Jefferies Financial Group Inc. Investor Meeting

Good morning, everybody. Welcome to our Investor Day at Jefferies. My name is Rich Handler, the CEO. I'm going to give you a very brief overview of our company today and how we see the future, followed up by Brian, who's going to put a little more detail in it, but the lion's share of the specifics will be given by our leadership team, which we're very proud of, and then we'll all be available for a question and answer afterwards. The two things I'm hoping that people will take away from the meeting today is something that our whole leadership team is very well aware of. First, the strength and scale and scope and capabilities of Jefferies today is something we think is incredibly unique and perhaps not fully understood. We hope to flesh that out a little bit more.

More importantly, the opportunity in the future, going forward, allows us, with the scale and the scope, we believe, to continue to grow and invest, but also bring even more profits to the bottom line. I think we'll talk a little bit today about how we're going to do that. Having been at Jefferies since 1990, it's a long time. We've been very consistent in both our strategy and our objectives. Our objective has always been to build the best world-class, full-service global investment bank. Our strategy has always been incredibly consistent as well. There's a handful of things that we have prioritized and we continue to prioritize. First and foremost is our clients.

This is true, and a lot of firms say this, but a lot of firms don't have the DNA wrapped throughout the entire organization to really be there for clients, both in good times and bad times. The second thing that we've been consistent with doing in terms of strategy is to invest in our human capital and our people and create an environment where people are empowered, they lead with honesty and integrity, and they have a long-term time horizon and a team focus. It is prevalent throughout our entire organization, and it's enabled us to get to where we are today. We are incredibly flat. Even with our growth that we are today, we're still relatively incredibly flat, and we're entrepreneurial. Those two factors are really a secret weapon that allows us to compete against the largest companies and competitors in the world.

You'll see today, through some of our slides, we have and always will lead through ideas and content and the ability to have truly unique execution. We have always had a focus on the long term, you've heard that from prior Investor Days, with a keen sense of urgency, and that balance has allowed us to navigate some very complicated markets and complicated situations, but it's always done well by us. We also are a firm that has consistently made sure we protected all stakeholders throughout the organization. Shareholders, bondholders, everyone who touches Jefferies, it's important for us to know that they have our commitment to protect them throughout the various market cycles. Finally, in our strategy being consistent, we've always wanted to build a company that had purpose, that was important, and it was bigger than just the pure nuts and bolts of operating an investment bank.

I'd like to remind everyone in this room, both fellow shareholders, the analysts that cover us, and people on the phone, we're not just a management team at Jefferies. We are also your partners in ownership. If you look at the senior leadership, the rest of the employees, our joint venture partners, and our board, you add that up in aggregate of the 250 million fully diluted shares at Jefferies, we own 100 million shares of that stock. As a result, we are incredibly aligned both for the good and for sometimes the not so good. There's a couple of things when you have that kind of ownership and that alignment that really are important.

I always tell our people, "When your stock is high, you're not as smart as you think you are, and when your stock is low, you're not as dumb as you think you are." It doesn't feel that way on both extremes, but that's the reality of the truth. We care deeply about our shareholders. When our stock is at attractive prices, we will buy our stock back in. It was on an 8-K this morning. In the last couple of weeks, we bought in 2.725 million shares, roughly a little over another 1%, at very attractive prices. In the last 10 months of calendar 2006, we've either given dividends or purchased back stock approaching 11% of our tangible book value. If you go back historically, the last five years is close to $4 billion. In the last seven years, it's over $5 billion or 44% or 7% historically.

We've been able to take advantage in targeted situations where we think the market is not understanding basically our story. I hope from today's presentation, you also get it's going to be slightly different. The tone is going to be slightly different. There's two points I want to make in that or actually a few points I want to make in regard to that. I say this without any arrogance and recognizing how fragile everything in the world is, but every one of our shareholders should understand what we all understand today. Jefferies has reached critical mass as a world-class institution. I shudder saying that because it jinxes you. The fact of the matter is, the scale and scope and capabilities and the geographical footprint are basically second to only a handful of the largest banks on the planet in our industry.

It's a remarkable accomplishment that I couldn't thank our team more for actually getting us to this point. The quality and breadth of our human capital, the people that are touching our clients, and the people who are supporting our people to touch our clients, I would put them on par against anyone in the industry. The client base that we have today, and this is someone who's been here for a very long time and watched the type of clients evolve over the decades. We are in an incredibly envious position. These are the most sophisticated, most important, largest, middle, small, across the board, all geographies. We are their partners. We are their trusted partners, and that is an advantage that we have never really had throughout our organization in our history.

I would also just say that despite the fact that we're constantly building, I'm not going to declare victory, our brand as an organization is actually becoming a major advantage to our company for the first time since I've been here. What does this mean for our future? We're always going to invest in our people and our company the way we have historically. That's not going to change. However, we think we're in a position to actually be able to start bringing even more profits to the bottom line, and a lot of what you're going to hear today is how we're going to do it. I'll just give you a little bit of an overview. First off, we've been saying this for a while, but we're very selective. We want to optimize all value.

We're at the tail end of approaching cleaning up the remainder of the merchant bank and cleaning up stuff that we're just monetizing and actually simplifying the story and redeploying that capital. I think you'll see that in the foreseeable future. I think our heavy investment in human capital, while we'll keep investing, we made the lion's share when the market was really tough, and I think you'll see the beginning of the peak of the hiring and the expensing of the stock to get us to this position. I think that point has passed. There will still be targeted hiring and specific ideas that will always be opportunistic when the right thing comes along. But the lion's share of the group hires, I think when you say you're at critical mass, it goes with the fact that you don't have to do the mass hires that we've had before.

Matt will talk a little bit about it, but I think you'll see comp leverage and operating leverage move in the right direction. I think Brian will talk a little bit about our asset management in terms of how we're basically going to hopefully close Point Bonita. It looks like the first quarter of next year, dealing with the regulatory process. But once we do that and the capital we've redeployed from asset management into, I mean, Hildene. That was a bad one. In Hildene, once we redeploy that capital, we'll wind up having a more consistent and more predictable EBITDA from our asset management business in addition to the other assets that we have in that group. I'd also add in terms of bringing more consistent earnings and profitability, it'll basically be the SMBC joint venture. You'll hear more about that as well.

We are extremely excited with the progress that we're making there. Our joint venture in Japanese equities will basically be started in early January, and I think that will contribute and show the template of what we're able to do with SMBC and take it to yet a different level. There are so many levers that you're going to see in terms of our ability to bring more to the bottom line and take advantage of our position that I think you'll understand why our whole organization is incredibly excited about where Jefferies is today. As you go through and listen to the slides of our various people, just step back for a second and think of where Jefferies came from and where we are in each of our relative businesses.

And I think if you see that, you will understand why we are so excited today to be at our firm. With that, I will hand it over to Brian.

Just want to make sure you have the correct one.