CONTINUOUS IMPROVEMENT IN INVESTMENT BANKING

Investment Banking Revenue By Product / Investment Banking Revenue By Industry

Capital Markets Participation. In one of the worst credit crunches in recent history, Jefferies helped clients raise more than $43 billion through more than 250 capital raising transactions. The number of equity and equity-linked transactions we managed or co-managed was up significantly over the previous year, to more than 170, with a considerable jump in lead-managed transactions. Our participation in debt transactions was also up significantly, to more than 80. Jefferies ranked as the top underwriter of 2007 high yield US new issues valued at $300 million and under³, and we continued our now seven-year run as the top underwriter of US high yield new issues valued at $150 million and under⁴. In addition, Leverage World named Jefferies High Yield Underwriter of the Year for 2007 based on the strong aftermarket performance of new issues⁵.

Our leveraged loan platform, Jefferies Finance, is now among the top 20 lead arrangers of institutional loans in the United States⁶. Despite the credit environment, Jefferies Finance continued to underwrite loans in the second half of the year and was profitable in every quarter of 2007.

Our equity-linked financing efforts continued to gain traction and provide creative options for our clients, as evidenced by one of our pre-IPO convertible offerings in the clean technology sector, which captured Equity Deal of the Year at the Euromoney and Ernst & Young 2007 Annual Global Renewable Energy Awards⁷.

Advisory Assignments. Over the course of the year, we worked on nearly 180 M&A transactions valued at $55.6 billion, and more than 30 completed and pending restructuring assignments. Jefferies ranked among the top 3 advisors of 2007 for deals under $500 million⁸, with top rankings in technology, aerospace and defense, and energy. Our presence among the private equity community continued to grow, with more than 90 transactions—nearly 20 percent—of our total transactions involving a financial sponsor. The Firm's global fund placement group, Helix Associates, acquired in 2005, represents clients that invest capital in North America, Europe and Asia. In 2007, Helix added a presence in San Francisco to its New York and London-based teams. Helix has successfully extended its franchise and now raises private equity funds for diverse strategies such as US and European buyouts, emerging markets, turnarounds and infrastructure investments. Aggregate capital raised in 2007 for our funds was 23 percent more than in 2006.

Sector Focus. We continue to gain traction in our markets, with all our groups performing well. In addition to the LongAcre Partners and Putnam Lovell acquisitions and new consumer and German teams, we also enhanced our energy, energy lending and UK healthcare teams, and appointed new heads of our maritime shipping and telecommunications groups, replacing retiring bankers in each case. In terms of revenues, energy (including maritime and oil services) accounted for 26 percent; industrial (including aerospace and defense and clean technology), 25 percent; technology, media and telecommunications, 24 percent; and financial services, consumer (including gaming) and healthcare combined, the remaining 25 percent.

Our technology practice completed nearly 120 transactions, valued at more than $20 billion, and ranked as the #1 technology M&A advisor for the third year in a row⁸. Our aerospace and defense practice completed more than 38 transactions, valued at $6.7 billion, including the #1 and #2 M&A Big Impact Deals of 2007, as ranked by Washington Technology⁹. The team was also the #1 aerospace and defense M&A advisor for three years running⁸. Our energy practice (including maritime and oil services) completed almost 80 transactions, valued at more than $30 billion, and ranked as the #1 M&A energy advisor for the second consecutive year⁸. In addition, the Firm captured three Deal of the Year awards from The Banker magazine for energy-related transactions involving companies in Norway, Greece and Madagascar¹⁰.

Europe and Asia. Our non-US activities are bearing fruit, currently accounting for about 15 percent of the Firm's investment banking revenues. In London, in addition to appointing a co-head of global investment banking, we added an experienced head of international equity capital markets to lead and grow our equity, equity-linked and structured products efforts. We participated in 17 equity and equity-linked transactions, valued at more than $1.9 billion. We served as Nomad or broker to 14 AIM-listed companies across the shipping, energy, clean technology, technology, industrial and biotechnology sectors. We also served as bookrunner for the 2007 International IPO of the Year, as determined by the Quoted Company Awards¹¹. In the Middle East and Asia, we have a growing practice in India, we helped raise more than $850 million for China-based companies during 2007, and our Dubai office has been active on a number of business fronts in further developing our international clientele and assisting in key transactions, most notably the sale of Aston Martin to an international consortium of investors.

Our Brand continues to gain recognition in the marketplace and to reflect the quality of our capabilities. In April, Thomson Financial's Buyouts magazine recognized Jefferies for our work with growing and mid-sized companies, naming our Firm Mid-Market Investment Bank of the Year for 2006. It's worth noting that Jefferies earned a similar honor for 2005 from Investment Dealers' Digest¹². In addition, Jefferies was named #1 investment bank in the boutique category on the AO Top Dealmakers List by AlwaysOn magazine and KPMG¹³.

3Thomson Financial/SDC, 2007. All high yield US new issues $300 million and under. Excludes mortgage and asset-backed securities. Full credit to lead manager, equal if joint. 4 Thomson Financial/SDC, 2001-2007. All high yield US new issues under $150 million. Excludes mortgage and asset-backed securities. Full credit to lead manager, equal if joint. 5 Published 1/25/08, based on data provided by FridsonVision, LLC. 6 LoanConnector, 2007. Based on volume. Data provided by Reuters LPC. 7 Announced September 2007. 8 Thomson Financial/SDC, 2007. US transactions announced or closed 1/1/07-12/31/07. Technology M&A transactions in North America and Western Europe announced 1/1/05-12/31/07, under $1 billion. Defense-related M&A transactions in North America and Western Europe announced or closed 1/1/05-12/31/07, all values. US Energy M&A transactions announced 1/1/06-12/31/07. Includes mergers, acquisitions and minority investments with disclosed and undisclosed values. Excludes tender offers, exchange offers, self-tenders, repurchases, remaining interests, privatizations. 9 Announced February 2008. 10 Announced May 2007. 11 Announced January 2008. 12 Published January 16, 2006. 13 Announced December 2007.