0001084580 jef:EpicGasMember 2018-10-01 2018-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, ~~2018~~2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-14947

JEFFERIES GROUP LLC

(Exact name of registrant as specified in its charter)



Delaware			95-4719745
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

520 Madison Avenue, ~~New York,~~	New York,	New York	10022
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: ~~(212)~~ (212) 284-2550

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



~~Large accelerated filer~~ ☐	~~Accelerated filer~~ ☐
~~Non-accelerated filer~~ ☒	~~Smaller reporting company~~ ☐
	Large accelerated filer	☐	Accelerated filer	☐
	Non-accelerated filer	☒	Smaller reporting company	☐
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
4.850% Senior Notes Due 2027	JEF/27A	New York Stock Exchange
5.125% Senior Notes Due 2023	JEF/23	New York Stock Exchange

The Registrant is a wholly-owned subsidiary of Jefferies Financial Group Inc. and meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with a reduced disclosure format as permitted by Instruction H(2).

JEFFERIES GROUP LLC

INDEX TO QUARTERLY REPORT ON FORM 10-Q

August 31, ~~2018~~2019

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

JEFFERIES GROUP LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)

(In thousands)


	August 31, 2018			November 30, 2017			August 31, 2019			November 30, 2018
ASSETS
Cash and cash equivalents ($1,094 and $7,514 at August 31, 2018 and November 30, 2017, respectively, related to consolidated VIEs)	$	4,812,564		$	5,164,492
Cash and cash equivalents ($1,151 and $1,096 at August 31, 2019 and November 30, 2018, respectively, related to consolidated VIEs)							$	4,665,490		$	5,145,886
Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations	913,456			578,014			658,335			707,960
Financial instruments owned, at fair value, (including securities pledged of $12,868,364 and $10,842,051 at August 31, 2018 and November 30, 2017, respectively; and $381 and $38,044 at August 31, 2018 and November 30, 2017, respectively, related to consolidated VIEs)	15,195,619			14,193,352
Financial instruments owned, at fair value (including securities pledged of $12,087,982 and $13,059,802 at August 31, 2019 and November 30, 2018, respectively; and $339 and $380 at August 31, 2019 and November 30, 2018, respectively, related to consolidated VIEs)							16,370,912			16,399,526
Loans to and investments in related parties	758,807			682,790			943,174			997,524
Securities borrowed	7,369,908			7,721,803			7,895,149			6,538,212
Securities purchased under agreements to resell	3,659,059			3,689,559
Securities received as collateral	—			103
Securities purchased under agreements to resell (includes $25,000 and $0 at fair value at August 31, 2019 and November 30, 2018, respectively)							4,499,995			2,785,758
Receivables:
Brokers, dealers and clearing organizations	2,524,122			2,514,838			2,927,789			3,218,984
Customers	1,951,807			1,563,758			1,686,214			2,017,090
Fees, interest and other ($0 and $197 at August 31, 2018 and November 30, 2017, respectively, related to consolidated VIEs)	308,855			381,231
Fees, interest and other							350,663			327,083
Premises and equipment	298,982			297,750			323,510			304,026
Goodwill	1,643,058			1,647,089			1,638,574			1,642,170
Other assets ($2 at both August 31, 2018 and November 30, 2017, related to consolidated VIEs)	1,136,236			1,270,912
Other assets ($2 at both August 31, 2019 and November 30, 2018, related to consolidated VIEs)							1,133,783			1,084,554
Total assets	$	40,572,473		$	39,705,691		$	43,093,588		$	41,168,773
LIABILITIES AND EQUITY
Short-term borrowings (includes $0 and $23,324 at fair value at August 31, 2018 and November 30, 2017, respectively)	$	382,006		$	436,215
Short-term borrowings							$	518,914		$	387,492
Financial instruments sold, not yet purchased, at fair value	8,128,200			8,171,929			10,296,315			9,478,944
Collateralized financings:
Securities loaned	2,531,504			2,843,911			2,182,865			1,838,688
Securities sold under agreements to repurchase	9,864,483			8,660,511			8,236,981			8,643,069
Other secured financings (includes $1,004,822 and $722,108 at August 31, 2018 and November 30, 2017, respectively, related to consolidated VIEs)	1,004,822			722,108
Obligation to return securities received as collateral	—			103
Other secured financings (includes $1,820,800 and $881,472 at August 31, 2019 and November 30, 2018, respectively, related to consolidated VIEs)							1,821,425			881,472
Payables:
Brokers, dealers and clearing organizations	1,938,308			2,226,768			2,253,033			2,448,059
Customers	3,187,580			2,664,023			3,599,564			3,176,727
Accrued expenses and other liabilities ($890 and $1,391 at August 31, 2018 and November 30, 2017, respectively, related to consolidated VIEs)	1,403,568			1,803,720
Long-term debt (includes $709,557 and $606,956 at fair value at August 31, 2018 and November 30, 2017, respectively)	6,574,866			6,416,844
Accrued expenses and other liabilities ($1,306 and $642 at August 31, 2019 and November 30, 2018, respectively, related to consolidated VIEs)							1,227,798			1,585,635
Long-term debt (includes $1,014,509 and $686,170 at fair value at August 31, 2019 and November 30, 2018, respectively)							6,767,163			6,546,283
Total liabilities	35,015,337			33,946,132			36,904,058			34,986,369
EQUITY
Member’s paid-in capital	5,745,719			5,895,601			6,387,097			6,376,662
Accumulated other comprehensive loss:
Accumulated other comprehensive income (loss):
Currency translation adjustments	(174,626		)	(98,909		)	(220,080		)	(185,804		)
Changes in instrument specific credit risk	(18,917		)	(27,888		)	20,805			(5,728		)
Cash flow hedges	446			(936		)	—			470
Additional minimum pension liability	(4,548		)	(9,046		)	(4,693		)	(4,761		)
Available-for-sale securities							231			(346		)
Total accumulated other comprehensive loss	(197,645		)	(136,779		)	(203,737		)	(196,169		)
Total Jefferies Group LLC member’s equity	5,548,074			5,758,822			6,183,360			6,180,493
Noncontrolling interests	9,062			737			6,170			1,911
Total equity	5,557,136			5,759,559			6,189,530			6,182,404
Total liabilities and equity	$	40,572,473		$	39,705,691		$	43,093,588		$	41,168,773

See accompanying notes to consolidated financial statements.

Table of Contents

JEFFERIES GROUP LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

(In thousands)


	Three Months Ended August 31,					Nine Months Ended August 31,					Three Months Ended August 31,						Nine Months Ended August 31,
	2018			2017		2018			2017		2019			2018			2019		2018
Revenues:
Commissions and other fees	$	155,539		$	139,082	$	461,545		$	437,547	$	171,003		$	162,700		$	493,843	$	482,194
Principal transactions	143,308			186,408		498,583			688,568		148,873			143,308			632,002		498,583
Investment banking	465,326			475,702		1,405,614			1,235,586		412,533			465,326			1,128,216		1,405,614
Asset management fees	5,184			4,272		16,130			16,368		3,340			5,184			14,559		16,130
Interest	305,347			230,496		870,490			660,323		383,596			305,347			1,163,022		870,490
Other	13,581			12,371		79,327			58,691		22,286			6,420			79,354		58,678
Total revenues	1,088,285			1,048,331		3,331,689			3,097,083		1,141,631			1,088,285			3,510,996		3,331,689
Interest expense	310,670			247,639		910,271			721,584		364,472			310,670			1,146,268		910,271
Net revenues	777,615			800,692		2,421,418			2,375,499		777,159			777,615			2,364,728		2,421,418
Non-interest expenses:
Compensation and benefits	428,033			462,933		1,327,760			1,373,627		411,936			428,033			1,261,506		1,327,760
Non-compensation expenses:
Floor brokerage and clearing fees	45,745			44,869		135,808			138,221		54,247			45,745			168,698		135,808
Underwriting costs	20,528			—		47,832			—
Technology and communications	76,877			72,440		222,335			205,425		86,649			76,877			247,464		222,335
Occupancy and equipment rental	25,559			27,736		75,143			77,145		29,300			25,559			87,587		75,143
Business development	39,733			23,125		124,233			72,223		36,526			39,733			103,430		124,233
Professional services	35,316			25,007		101,715			83,544		42,379			35,316			117,372		101,715
Underwriting costs											14,647			20,528			36,045		47,832
Other	18,723			22,318		54,888			62,670		18,400			18,723			41,828		54,888
Total non-compensation expenses	262,481			215,495		761,954			639,228		282,148			262,481			802,424		761,954
Total non-interest expenses	690,514			678,428		2,089,714			2,012,855		694,084			690,514			2,063,930		2,089,714
Earnings before income taxes	87,101			122,264		331,704			362,644		83,075			87,101			300,798		331,704
Income tax expense	26,923			38,439		234,337			95,009		18,250			26,923			79,789		234,337
Net earnings	60,178			83,825		97,367			267,635		64,825			60,178			221,009		97,367
Net earnings (loss) attributable to noncontrolling interests	(4		)	10		(1		)	50		(143		)	(4		)	140		(1		)
Net earnings attributable to Jefferies Group LLC	$	60,182		$	83,815	$	97,368		$	267,585	$	64,968		$	60,182		$	220,869	$	97,368

See accompanying notes to consolidated financial statements.

