding Principles
Jefferies’ long-standing liquidity and funding principles have maintained the strength andsoundness of our platform across market cycles
Owning inventory that is composed of liquid assets that turn over regularly, with aminimal amount of Level 3 Assets
Maintaining a sound, long-term capital base and reasonable leverage relative to ourbusiness 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 clearinghouses, or fixed for periods of time that exceed the expected tenure of the inventorythey 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 ourcapital capacity or risk tolerance (Jefferies Finance, Jefferies LoanCore)
48
Limited Leverage
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Historical Quarterly Leverage($ Millions)
5.0x
7.0x
9.0x
11.0x
13.0x
15.0x
17.0x
$-
$10,000
$20,000
$30,000
$40,000
$50,000
Total Capital Gross Assets Leverage
Limited Leverage
Jefferies has a long-standing policy of carefully managing balance sheet leverage
In periods of stress, Jefferies has demonstrated the ability to rapidly reduce leveragewithout unduly impacting our business
Predecessor Successor
(1) Total assets divided by total equity. Q2 2013 through Q3 2014 exclude merger impacts. See page 59 for further detail.
(1)
49
Asset and Capital Growth
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Total Assets and Total Capital($ Millions)
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
1Q 08 4Q 08 4Q 09 4Q 10 4Q 11 4Q 12 4Q 13 3Q 14
Gross Assets Total Capital Assets / Capital
Asset and Capital Growth
Predecessor Successor
Consistent capital growth to support business expansion
50
Level 3 Trading Assets Overview
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Level 3 Financial Instruments Owned (1) as a Percentage of Financial Instruments Owned
($ Millions)
7%6%
5%5% 5%
3% 3%3%
2%2% 3% 3%
3%
3% 3% 3%
3% 3%3%
3% 3%3% 3%
3%
$-
$4,000
$8,000
$12,000
$16,000
$20,000
4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 3Q 14
Level 1 and 2 Inventory Level 3 Inventory
Level 3 Trading Assets Overview
97% of inventory is Levels 1 and 2, with a minimal amount of Level 3 Trading Assets
Level 3 Trading Assets (1) represent only 13% of tangible common equity
(1) Excludes Level 3 trading inventory assets attributable to third party or employee noncontrolling interests in certain consolidated entities.
Predecessor Successor
Level 3 Financial Instruments Owned (1) as a Percentage of Tangible Common Equity($ Millions)
Predecessor Successor
18% 23% 23% 26%26% 22% 18% 19% 17%
18%
19% 20% 16% 15% 15% 15% 15% 16%14% 14% 14% 14% 14%
13%
$-
$1,000
$2,000
$3,000 $4,000
$5,000
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
Tangible Common Equity Level 3 Assets
51
Stable Secured Funding Model
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Portion of Inventory Deemed Liquid (Fundable at Haircuts of 10% or Better)
Clearing Corp Eligible Repo – Limited reliance on bilateral and tri-party repo
Average Term for Non-Clearing Corp Eligible Repo – Secured funding in excess of asset liquidation timeframe
Stable Secured Funding Model
48 55 4769 78
88
139 125103 104
120
0
50
100
150
1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014
#
o f D a y s
Predecessor Successor
Note: Dark blue lines represent 3-year averages.
89% 88% 90% 89%85%
82%87%
84%82% 81% 82%
75%
80%
85%
90%
95%
1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014
Predecessor Successor
80%
73%77% 78% 77%
72%77%
73%76% 74% 75%
65%
70%
75%
80%
85%
1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014
Predecessor Successor
Mean: 76%
Mean: 85%
Mean: 89 days
52
Liquidity Pool
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Total Liquidity Pool
($ Millions)
$3,441 $3,571 $3,379
$4,229$4,423
$4,726
$5,187
$5,574$5,282
$4,467
$5,824 $5,913
9.8% 10.2% 9.4%
12.3% 12.2% 12.5%13.3%
14.4%
13.1%
10.3%
13.4% 13.2%
0.0%
3.0%
6.0%
9.0%
12.0%
15.0%
18.0%
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
11/30/11 02/29/12 05/31/12 08/31/12 11/30/12 02/28/13 05/31/13 08/31/13 11/30/13 02/28/14 05/31/14 08/31/14
Cash & Cash Equivalents Other Liquidity Sources Liquidity Pool as % of Total Assets
Liquidity Pool
Jefferies maintains significant excess liquidity on hand
(1) Consists primarily of securities purchased under agreements to resell, our U.K. liquidity pool, unencumbered inventory representing an estimate of the amount of additional
secured financing that could be reasonably obtained and funds available under our senior secured revolving credit facility.(2) Cash & Cash Equivalents plus Other Liquidity Sources, divided by Total Assets.