Table of Contents

JEFFERIES GROUP LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)


	Three Months Ended August 31,						Nine Months Ended August 31,						Three Months Ended August 31,						Nine Months Ended August 31,
	2018			2017			2018			2017			2019			2018			2019			2018
Net earnings	$	60,178		$	83,825		$	97,367		$	267,635		$	64,825		$	60,178		$	221,009		$	97,367
Other comprehensive income (loss), net of tax:
Currency translation and other adjustments (1)	(26,050		)	3,830			(71,219		)	27,182
Currency translation adjustments and other (1)													(28,023		)	(26,050		)	(34,208		)	(71,219		)
Changes in instrument specific credit risk (2)	1,067			3,508			8,971			(8,870		)	5,889			1,067			26,533			8,971
Cash flow hedges (3)	85			(1,585		)	1,382			(1,585		)	—			85			(470		)	1,382
Total other comprehensive income (loss), net of tax (4)	(24,898		)	5,753			(60,866		)	16,727
Unrealized gain on available-for-sale securities (4)													198			—			577			—
Total other comprehensive loss, net of tax (5)													(21,936		)	(24,898		)	(7,568		)	(60,866		)
Comprehensive income	35,280			89,578			36,501			284,362			42,889			35,280			213,441			36,501
Net earnings (loss) attributable to noncontrolling interests	(4		)	10			(1		)	50			(143		)	(4		)	140			(1		)
Comprehensive income attributable to Jefferies Group LLC	$	35,284		$	89,568		$	36,502		$	284,312		$	43,032		$	35,284		$	213,301		$	36,502

(1)

The amounts during the three and nine months ended August 31, 2019 include income tax benefits of $8.9 million and $10.6 million respectively, compared with $2.8 million in both the three and nine months ended August 31, 2018, ~~include~~related to the impact of certain discrete items related to tax planning for our non-U.S. subsidiaries in connection with the Tax Cuts and Jobs Act (the “Tax Act”). The amount during the nine months ended August 31, 2018 includes $5.3 million related to the transfer of the German Pension Plan, which was reclassified to Compensation and benefits expenses within the Consolidated Statements of Earnings and ($0.8) million related to the Tax ~~Cuts and Jobs~~ Act, ~~(the “Tax Act”),~~ which was reclassified to Member’s paid-in capital and a gain of $20.5 million related to foreign currency gains, which was reclassified to Other revenues within the Consolidated Statements of Earnings.

(2)

The amounts include income tax expenses of approximately $2.0 million and $9.0 million for the three and nine months ended August 31, 2019, respectively, and income tax expenses of approximately $0.3 million and $11.0 million for the three and nine months ended August 31, 2018, respectively. The amount during the nine months ended August 31, 2019 also includes gains of $0.5 million, net of taxes of $0.2 million, related to changes in instrument specific risk, which was reclassified to Principal transactions revenues within the Consolidated Statements of Earnings. The amounts during the three and nine months ended August 31, 2018 ~~include $2.8 million related to the impact of certain discrete items related to our non-U.S. subsidiaries planning for the Tax Act.~~

~~(2)~~

The amounts include income tax expense of approximately $0.3 million and $11.0 million for the three and nine months ended August 31, 2018, respectively, and income tax expense of approximately $2.1 million and income tax benefit of approximately $5.3 million for the three and nine months ended August 31, 2017, respectively. The amounts during the three and nine months ended August 31, 2018 also include ~~a gain~~gains of $0.1 million and $0.4 million, net of taxes of $0.1 million, respectively, related to changes in instrument specific ~~credit~~ risk, which was reclassified to Principal ~~transaction~~transactions revenues within the Consolidated Statements of Earnings. The amount during the nine months ended August 31, 2018 includes ($6.5) million related to the Tax Act, which was reclassified to Member’s paid-in capital.

(3)

The amount during the nine months ended August 31, 2019 includes income tax benefits of $0.2 million. The cash flow hedge loss of $0.5 million during the nine months ended August 31, 2019 was reclassified to Other revenues within the Consolidated Statement of Earnings due to the sale of all of our common shares of Epic Gas Ltd. (“Epic Gas”). Refer to Note 9, Investments for further information. The amount during the nine months ended August 31, 2018 includes income tax expenses of $0.7 million. The amount during the nine months ended August 31, 2018 also includes ($0.2) million related to the Tax Act, which was reclassified to Member’s paid-in capital.


(4)	The amount during the nine months ended August 31, 2019 includes income tax expense of approximately $0.2 million.


(5)	None of the components of other comprehensive ~~income (loss)~~loss are attributable to noncontrolling interests.

See accompanying notes to consolidated financial statements.

Table of Contents

JEFFERIES GROUP LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

(In thousands)



	Three Months Ended August 31,						Nine Months Ended August 31,
	2019			2018			2019			2018
Member’s paid-in capital:
Balance, beginning of period	$	6,354,613		$	5,715,628		$	6,376,662		$	5,895,601
Cumulative effect of the adoption of the new revenue standard, net of tax	—			—			—			(6,121		)
Net earnings attributable to Jefferies Group LLC	64,968			60,182			220,869			97,368
Distributions to Jefferies Financial Group Inc.	(32,484		)	(30,091		)	(210,434		)	(248,684		)
Tax Cuts and Jobs Act adjustment	—			—			—			7,555
Balance, end of period	$	6,387,097		$	5,745,719		$	6,387,097		$	5,745,719
Accumulated other comprehensive income (loss), net of tax:
Balance, beginning of period	$	(181,801	)	$	(172,747	)	$	(196,169	)	$	(136,779	)
Currency translation adjustments and other	(28,023		)	(26,050		)	(34,208		)	(71,219		)
Changes in instrument specific credit risk	5,889			1,067			26,533			8,971
Cash flow hedges	—			85			(470		)	1,382
Unrealized gain on available-for-sale securities	198			—			577			—
Balance, end of period	$	(203,737	)	$	(197,645	)	$	(203,737	)	$	(197,645	)
Total Jefferies Group LLC member’s equity	$	6,183,360		$	5,548,074		$	6,183,360		$	5,548,074
Noncontrolling interests:
Balance, beginning of period	$	6,313		$	750		$	1,911		$	737
Net earnings (loss) attributable to noncontrolling interests	(143		)	(4		)	140			(1		)
Contributions	—			—			6,600			10
Distributions	—			—			(2,481		)	—
Consolidation of asset management entity	—			8,316			—			8,316
Balance, end of period	$	6,170		$	9,062		$	6,170		$	9,062
Total equity	$	6,189,530		$	5,557,136		$	6,189,530		$	5,557,136

Nine Months Ended
August 31, 2018 Year Ended
November 30, 2017
Member’s paid-in capital:
Balance, beginning of period $ 5,895,601
$ 5,538,103
Cumulative effect of the adoption of the new revenue standard, net of tax (6,121 ) —
Net earnings attributable to Jefferies Group LLC 97,368
357,498
Distribution to Jefferies Financial Group Inc. (248,684 ) —
Tax Cuts and Jobs Act adjustment 7,555
—
Balance, end of period $ 5,745,719
$ 5,895,601
Accumulated other comprehensive income (loss), net of tax (1) (2):
Balance, beginning of period $ (136,779 ) $ (168,157 )
Currency adjustments (3) (75,717 ) 53,396
Changes in instrument specific credit risk (4) 8,971
(21,394 )
Cash flow hedges (5) 1,382
(936 )
Pension adjustments (6) 4,498
312
Balance, end of period $ (197,645 ) $ (136,779 )
Total Jefferies Group LLC member’s equity $ 5,548,074
$ 5,758,822
Noncontrolling interests:
Balance, beginning of period $ 737
$ 651
Net earnings (loss) attributable to noncontrolling interests (1 ) 86
Contributions 10
—
Consolidation of asset management entity 8,316
—
Balance, end of period $ 9,062
$ 737
Total equity $ 5,557,136
$ 5,759,559


~~(1)~~	~~The components of other comprehensive income (loss) are attributable to Jefferies Group LLC. None of the components of other comprehensive income (loss) are attributable to noncontrolling interests.~~


~~(2)~~	~~There were no material reclassifications out of Accumulated other comprehensive income (loss) during the year ended November 30, 2017.~~


~~(3)~~	The amount during the nine months ended August 31, 2018 includes a gain of $20.5 million related to foreign currency gains, which was reclassified to earnings, and $2.8 million related to the impact of certain discrete items related to tax planning for our non-U.S. subsidiaries in connection with the Tax Act.


~~(4)~~	The amount during the nine months ended August 31, 2018 includes a gain of $0.4 million, net of taxes of $0.1 million, related to changes in instrument specific credit risk, which was reclassified to earnings, and ~~($6.5) million~~ ~~related to the Tax Act, which was reclassified to Member’s paid-in capital.~~


~~(5)~~	~~The amount during the nine months ended August 31, 2018 includes ($0.2) million related to the Tax Act, which was reclassified to Member’s paid-in capital.~~


~~(6)~~	~~The amount during the nine months ended August 31, 2018 includes~~ ~~$5.3 million~~ ~~related to the transfer of the German Pension Plan, which was reclassified to earnings, and~~ ~~($0.8) million~~ ~~related to the Tax Act, which was reclassified to Member’s paid-in capital.~~

See accompanying notes to consolidated financial statements.