(1) (2)
Predecessor Successor
53
Long-Term Debt Profile
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Long Term Debt Profile
Debt Maturity Schedule (Notional)($ Millions)
As of 8/31/14, our $6.2 billion notional of long-term debt had a weighted average maturity of 8.2 years
No scheduled debt maturities until November 2015 ($500 million)
No maturity of long-term debt in a single year is greater than 20% of outstanding long-term debt
Includes May 2014 2.375% EMTN issuance of €500 million ($685 million)
$0
$200
$400
$600
$800
$1,000
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Appendix
56
Notes and Disclosures to Leucadia Overview
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Note: Dollar amounts are Leucadia’s net carrying amount for each investment, forconsolidated subsidiaries equal to their assets less liabilities.
1) Adjusted for assumed maturity of 2015 8.125% Sr. Notes using Parent Company
Cash.
2) Includes $2.8 billion of goodwill and intangibles.
3) Classified within Parent Cash and Investments in Leucadia’s filings.
4) Investment commitment of $400 million contingent on Folger Hill raising at least$400 million of outside capital.
5) Adjusted for the $192 million EnerVest acquisition, which closed in September 2014.6) Carrying amount is net of deferred gain on real estate sale.
7) Represents Leucadia’s approximate weighted average ownership; ownership varies bydealership between 65% and 90%.
8) Adjusted for the $63 million EOG acquisition, which closed in September 2014.
9) Adjusted for the $71 million Golden Queen investment, which closed in September2014.
10)Adjusted to include $250 million from the sale of Premier Entertainment to Twin RiverManagement Group, Inc., closed July 2014.
11)Excludes Jefferies Net Deferred Tax Asset of $445 million.
57
Leucadia – Cash and Investments and Parent Debt GAAP
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Reconciliations
Reconciliation of Cash and Investments
Reconciliation of Parent Debt
($ millions)
Parent Debt, Excluding Redeemable Preferred Shares (GAAP) at June 30, 2014 1,444.4$Assumed Redemption of 8.125% Senior Notes due 2015 (457.1)
Parent Debt, As Adjusted 987.3$
($ millions)
Available Cash and Investments (GAAP) at June 30, 2014 2,224.8$Structured Alpha classified with Asset Management (82.7) Maturity of 8.125% Senior Notes due 2015 (457.1) Acquisition of EOG by Juneau (63.0) Acquisition of Golden Queen (71.0)
Acquisition of EnerVest by Vitesse (192.0) Proceeds from Premier Entertainment Sale 250.0
Available Cash and Investments, As Adjusted 1,609.0$
58
Leverage Ratio GAAP Reconciliation
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g
Leverage Ratio - Excluding Merger Impacts
May 31, August 31, November 30, February 28, May 31, August 31,
($ Millions) 2013 2013 2013 2014 2014 2014
Total Assets 38,938$ 38,830$ 40,177$ 43,440$ 43,610$ 44,764$Goodwill and Acquisition Accounting Fair ValueAdjustments on the Merger with Leucadia (1,957) (1,957) (1,957) (1,957) (1,957) (1,957) Net Amortization to Date on Asset RelatedPurchase Accounting Adjustments 9 18 27 32 37 42
Total Assets Excluding the Impact of the Merger 36,990$ 36,891$ 38,247$ 41,515$ 41,690$ 42,849$
Total Equity 5,183$ 5,241$ 5,422$ 5,462$ 5,527$ 5,602$Equity Arising from Merger Consideration (1,426) (1,426) (1,426) (1,426) (1,426) (1,426)
Preferred Stock Assumed by Leucadia 125 125 125 125 125 125 Net Amortization to Date of Purchase AccountingAdjustments, net of tax (8) (17) (25) (36) (48) (58)
Total Equity Excluding the Impact of the Merger 3,874$ 3,923$ 4,096$ 4,125$ 4,178$ 4,243$
Leverage Ratio - Excluding Merger Impacts 9.5x 9.4x 9.3x 10.0x 10.0x 10.1x