Table of Contents

JEFFERIES GROUP LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)


	Nine Months Ended August 31,						Nine Months Ended August 31,
	2018			2017			2019			2018
Cash flows from operating activities:
Net earnings	$	97,367		$	267,635		$	221,009		$	97,367
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization	10,208			1,820			24,626			10,208
Income on loans to and investments in related parties	(30,687		)	(65,323		)	(71,615		)	(30,687		)
Distributions received on investments in related parties	2,330			8,021			126,504			2,330
Other adjustments	(96,359		)	91,313			81,362			(96,359		)
Net change in assets and liabilities:
Securities deposited with clearing and depository organizations	64,890			119			(153		)	64,890
Receivables:
Brokers, dealers and clearing organizations	(27,967		)	(546,424		)	268,337			(27,967		)
Customers	(388,076		)	(448,494		)	330,869			(388,076		)
Fees, interest and other	64,563			(31,877		)	(27,007		)	64,563
Securities borrowed	309,722			—			(1,410,295		)	309,722
Financial instruments owned	(1,115,411		)	(160,080		)	(102,577		)	(1,115,411		)
Securities purchased under agreements to resell	(53,020		)	524,937			(1,772,192		)	(53,020		)
Other assets	117,440			(50,147		)	(74,840		)	117,440
Payables:
Brokers, dealers and clearing organizations	(260,193		)	(652,668		)	(169,021		)	(260,193		)
Customers	523,611			162,387			422,840			523,611
Securities loaned	(275,629		)	(68,310		)	387,016			(275,629		)
Financial instruments sold, not yet purchased	52,196			50,267			921,282			52,196
Securities sold under agreements to repurchase	1,250,575			1,668,725			(346,031		)	1,250,575
Accrued expenses and other liabilities	(392,471		)	209,756			(323,548		)	(392,471		)
Net cash provided by (used in) operating activities	(146,911		)	961,657
Net cash used in operating activities							(1,513,434		)	(146,911		)
Cash flows from investing activities:
Contributions to loans to and investments in related parties	(1,918,500		)	(2,916,204		)	(26,849		)	(1,918,500		)
Distributions from loans to and investments in related parties	1,873,000			2,729,276			24,629			1,873,000
Net payments on premises and equipment	(52,699		)	(53,595		)	(71,392		)	(52,699		)
Cash received from contingent consideration	—			1,342
Consolidation of asset management entity	130			—			—			130
Net cash used in investing activities	(98,069		)	(239,181		)	(73,612		)	(98,069		)

Continued on next page.

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CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED (UNAUDITED)

(In thousands)


	Nine Months Ended August 31,						Nine Months Ended August 31,
	2018			2017			2019			2018
Cash flows from financing activities:
Proceeds from short-term borrowings	616,283			144,174			1,418,000			616,283
Payments on short-term borrowings	(669,466		)	(247,130		)	(1,221,000		)	(669,466		)
Proceeds from issuance of long-term debt, net of issuance costs	1,321,714			1,030,027			908,332			1,321,714
Repayment of long-term debt	(1,025,563		)	(121,957		)	(756,614		)	(1,025,563		)
Dividend distribution	(218,593		)	—
Net proceeds from (payments on) other secured financings	282,714			(203,036		)
Distributions to Jefferies Financial Group Inc.							(208,647		)	(218,593		)
Net proceeds from other secured financings							939,953			282,714
Net change in bank overdrafts	2,369			(5,764		)	(9,028		)	2,369
Proceeds from noncontrolling interests	10			—
Proceeds from contributions of noncontrolling interests							6,600			10
Payments on distributions to noncontrolling interests							(2,481		)	—
Net cash provided by financing activities	309,468			596,314			1,075,115			309,468
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(16,084		)	5,391			(18,243		)	(16,084		)
Net increase in cash, cash equivalents and restricted cash	48,404			1,324,181
Net increase (decrease) in cash, cash equivalents and restricted cash							(530,174		)	48,404
Cash, cash equivalents and restricted cash at beginning of period	5,642,776			4,286,513			5,819,027			5,642,776
Cash, cash equivalents and restricted cash at end of period	$	5,691,180		$	5,610,694		$	5,288,853		$	5,691,180

Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest	$	1,001,307		$	777,969		$	1,205,380		$	1,001,307
Income taxes, net	152,600			3,329			72,925			152,600

The following presents our cash, cash equivalents and restricted cash by category within the Consolidated Statements of Financial Condition (in thousands):


	August 31, 2018		November 30, 2017		August 31, 2019		November 30, 2018
Cash and cash equivalents	$	4,812,564	$	5,164,492	$	4,665,490	$	5,145,886
Cash and securities segregated and on deposit for regulatory purposes with clearing and depository organizations	878,616		478,284		623,363		673,141
Total cash, cash equivalents and restricted cash	$	5,691,180	$	5,642,776	$	5,288,853	$	5,819,027

See accompanying notes to consolidated financial statements.

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JEFFERIES GROUP LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Index



Note	Page
Note 1. Organization and Basis of Presentation	9
Note 2. Summary of Significant Accounting Policies	10
Note 3. Accounting Developments	1110
Note 4. Fair Value Disclosures	1412
Note 5. Derivative Financial Instruments	3029
Note 6. Collateralized Transactions	3634
Note 7. Securitization Activities	37
Note 8. Variable Interest Entities	38
Note ~~8. Variable Interest Entities~~9. Investments	4041
~~Note 9. Investments~~	43
Note 10. Goodwill and Intangible Assets	44
Note 11. Short-Term Borrowings	46
Note ~~11. Short-Term Borrowings~~12. Long-Term Debt	47
Note ~~12. Long-Term Debt~~13. Revenues from Contracts with Customers	48
Note ~~13. Revenues from Contracts with Customers~~14. Compensation Plans	4951
Note ~~14. Compensation Plans~~15. Income Taxes	52
Note ~~15. Income Taxes~~16. Commitments, Contingencies and Guarantees	53
Note 17. Net Capital Requirements	54
Note ~~16. Commitments, Contingencies and Guarantees~~18. Segment Reporting	55
~~Note 17. Net Capital Requirements~~	57
~~Note 18. Segment Reporting~~	57
Note 19. Related Party Transactions	59
~~Note 20. Subsequent Events~~	6156

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

Note 1. Organization and Basis of Presentation

Organization

Jefferies Group LLC is the largest independent ~~U.S-headquartered~~U.S.-headquartered global full service, integrated securities and investment banking firm. The accompanying Consolidated Financial Statements represent the accounts of Jefferies Group LLC and all our subsidiaries (together “we” or “us”). The subsidiaries of Jefferies Group LLC include Jefferies LLC, Jefferies International Limited, Jefferies Hong Kong Limited, Jefferies Financial Services, Inc., Jefferies Funding LLC, Jefferies Leveraged Credit Products, LLC and all other entities in which we have a controlling financial interest or are the primary beneficiary.

Jefferies Group LLC is a direct wholly owned subsidiary of publicly traded Jefferies Financial Group Inc. (“Jefferies”)~~, formerly known as Leucadia National Corporation.~~. Jefferies does not guarantee any of our outstanding debt securities. Our 3.875% Convertible Senior Debentures due 2029 (principal amount of $345.0 million) (the “debentures”) were convertible into Jefferies common shares. At November 22, 2017, all of the remaining convertible debentures were called for optional redemption and were redeemed on January 5, 2018 (see Note 12, Long-Term Debt, for further details). Jefferies Group LLC is a Securities and Exchange Commission (“SEC”) reporting company, filing annual, quarterly and periodic financial reports. Richard Handler, our Chief Executive Officer and Chairman, is the Chief Executive Officer of Jefferies, as well as a Director of Jefferies. Brian P. Friedman, our Chairman of the Executive Committee, is Jefferies’ President and a Director of Jefferies.

On October 1, 2018, Jefferies transferred its 50% interest in Berkadia Commercial Mortgage Holding LLC (“Berkadia”) and investments in certain separately managed accounts and funds to us. On November 1, 2018, we purchased Leucadia Investment Management Limited, an investment advisory company, from Leucadia Asset Management Holding LLC, a subsidiary of Jefferies. These transfers were accomplished as capital contributions from Jefferies of approximately $598.2 million and total cash payments of $76.0 million to Jefferies during the fourth quarter of 2018. In connection with ~~the acquisition~~these transfers, related deferred tax liabilities of approximately $50.9 million were transferred to us, for which Jefferies Bache from Prudential on July 1, 2011, we acquired a defined benefits pension plan located in Germany (the “German Pension Plan”) for the benefit of eligible employees of Jefferies Bache in that territory. On December 28, 2017, a Liquidation Insurance Contract was entered into with Generali Lebensversicherung AG (“Generali”) to transfer the defined benefit pension obligations and insurance contracts to Generali, for approximately €6.5 million, which was paid in January 2018 and released us from any and all obligations under the German Pension Plan. In addition, on December 28, 2017, we entered into an agreement with Prudential under which we received $3.25 million as consideration for the release of Prudential by us from their indemnity relating to the German Pension Plan defined benefit pension obligations.has indemnified us.

We operate in ~~two~~2 reportable business segments, Capital Markets and Asset Management. For further information on our reportable business segments, refer to Note 18, Segment Reporting.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended November 30, ~~2017.~~2018. Certain footnote disclosures included in our Annual Report on Form 10-K for the year ended November 30, ~~2017~~2018 have been condensed or omitted from the consolidated financial statements as they are not required for interim reporting under U.S. GAAP. The Consolidated Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for the fair presentation of the results for the interim period. The results presented in the Consolidated Financial Statements for interim periods are not necessarily indicative of the results for the entire year.

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period to prepare these consolidated financial statements in conformity with U.S. GAAP. The most important of these estimates and assumptions relate to fair value measurements, compensation and benefits, goodwill and intangible assets, the ability to realize certain deferred tax assets and the recognition and measurement of uncertain tax positions. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates.

During the third quarter of 2019, we have reclassified the presentation of certain other fees, primarily related to prime brokerage services offered to clients. These fees were previously presented as Other revenues in our Consolidated Statements of Earnings and are now presented within Commissions and other fees. Previously reported results are presented on a comparable basis. This change had the impact of increasing Commissions and other fees and reducing Other revenues by $7.2 million and $20.6 million for the three and nine months ended August 31, 2018, respectively. There is no impact on Total revenues as a result of this change in presentation.

Consolidation

Our policy is to consolidate all entities that we control by ownership of a majority of the outstanding voting stock. In addition, we consolidate entities that meet the definition of a variable interest entity (“VIE”) for which we are the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. For consolidated entities that are less than wholly owned, the ~~third-party’s~~third party’s holding of equity interest is presented as Noncontrolling interests in our Consolidated Statements of Financial Condition and Consolidated Statements of Changes in Equity. The portion of net earnings attributable to the noncontrolling interests is presented as Net earnings (loss) attributable to noncontrolling interests in our Consolidated Statements of Earnings.

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(Unaudited)

In situations in which we have significant influence, but not control, of an entity that does not qualify as a VIE, we apply either the equity method of accounting or fair value accounting pursuant to the fair value option election under U.S. GAAP, with our portion of net earnings or gains and losses recorded in Other revenues or Principal ~~transaction~~transactions revenues, respectively. We also have formed nonconsolidated investment vehicles with third-party investors that are typically organized as partnerships or limited liability companies and are carried at fair value. We act as general partner or managing member for these investment vehicles and have generally provided the third-party investors with termination or “kick-out” rights.

Intercompany accounts and transactions are eliminated in consolidation.

~~Changes to the Consolidated Statements of Operations~~

We have reorganized the presentation of our gains and losses generated from our capital invested in asset management funds managed by us and related parties in the first quarter of 2018. This was previously presented as Asset management: Investment income (loss) from investments in managed funds and is now presented within Principal transactions revenues.

~~Changes to the Consolidated Statements of Cash Flows~~

In the first quarter of 2018, we made certain changes to the presentation of our Consolidated Statements of Cash Flows in order to net certain Short-term borrowings, primarily related to revolving intraday credit advances. Refer to Note 11, Short-Term Borrowings, for further information. The changes had the impact of reducing Proceeds from short-term borrowings by $25,640.4 million and increasing Payments on short-term borrowings by $25,640.4 million for the nine month period ended August 31, 2017. There was no change to the total Net cash provided by financing activities. We do not believe these changes are material to our Consolidated Statements of Cash Flows.

Note 2. Summary of Significant Accounting Policies

For a detailed discussion about the Company’s significant accounting policies, see Note 2, Summary of Significant Accounting Policies, in our consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended November 30, ~~2017.~~2018.

During the nine months ended August 31, 2018, other than the following, there were no significant changes made to the Company’s significant accounting policies. The accounting policy changes are attributable to the adoption of the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (the “new revenue standard” or Accounting Standards Codification 606, (“ASC 606”)) on December 1, 2017. These revenue recognition policy updates are applied prospectively in our financial statements from December 1, 2017 forward. Reported financial information for the historical comparable period was not revised and continues to be reported under the accounting standards in effect during the historical periods.

~~Investment Banking Revenues:~~

~~Advisory fees from mergers and acquisitions engagements are recognized at a point in time when the related transaction is completed.~~

Expenses associated with investment banking advisory engagements are deferred only to the extent they are explicitly reimbursable by the client and the related revenue is recognized at a point in time. All other investment banking advisory related expenses, including expenses incurred related to restructuring advisory engagements, are expensed as incurred.

All investment banking expenses are recognized within their respective expense category on the Consolidated Statements of Earnings and any expenses reimbursed by clients are recognized as Investment banking revenues.

~~Asset Management Fees:~~

~~Performance fee revenue is generally recognized only at the end of the performance period to the extent that the benchmark return has been met.~~

~~Refer to Note 3, Accounting Developments, and Note 13, Revenues From Contracts With Customers, for further information.~~

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~~JEFFERIES GROUP LLC AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(Unaudited)~~

Note 3. Accounting Developments

Accounting Standards to be Adopted in Future Periods

Consolidation. In October 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-17, Consolidation: Targeted Improvements to Related Party Guidance for Variable Interest Entities. The guidance requires indirect interests held through related parties under common control arrangements be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. The guidance is effective in the first quarter of fiscal 2021. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

Internal-Use Software. In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The guidance amends the definition of a hosting arrangement and requires that the customer in a hosting arrangement that is a service contract capitalize certain implementation costs as if the arrangement was an internal-use software project. The guidance is effective in the first quarter of fiscal 2021. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

Defined Benefit Plans. In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General: Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. The objective of the guidance is to improve the effectiveness of disclosure requirements on defined benefit pension plans and other postretirement plans. The guidance is effective in the first quarter of fiscal 2021. We do not believe the new guidance will have a material impact on our consolidated financial statements.

Derivatives and Hedging. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. The objective of the guidance is to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The guidance is effective in the first quarter of fiscal 2020. We do not believe the new guidance will have a material impact on our consolidated financial statements.

~~Stock Compensation.~~ In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation: Scope of Modification Accounting. The guidance provides clarity and reduces diversity in practice and cost and complexity when accounting for a change to the terms or conditions of a share-based payment award. The guidance is effective in the first quarter of fiscal 2019. We do not believe the new guidance will have a material impact on our consolidated financial statements.

Goodwill. In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies goodwill impairment testing. The guidance is effective in the first quarter of fiscal 2021. We do not believe the new guidance will have a material impact on our consolidated financial statements.

Financial Instruments—Credit Losses. In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. The guidance provides for estimating credit losses on certain types of financial instruments by introducing an approach based on expected losses. The guidance is effective in the first quarter of fiscal 2021. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

Leases. In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). The guidance affects the accounting for leases and provides for a lessee model that brings substantially all leases that are longer than one year onto the balance sheet, which will result in the recognition of a right of use asset and a corresponding lease liability. The right of use asset and lease liability will be measured initially using the present value of the remaining rental payments. ~~A significant portion of the~~The population of contracts that will be subject to recognition on our Consolidated Statements of Financial Condition ~~have~~has been identified; however, ~~their~~the initial measurement of the contracts still remains under evaluation. We are currently modifying our lease accounting systems to enable us to comply with the accounting requirements of this guidance. In July 2018, the FASB issued ASU No. 2018-11, Leases: Targeted Improvements. The guidance allows an entity to recognize a cumulative-effect adjustment to the opening balance of retained earnings upon adoption of ASU 2016-02. We plan on adopting both lease ASUs in the first quarter of fiscal 2020 with a cumulative-effect adjustment to opening member’s equity in the period of adoption. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

~~Adopted Accounting Standards~~

~~Fair Value Measurement.~~ In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The objective of this guidance is to improve the effectiveness of disclosure requirements on fair value measurement by eliminating certain disclosure requirements for fair value measurements for all entities, requiring public entities to disclose certain new information and modifying some disclosure requirements. We early adopted this guidance in the third quarter of fiscal 2018 and the adoption did not have a material impact on our consolidated financial statements.

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(Unaudited)

~~Comprehensive Income.~~ In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The guidance allows companies the option to reclassify stranded taxes from Accumulated other comprehensive income to retained earnings due to the decrease in the Federal Statutory tax rate from 35% to 21% resulting from the Tax Act. The amount of the reclassification is the difference between the historical corporate income tax rate and the newly enacted corporate income tax rate. We early adopted this guidance as of February 28, 2018, resulting in a reclassification adjustment of $7.6 million related to unamortized pension liabilities, cash flow hedges and instrument specific credit risk in our consolidated financial statements.

~~Retirement Benefits.~~ In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The guidance impacts the presentation of net periodic pension costs in the statement of income. We early adopted this guidance in the first quarter of fiscal 2018 and the adoption did not have a material impact on our Consolidated Statements of Earnings.

~~Statement of Cash Flows.~~ In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The guidance adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash (“ASU 2016-18”), which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. We adopted both ASUs in the first quarter of fiscal 2018. Prior periods were retrospectively adjusted to conform to the current period’s presentation. The adoption of ASU 2016-15 did not have a material impact on our Consolidated Statements of Cash Flows. Upon adoption of ASU 2016-18, we recorded an increase of $45.9 million in Net cash used for operating activities for the nine months ended August 31, 2017 related to reclassifying the changes in our restricted cash balance from operating activities to the cash and cash equivalent balances within the Consolidated Statements of Cash Flows.

~~Financial Instruments.~~ ~~In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments~~—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. We adopted the guidance on financial liabilities under the fair value option in the first quarter of fiscal 2016 and we adopted the remaining guidance in the first quarter of fiscal 2018. The adoption of this accounting guidance did not have a material effect on our consolidated financial statements.

~~Revenue Recognition~~. We adopted the new revenue standard on December 1, 2017 and recognized a reduction of $6.1 million after-tax to beginning Member’s paid-in capital as the cumulative effect of adoption of this accounting change. The impact of adoption is primarily related to investment banking expenses that were deferred as of November 30, 2017 under the previously existing accounting guidance, which would have been expensed in prior periods under the new revenue standard, and investment banking revenues that were previously recognized in prior periods, which would have been deferred as of November 30, 2017 under the new revenue standard. We elected to adopt the new guidance using a modified retrospective approach applied to contracts that were not completed as of December 1, 2017. Accordingly, the new revenue standard is applied prospectively in our financial statements from December 1, 2017 forward and reported financial information for historical comparable periods is not revised and continues to be reported under the accounting standards in effect during those historical periods.

The new revenue guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other U.S. GAAP, and as a result, did not have an impact on the elements of our Consolidated Statements of Earnings most closely associated with financial instruments, including Principal transaction revenues, Interest income and Interest expense. The new revenue standard primarily impacts the following of our revenue recognition and presentation accounting policies:

~~Investment Banking Revenues.~~ Advisory fees from mergers and acquisitions engagements are recognized at a point in time when the related transaction is completed, as the performance obligation is to successfully broker a specific transaction.

~~Certain Capital Markets Revenues.~~ Revenues associated with price stabilization activities as part of a securities underwriting were historically recognized as part of Investment banking revenues. Under the new revenue standard, revenue from these activities is recognized within Principal transaction revenues, as these revenues are not considered to be within the scope of the new standard.

~~Investment Banking Advisory Expenses.~~ Historically, expenses associated with investment banking advisory assignments were deferred until reimbursed by the client, the related fee revenue is recognized or the engagement is otherwise concluded. Under the new revenue standard, expenses are deferred only to the extent they are explicitly reimbursable by the client and the related revenue is recognized at a point in time. All other investment banking advisory related expenses, including expenses incurred related to restructuring assignments, are expensed as incurred.

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~~(Unaudited)~~

~~Investment Banking Underwriting and Advisory Expenses.~~ Expenses have historically been recorded net of client reimbursements and/or netted against revenues. Under the new revenue standard, all investment banking expenses will be recognized within their respective expense category on the Consolidated Statements of Earnings and any expense reimbursements will be recognized as Investment banking revenues (~~i.e., expenses are no longer recorded net of client reimbursements and are not netted against revenues).~~

~~Asset Management Fees.~~ In certain asset management fee arrangements, we receive performance-based fees, which vary with performance or, in certain cases, are earned when the return on assets under management exceed certain benchmark returns or other performance targets. Historically, performance fees have been accrued (or reversed) quarterly based on measuring performance to date versus any relevant benchmark return hurdles stated in the investment management agreement. Under the new revenue standard, performance fees are considered variable as they are subject to fluctuation (~~e.g., based on market performance) and/or are contingent on a future event during the measurement period (e.g.~~, exceeding a specified benchmark index) and are recognized only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved. Accordingly, performance fee revenue will generally be recognized only at the end of the performance period to the extent that the benchmark return has been met.

There was no significant impact as a result of applying the new revenue standard to our consolidated financial statements for the three and nine months ended August 31, 2018, except as it relates to the presentation of investment banking expenses. The table below presents the impact to revenues and expenses as a result of the change in presentation of investment banking expenses (in thousands):

Three Months Ended August 31, 2018 Nine Months Ended August 31, 2018
As Reported ASC 606 Impact Adjusted (1) As Reported ASC 606 Impact Adjusted (1)
Revenues:
Investment banking $ 465,326
$ 36,319
$ 429,007
$ 1,405,614
$ 101,146
$ 1,304,468
Total revenues 1,088,285
36,319
1,051,966
3,331,689
101,146
3,230,543
Net revenues 777,615
36,319
741,296
2,421,418
101,146
2,320,272
Non-interest expenses:
Underwriting costs 20,528
20,528
—
47,832
47,832
—
Technology and communications 76,877
97
76,780
222,335
311
222,024
Business development 39,733
14,946
24,787
124,233
50,187
74,046
Professional services 35,316
401
34,915
101,715
1,968
99,747
Other expenses 18,723
347
18,376
54,888
848
54,040
Total non-compensation expenses 262,481
36,319
226,162
761,954
101,146
660,808
Total non-interest expenses 690,514
36,319
654,195
2,089,714
101,146
1,988,568


~~(1)~~	~~The amounts reflect each affected financial statement line item as they would have been reported under U.S. GAAP, prior to the adoption of the new revenue standard.~~

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~~(Unaudited)~~

Note 4. Fair Value Disclosures

The following is a summary of our financial assets and liabilities that are accounted for at fair value on a recurring basis, excluding Investments at fair value based on net asset value (“NAV”) of ~~$325.3~~$573.5 million and ~~$215.4~~$322.9 million at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively, by level within the fair value hierarchy (in thousands):


	August 31, 2018											August 31, 2019
	Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)			Total		Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)			Total
Assets:
Financial instruments owned:
Corporate equity securities	$	1,881,376	$	72,569	$	48,045	$	—		$	2,001,990	$	2,388,213	$	162,382	$	50,600	$	—		$	2,601,195
Corporate debt securities	—		2,286,852		9,651		—			2,296,503		—		2,892,471		9,288		—			2,901,759
Collateralized debt obligations and collateralized loan obligations	—		82,339		23,601		—			105,940		—		114,045		21,135		—			135,180
U.S. government and federal agency securities	2,876,669		45,889		—		—			2,922,558		2,115,452		204,076		—		—			2,319,528
Municipal securities	—		749,616		—		—			749,616		—		706,375		—		—			706,375
Sovereign obligations	1,319,415		666,745		—		—			1,986,160		1,521,540		1,088,927		—		—			2,610,467
Residential mortgage-backed securities	—		1,894,533		4,954		—			1,899,487		—		1,405,246		17,929		—			1,423,175
Commercial mortgage-backed securities	—		791,449		23,916		—			815,365		—		373,319		5,462		—			378,781
Other asset-backed securities	—		263,967		69,305		—			333,272		—		490,055		34,598		—			524,653
Loans and other receivables	—		1,455,496		48,985		—			1,504,481		—		1,460,982		75,563		—			1,536,545
Derivatives	6,644		3,496,790		3,137		(3,331,143		)	175,428		9,258		2,954,937		16,024		(2,494,475		)	485,744
Investments at fair value	—		—		79,539		—			79,539		—		41,548		132,505		—			174,053
Total financial instruments owned, excluding Investments at fair value based on NAV	$	6,084,104	$	11,806,245	$	311,133	$	(3,331,143	)	$	14,870,339	$	6,034,463	$	11,894,363	$	363,104	$	(2,494,475	)	$	15,797,455
Securities purchased under agreements to resell												$	—	$	—	$	25,000	$	—		$	25,000

Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	1,312,412	$	1,507	$	413	$	—		$	1,314,332	$	2,750,131	$	7,097	$	211	$	—		$	2,757,439
Corporate debt securities	—		1,375,530		1,557		—			1,377,087		—		1,803,666		1,202		—			1,804,868
U.S. government and federal agency securities	1,127,608		—		—		—			1,127,608		1,922,145		—		—		—			1,922,145
Sovereign obligations	1,513,237		958,998		55		—			2,472,290		1,281,332		853,882		—		—			2,135,214
Commercial mortgage-backed securities	—		—		70		—			70		—		—		35		—			35
Loans	—		1,136,579		8,661		—			1,145,240		—		1,097,178		16,630		—			1,113,808
Derivatives	4,976		4,125,994		12,134		(3,451,531		)	691,573		7,327		3,087,898		66,787		(2,599,206		)	562,806
Total financial instruments sold, not yet purchased	$	3,958,233	$	7,598,608	$	22,890	$	(3,451,531	)	$	8,128,200	$	5,960,935	$	6,849,721	$	84,865	$	(2,599,206	)	$	10,296,315
Long-term debt	$	—	$	545,927	$	163,630	$	—		$	709,557	$	—	$	666,446	$	348,063	$	—		$	1,014,509


(1)	Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions with the same counterparty.

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	November 30, 2017											November 30, 2018
	Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)			Total		Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)			Total
Assets:
Financial instruments owned:
Corporate equity securities	$	1,801,453	$	57,091	$	22,009	$	—		$	1,880,553	$	1,907,945	$	118,681	$	51,040	$	—		$	2,077,666
Corporate debt securities	—		3,261,300		26,036		—			3,287,336		—		2,683,180		9,484		—			2,692,664
Collateralized debt obligations and collateralized loan obligations	—		139,166		30,004		—			169,170		—		72,949		25,815		—			98,764
U.S. government and federal agency securities	1,269,230		39,443		—		—			1,308,673		1,789,614		56,592		—		—			1,846,206
Municipal securities	—		710,513		—		—			710,513		—		894,253		—		—			894,253
Sovereign obligations	1,381,552		1,035,907		—		—			2,417,459		1,769,556		1,043,409		—		—			2,812,965
Residential mortgage-backed securities	—		1,453,294		26,077		—			1,479,371		—		2,163,629		19,603		—			2,183,232
Commercial mortgage-backed securities	—		508,115		12,419		—			520,534		—		819,406		10,886		—			830,292
Other asset-backed securities	—		217,111		61,129		—			278,240		—		239,381		53,175		—			292,556
Loans and other receivables	—		1,620,581		47,304		—			1,667,885		—		2,056,593		46,985		—			2,103,578
Derivatives	160,168		3,248,586		9,295		(3,254,216		)	163,833		12,186		2,524,988		5,922		(2,412,486		)	130,610
Investments at fair value	—		946		93,454		—			94,400		—		—		113,831		—			113,831
Total financial instruments owned, excluding Investments at fair value based on NAV	$	4,612,403	$	12,292,053	$	327,727	$	(3,254,216	)	$	13,977,967	$	5,479,301	$	12,673,061	$	336,741	$	(2,412,486	)	$	16,076,617
Securities received as collateral	$	103	$	—	$	—	$	—		$	103

Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	1,456,675	$	32,122	$	48	$	—		$	1,488,845	$	1,685,071	$	1,444	$	—	$	—		$	1,686,515
Corporate debt securities	—		1,688,825		522		—			1,689,347		—		1,505,618		522		—			1,506,140
U.S. government and federal agency securities	1,430,737		—		—		—			1,430,737		1,384,295		—		—		—			1,384,295
Sovereign obligations	1,216,643		956,992		—		—			2,173,635		1,735,242		661,095		—		—			2,396,337
Commercial mortgage-backed securities	—		—		105		—			105
Loans	—		1,148,824		3,486		—			1,152,310		—		1,371,630		6,376		—			1,378,006
Derivatives	247,919		3,399,239		16,041		(3,426,249		)	236,950		26,471		3,585,249		27,536		(2,511,605		)	1,127,651
Total financial instruments sold, not yet purchased	$	4,351,974	$	7,226,002	$	20,202	$	(3,426,249	)	$	8,171,929	$	4,831,079	$	7,125,036	$	34,434	$	(2,511,605	)	$	9,478,944
Short-term borrowings	$	—	$	23,324	$	—	$	—		$	23,324
Long-term debt	$	—	$	606,956	$	—	$	—		$	606,956	$	—	$	485,425	$	200,745	$	—		$	686,170
Obligation to return securities received as collateral	$	103	$	—	$	—	$	—		$	103


(1)	Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions with the same counterparty.

The following is a description of the valuation basis, including valuation techniques and inputs, used in measuring our financial assets and liabilities that are accounted for at fair value on a recurring basis:

Corporate Equity Securities

•

Exchange-Traded Equity Securities: Exchange-traded equity securities are measured based on quoted closing exchange prices, which are generally obtained from external pricing services, and are categorized within Level 1 of the fair value hierarchy, otherwise they are categorized within Level 2 of the fair value hierarchy. To the extent these securities are actively traded, valuation adjustments are not applied.

~~Exchange-Traded Equity Securities:~~ Exchange-traded equity securities are measured based on quoted closing exchange prices, which are generally obtained from external pricing services, and are categorized within Level 1 of the fair value hierarchy, otherwise they are categorized within Level 2 of the fair value hierarchy. To the extent these securities are actively traded, valuation adjustments are not applied.

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~~Non-Exchange-Traded Equity Securities~~: Non-exchange-traded equity securities are measured primarily using broker quotations, pricing data from external pricing services and prices observed from recently executed market transactions and are categorized within Level 2 of the fair value hierarchy. Where such information is not available, non-exchange-traded equity securities are categorized within Level 3 of the fair value hierarchy and measured using valuation techniques involving quoted prices of or market data for comparable companies, similar company ratios and multiples (~~e.g.~~, price/Earnings before interest, taxes, depreciation and amortization (“EBITDA”), price/book value), discounted cash flow analyses and transaction prices observed from subsequent financing or capital issuance by the company. When using pricing data of comparable companies, judgment must be applied to adjust the pricing data to account for differences between the measured security and the comparable security (~~e.g., issuer market capitalization, yield, dividend rate, geographical concentration).~~

~~Equity Warrants:~~ Non-exchange-traded equity warrants are measured primarily using pricing data from external pricing services, prices observed from recently executed market transactions and broker quotations and are categorized within Level 2 of the fair value hierarchy. Where such information is not available, non-exchange-traded equity warrants are generally categorized within Level 3 of the fair value hierarchy and are measured using the Black-Scholes model with key inputs impacting the valuation including the underlying security price, implied volatility, dividend yield, interest rate curve, strike price and maturity date.

•

Non-Exchange-Traded Equity Securities: Non-exchange-traded equity securities are measured primarily using broker quotations, pricing data from external pricing services and prices observed from recently executed market transactions and are categorized within Level 2 of the fair value hierarchy. Where such information is not available, non-exchange-traded equity securities are categorized within Level 3 of the fair value hierarchy and measured using valuation techniques involving quoted prices of or market data for comparable companies, similar company ratios and multiples (e.g., price/Earnings before interest, taxes, depreciation and amortization (“EBITDA”), price/book value), discounted cash flow analyses and transaction prices observed from subsequent financing or capital issuance by the company. When using pricing data of comparable companies, judgment must be applied to adjust the pricing data to account for differences between the measured security and the comparable security (e.g., issuer market capitalization, yield, dividend rate, geographical concentration).

•

Equity Warrants: Non-exchange-traded equity warrants are measured primarily using pricing data from external pricing services, prices observed from recently executed market transactions and broker quotations and are categorized within Level 2 of the fair value hierarchy. Where such information is not available, non-exchange-traded equity warrants are generally categorized within Level 3 of the fair value hierarchy and are measured using the Black-Scholes model with key inputs impacting the valuation including the underlying security price, implied volatility, dividend yield, interest rate curve, strike price and maturity date.

Corporate Debt Securities

~~Corporate Bonds:~~ Corporate bonds are measured primarily using pricing data from external pricing services and broker quotations, where available, prices observed from recently executed market transactions and bond spreads or credit default swap spreads of the issuer adjusted for basis differences between the swap curve and the bond curve. Corporate bonds measured using these valuation methods are categorized within Level 2 of the fair value hierarchy. If broker quotes, pricing data or spread data is not available, alternative valuation techniques are used including cash flow models incorporating interest rate curves, single name or index credit default swap curves for comparable issuers and recovery rate assumptions. Corporate bonds measured using alternative valuation techniques are categorized within Level 3 of the fair value hierarchy and are a limited portion of our corporate bonds.

~~High Yield Corporate and Convertible Bonds:~~ A significant portion of our high yield corporate and convertible bonds are categorized within Level 2 of the fair value hierarchy and are measured primarily using broker quotations and pricing data from external pricing services, where available, and prices observed from recently executed market transactions of institutional size. Where pricing data is less observable, valuations are categorized within Level 3 of the fair value hierarchy and are based on pending transactions involving the issuer or comparable issuers, prices implied from an issuer’s subsequent financing or recapitalization, models incorporating financial ratios and projected cash flows of the issuer and market prices for comparable issuers.

•

Investment Grade Corporate Bonds: Investment grade corporate bonds are measured primarily using pricing data from external pricing services and broker quotations, where available, prices observed from recently executed market transactions and bond spreads or credit default swap spreads of the issuer adjusted for basis differences between the swap curve and the bond curve. Investment grade corporate bonds measured using these valuation methods are categorized within Level 2 of the fair value hierarchy. If broker quotes, pricing data or spread data is not available, alternative valuation techniques are used including cash flow models incorporating interest rate curves, single name or index credit default swap curves for comparable issuers and recovery rate assumptions. Investment grade corporate bonds measured using alternative valuation techniques are categorized within Level 2 or Level 3 of the fair value hierarchy and are a limited portion of our investment grade corporate bonds.

•

High Yield Corporate and Convertible Bonds: A significant portion of our high yield corporate and convertible bonds are categorized within Level 2 of the fair value hierarchy and are measured primarily using broker quotations and pricing data from external pricing services, where available, and prices observed from recently executed market transactions of institutional size. Where pricing data is less observable, valuations are categorized within Level 3 of the fair value hierarchy and are based on pending transactions involving the issuer or comparable issuers, prices implied from an issuer’s subsequent financing or recapitalization, models incorporating financial ratios and projected cash flows of the issuer and market prices for comparable issuers.

Collateralized Debt Obligations and Collateralized Loan Obligations

Collateralized debt obligations (“CDOs”) and collateralized loan obligations (“CLOs”) are measured based on prices observed from recently executed market transactions of the same or similar security or based on valuations received from third-party brokers or data providers and are categorized within Level 2 or Level 3 of the fair value hierarchy depending on the observability and significance of the pricing inputs. Valuation that is based on recently executed market transactions of similar securities incorporates additional review and analysis of pricing inputs and comparability criteria, including, but not limited to, collateral type, tranche type, rating, origination year, prepayment rates, default rates and loss severity.

U.S. Government and Federal Agency Securities

~~U.S. Treasury Securities:~~ ~~U.S. Treasury securities are measured based on quoted market prices and categorized within Level 1 of the fair value hierarchy.~~

~~U.S. Agency Debt Securities:~~ Callable and non-callable U.S. agency debt securities are measured primarily based on quoted market prices obtained from external pricing services and are generally categorized within Level 1 or Level 2 of the fair value hierarchy.


•	U.S. Treasury Securities: U.S. Treasury securities are measured based on quoted market prices obtained from external pricing services and categorized within Level 1 of the fair value hierarchy.


•	U.S. Agency Debt Securities: Callable and non-callable U.S. agency debt securities are measured primarily based on quoted market prices obtained from external pricing services and are generally categorized within Level 1 or Level 2 of the fair value hierarchy.

Municipal Securities

Municipal securities are measured based on quoted prices obtained from external pricing services and are generally categorized within Level 2 of the fair value hierarchy.

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Sovereign Obligations

Sovereign government obligations are measured based on quoted market prices obtained from external pricing services, where available, or recently executed independent transactions of comparable size. Sovereign government obligations, with consideration given to the country of issuance, are generally categorized within Level 1 or Level 2 of the fair value hierarchy, primarily based on the country of issuance. Sovereign government obligations are categorized within Level 2 or Level 3 of the fair value hierarchy depending on the observability of these input parameters.hierarchy.

Residential Mortgage-Backed Securities

~~Agency Residential Mortgage-Backed Securities (“RMBS”):~~ Agency RMBS include mortgage pass-through securities (fixed and adjustable rate), collateralized mortgage obligations and principal-only and interest-only (including inverse interest-only) securities. Agency RMBS are generally measured using recent transactions, pricing data from external pricing services or expected future cash flow techniques that incorporate prepayment models and other prepayment assumptions to amortize the underlying mortgage loan collateral and are categorized within Level 2 of the fair value hierarchy. We use prices observed from recently executed transactions to develop market-clearing spread and yield curve assumptions. Valuation inputs with regard to the underlying collateral incorporate factors such as weighted average coupon, loan-to-value, credit scores, geographic location, maximum and average loan size, originator, servicer and weighted average loan age.

~~Non-Agency RMBS:~~ The fair value of non-agency RMBS is determined primarily using discounted cash flow methodologies and securities are categorized within Level 2 or Level 3 of the fair value hierarchy based on the observability and significance of the pricing inputs used. Performance attributes of the underlying mortgage loans are evaluated to estimate pricing inputs, such as prepayment rates, default rates and the severity of credit losses. Attributes of the underlying mortgage loans that affect the pricing inputs include, but are not limited to, weighted average coupon; average and maximum loan size; loan-to-value; credit scores; documentation type; geographic location; weighted average loan age; originator; servicer; historical prepayment, default and loss severity experience of the mortgage loan pool; and delinquency rate. Yield curves used in the discounted cash flow models are based on observed market prices for comparable securities and published interest rate data to estimate market yields. In addition, broker quotes, where available, are also referenced to compare prices primarily on interest-only securities.

•

Agency Residential Mortgage-Backed Securities (“RMBS”): Agency RMBS include mortgage pass-through securities (fixed and adjustable rate), collateralized mortgage obligations and principal-only and interest-only (including inverse interest-only) securities. Agency RMBS are generally measured using recent transactions, pricing data from external pricing services or expected future cash flow techniques that incorporate prepayment models and other prepayment assumptions to amortize the underlying mortgage loan collateral and are categorized within Level 2 or Level 3 of the fair value hierarchy. We use prices observed from recently executed transactions to develop market-clearing spread and yield curve assumptions. Valuation inputs with regard to the underlying collateral incorporate factors such as weighted average coupon, loan-to-value, credit scores, geographic location, maximum and average loan size, originator, servicer and weighted average loan age.

•

Non-Agency RMBS: The fair value of non-agency RMBS is determined primarily using discounted cash flow methodologies and securities are categorized within Level 2 or Level 3 of the fair value hierarchy based on the observability and significance of the pricing inputs used. Performance attributes of the underlying mortgage loans are evaluated to estimate pricing inputs, such as prepayment rates, default rates and the severity of credit losses. Attributes of the underlying mortgage loans that affect the pricing inputs include, but are not limited to, weighted average coupon; average and maximum loan size; loan-to-value; credit scores; documentation type; geographic location; weighted average loan age; originator; servicer; historical prepayment, default and loss severity experience of the mortgage loan pool; and delinquency rate. Yield curves used in the discounted cash flow models are based on observed market prices for comparable securities and published interest rate data to estimate market yields. In addition, broker quotes, where available, are also referenced to compare prices primarily on interest-only securities.

Commercial Mortgage-Backed Securities

~~Agency Commercial Mortgage-Backed Securities (“CMBS”):~~ Government National Mortgage Association (“GNMA”) project loan bonds are measured based on inputs corroborated from and benchmarked to observed prices of recent securitization transactions of similar securities with adjustments incorporating an evaluation of various factors, including prepayment speeds, default rates and cash flow structures, as well as the likelihood of pricing levels in the current market environment. Federal National Mortgage Association (“FNMA”) Delegated Underwriting and Servicing (“DUS”) mortgage-backed securities are generally measured by using prices observed from recently executed market transactions to estimate market-clearing spread levels for purposes of estimating fair value. GNMA project loan bonds and FNMA DUS mortgage-backed securities are categorized within Level 2 of the fair value hierarchy.

~~Non-Agency CMBS:~~ Non-agency CMBS are measured using pricing data obtained from external pricing services, prices observed from recently executed market transactions or based on expected cash flow models that incorporate underlying loan collateral characteristics and performance. Non-Agency CMBS are categorized within Level 2 or Level 3 of the fair value hierarchy depending on the observability of the underlying inputs.

•

Agency Commercial Mortgage-Backed Securities (“CMBS”): Government National Mortgage Association (“GNMA”) project loan bonds are measured based on inputs corroborated from and benchmarked to observed prices of recent securitization transactions of similar securities with adjustments incorporating an evaluation of various factors, including prepayment speeds, default rates and cash flow structures, as well as the likelihood of pricing levels in the current market environment. Federal National Mortgage Association (“FNMA”) Delegated Underwriting and Servicing (“DUS”) mortgage-backed securities are generally measured by using prices observed from recently executed market transactions to estimate market-clearing spread levels for purposes of estimating fair value. GNMA project loan bonds and FNMA DUS mortgage-backed securities are categorized within Level 2 of the fair value hierarchy.

•

Non-Agency CMBS: Non-agency CMBS are measured using pricing data obtained from external pricing services, prices observed from recently executed market transactions or based on expected cash flow models that incorporate underlying loan collateral characteristics and performance. Non-Agency CMBS are categorized within Level 2 or Level 3 of the fair value hierarchy depending on the observability of the underlying inputs.

Other Asset-Backed Securities

Other asset-backed securities (“ABS”) include, but are not limited to, securities backed by auto loans, credit card receivables, student loans and other consumer loans and are categorized within Level 2 or Level 3 of the fair value hierarchy. Valuations are primarily determined using pricing data obtained from external pricing services, broker quotes and prices observed from recently executed market transactions. In addition, recent transaction data from comparable deals is deployed to develop market clearing yields and cumulative loss assumptions. The cumulative loss assumptions are based on the analysis of the underlying collateral and comparisons to earlier deals from the same issuer to gauge the relative performance of the deal.

Loans and Other Receivables

•

Corporate Loans: Corporate loans categorized within Level 2 of the fair value hierarchy are measured based on market consensus pricing service quotations. Where available, market price quotations from external pricing services are reviewed to ensure they are supported by transaction data. Corporate loans categorized within Level 3 of the fair value hierarchy are measured based on price quotations that are considered to be less transparent, market prices for debt securities of the same creditor and estimates of future cash flows incorporating assumptions regarding creditor default and recovery rates and consideration of the issuer’s capital structure.

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~~Loans and Other Receivables~~

~~Corporate Loans:~~ Corporate loans categorized within Level 2 of the fair value hierarchy are measured based on market consensus pricing service quotations. Where available, market price quotations from external pricing services are reviewed to ensure they are supported by transaction data. Corporate loans categorized within Level 3 of the fair value hierarchy are measured based on price quotations that are considered to be less transparent, market prices for debt securities of the same creditor and estimates of future cash flows incorporating assumptions regarding creditor default and recovery rates and consideration of the issuer’s capital structure.

~~Participation Certificates in Agency Residential Loans:~~ Valuations of participation certificates in agency residential loans are based on observed market prices of recently executed purchases and sales of similar loans and data provider pricing. The loan participation certificates are categorized within Level 2 of the fair value hierarchy given the observability and volume of recently executed transactions and availability of data provider pricing.

~~Project Loans and Participation Certificates in GNMA Project and Construction Loans:~~ Valuations of participation certificates in GNMA project and construction loans are based on inputs corroborated from and benchmarked to observed prices of recent securitizations with similar underlying loan collateral to derive an implied spread. Securitization prices are adjusted to estimate the fair value of the loans to account for the arbitrage that is realized at the time of securitization. The measurements are categorized within Level 2 of the fair value hierarchy given the observability and volume of recently executed transactions.

~~Consumer Loans and Funding Facilities:~~ Consumer and small business whole loans and related funding facilities are valued based on observed market transactions and incorporating valuation inputs including, but not limited to, delinquency and default rates, prepayment rates, borrower characteristics, loan risk grades and loan age. These assets are categorized within Level 2 or Level 3 of the fair value hierarchy.

~~Escrow and Trade Claim Receivables:~~ Escrow and trade claim receivables are categorized within Level 3 of the fair value hierarchy where fair value is estimated based on reference to market prices and implied yields of debt securities of the same or similar issuers. Escrow and trade claim receivables are categorized within Level 2 of the fair value hierarchy where fair value is based on recent observations in the same receivable.

•

Participation Certificates in Agency Residential Loans: Valuations of participation certificates in agency residential loans are based on observed market prices of recently executed purchases and sales of similar loans and data provider pricing. The loan participation certificates are categorized within Level 2 of the fair value hierarchy given the observability and volume of recently executed transactions and availability of data provider pricing.

•

Project Loans and Participation Certificates in GNMA Project and Construction Loans: Valuations of participation certificates in GNMA project and construction loans are based on inputs corroborated from and benchmarked to observed prices of recent securitizations with similar underlying loan collateral to derive an implied spread. Securitization prices are adjusted to estimate the fair value of the loans to account for the arbitrage that is realized at the time of securitization. The measurements are categorized within Level 2 of the fair value hierarchy given the observability and volume of recently executed transactions.

•

Consumer Loans and Funding Facilities: Consumer and small business whole loans and related funding facilities are valued based on observed market transactions and incorporating valuation inputs including, but not limited to, delinquency and default rates, prepayment rates, borrower characteristics, loan risk grades and loan age. These assets are categorized within Level 2 or Level 3 of the fair value hierarchy.

•

Escrow and Claim Receivables: Escrow and claim receivables are categorized within Level 3 of the fair value hierarchy where fair value is estimated based on reference to market prices and implied yields of debt securities of the same or similar issuers. Escrow and claim receivables are categorized within Level 2 of the fair value hierarchy where fair value is based on recent observations in the same receivable.

Derivatives

~~Listed Derivative Contracts:~~ Listed derivative contracts that are actively traded are measured based on quoted exchange prices, broker quotes or vanilla option valuation models, such as Black-Scholes, using observable valuation inputs from the principal market or consensus pricing services. Exchange quotes and/or valuation inputs are generally obtained from external vendors and pricing services. Broker quotes are validated directly through observable and tradeable quotes. Listed derivative contracts that use unadjusted exchange close prices are generally categorized within Level 1 of the fair value hierarchy. All other listed derivative contracts are generally categorized within Level 2 of the fair value hierarchy.

~~Over-the-Counter (“OTC”) Derivative Contracts:~~ OTC derivative contracts are generally valued using models, whose inputs reflect assumptions that we believe market participants would use in valuing the derivative in a current transaction. Inputs to valuation models are appropriately calibrated to market data. For many OTC derivative contracts, the valuation models do not involve material subjectivity as the methodologies do not entail significant judgment and the inputs to valuation models do not involve a high degree of subjectivity as the valuation model inputs are readily observable or can be derived from actively quoted markets. OTC derivative contracts are primarily categorized within Level 2 of the fair value hierarchy given the observability and significance of the inputs to the valuation models. Where significant inputs to the valuation are unobservable, derivative instruments are categorized within Level 3 of the fair value hierarchy.

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•

Listed Derivative Contracts: Listed derivative contracts that are actively traded are measured based on quoted exchange prices, broker quotes or vanilla option valuation models, such as Black-Scholes, using observable valuation inputs from the principal market or consensus pricing services. Exchange quotes and/or valuation inputs are generally obtained from external vendors and pricing services. Broker quotes are validated directly through observable and tradeable quotes. Listed derivative contracts that use unadjusted exchange close prices are generally categorized within Level 1 of the fair value hierarchy. All other listed derivative contracts are generally categorized within Level 2 of the fair value hierarchy.

•

Over-the-Counter (“OTC”) Derivative Contracts: OTC derivative contracts are generally valued using models, whose inputs reflect assumptions that we believe market participants would use in valuing the derivative in a current transaction. Where available, valuation inputs are calibrated from observable market data. For many OTC derivative contracts, the valuation models do not involve material subjectivity as the methodologies do not entail significant judgment and the inputs to valuation models do not involve a high degree of subjectivity as the valuation model inputs are readily observable or can be derived from actively quoted markets. OTC derivative contracts are primarily categorized within Level 2 of the fair value hierarchy given the observability and significance of the inputs to the valuation models. Where significant inputs to the valuation are unobservable, derivative instruments are categorized within Level 3 of the fair value hierarchy.

OTC options include OTC equity, foreign exchange, interest rate and commodity options measured using various valuation models, such as Black-Scholes, with key inputs including the underlying security price, foreign exchange spot rate, commodity price, implied volatility, dividend yield, interest rate curve, strike price and maturity date. Discounted cash flow models are utilized to measure certain OTC derivative contracts including the valuations of our interest rate swaps, which incorporate observable inputs related to interest rate curves, valuations of our foreign exchange forwards and swaps, which incorporate observable inputs related to foreign currency spot rates and forward curves and valuations of our commodity swaps and forwards, which incorporate observable inputs related to commodity spot prices and forward curves. Discounted cash flow models are also utilized to measure certain variable funding note swaps, which are backed by CLOs and incorporates constant prepayment rate, constant default rate and loss severity assumptions. Credit default swaps include both index and single-name credit default swaps. ~~External prices are~~Where available, ~~as inputs~~external data is used in measuring index credit default swaps and single-name credit default swaps. For commodity and equity total return swaps, market prices are generally observable for the underlying asset and used as the basis for measuring the fair value of the derivative contracts. Total return swaps executed on other underlyings are measured based on valuations received from external pricing services.

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Investments at Fair Value

Investments at fair value ~~based on NAV~~ includes investments in hedge funds, fund of funds and private equity funds, which are measured at the NAV of the funds, provided by the fund managers and are excluded from the fair value hierarchy. Investments at fair value also include direct equity investments in private companies, which are measured at fair value using valuation techniques involving quoted prices of or market data for comparable companies, similar company ratios and multiples (e.g., price/EBITDA, price/book value), discounted cash flow analyses and transaction prices observed for subsequent financing or capital issuance by the company. Direct equity investments in private companies are categorized within Level 2 or Level 3 of the fair value hierarchy. Additionally, investments at fair value include investments in insurance contracts relating to our defined benefit plan in Germany. Fair value for the insurance contracts is determined using a third party and is categorized within Level 3 of the fair value hierarchy.

The following tables present information about our investments in entities that have the characteristics of an investment company (in thousands):

August 31, 2018
Fair Value (1)
Unfunded
Commitments

Redemption Frequency
(if currently eligible)
Equity Long/Short Hedge Funds (2) $ 16,606
$ —
Monthly, Quarterly
Fixed Income and High Yield Hedge Funds (3) 219
—
—
Fund of Funds (4) 175
—
—
Equity Funds (5) 36,702
20,209
—
Commodity Funds (6) 10,228
—
—
Multi-asset Funds (7) 261,350
—
—
Total $ 325,280
$ 20,209



	August 31, 2019
	Fair Value (1)		Unfunded Commitments
Equity Long/Short Hedge Funds (2)	$	292,205	$	—
Equity Funds (3)	33,891		19,154
Commodity Funds (4)	15,212		—
Multi-asset Funds (5)	231,991		—
Other Funds (6)	158		—
Total	$	573,457	$	19,154

November 30, 2017
Fair Value (1)
Unfunded
Commitments

Redemption Frequency
(if currently eligible)
Equity Long/Short Hedge Funds (2) $ 33,176
$ —
Monthly, Quarterly
Fixed Income and High Yield Hedge Funds (3) 417
—
—
Fund of Funds (4) 189
—
—
Equity Funds (5) 26,798
19,084
—
Multi-asset Funds (7) 154,805
—
—
Total $ 215,385
$ 19,084



	November 30, 2018
	Fair Value (1)		Unfunded Commitments
Equity Long/Short Hedge Funds (2)	$	15,338	$	—
Equity Funds (3)	40,070		20,996
Commodity Funds (4)	10,129		—
Multi-asset Funds (5)	256,972		—
Other Funds (6)	400		—
Total	$	322,909	$	20,996


(1)	Where fair value is calculated based on NAV, fair value has been derived from each of the funds’ capital statements.

(2)

This category includes investments in hedge funds that invest, long and short, primarily in equity securities in domestic and international markets in both the public and private sectors. At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, approximately 2%94% and 1%0%, respectively, of the fair value of investments in this category cannot be redeemed because these investments include restrictions that do not allow for redemption in the first 36 months after acquisition. At August 31, 2019 and November 30, 2018, approximately 6% and 97%, respectively, of the fair value of investments in this category are ~~classified as being in liquidation.~~redeemable quarterly with 60 days prior written notice.

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(3)	This category includes investments in funds that invest in loans secured by a first trust deed on property, domestic and international public high yield debt, private high yield investments, senior bank loans, public leveraged equities, distressed debt and private equity investments. There are no redemption provisions.


~~(4)~~	This category includes investments in fund of funds that invest in various private equity funds. The investments in this category are managed by us and have no redemption provisions. These investments are gradually being liquidated or we have requested redemption, however, we are unable to estimate when these funds will be received.

~~(5)~~

At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, the investments in this category include investments in equity funds that invest in the equity of various U.S. and foreign private companies in the energy, technology, internet service and telecommunication service industries. These investments cannot be redeemed; instead, distributions are received through the liquidation of the underlying assets of the funds which are primarily expected to be liquidated in approximately one to ~~ten~~nine years.


~~(6)~~(4)	This category includes investments in a hedge ~~funds~~fund that ~~invest,~~invests, long and short, primarily in commodities. Investments in this category are redeemable quarterly with 60 days prior written notice.

~~(7)~~(5)

This category includes investments in hedge funds that invest, long and short, primarily in multi-asset securities in domestic and international markets in both the public and private sectors. At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, investments representing approximately ~~17%~~4% and ~~12%~~15%, respectively, of the fair value of investments in this category are redeemable monthly with 30 days prior written notice.

~~Other Secured Financings~~

~~Other secured financings that are accounted for at~~

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(6)

This category includes investments in a fund that invests in loans secured by a first trust deed on property, domestic and international public high yield debt, private high yield investments, senior bank loans, public leveraged equities, distressed debt and private equity investments and there are no redemption provisions. This category also includes investments in a fund of funds that invests in various private equity funds that are managed by us and have no redemption provisions. Investments in the fund of funds are gradually being liquidated, however, the timing of when the proceeds will be received is uncertain.

Securities Purchased Under Agreements to Resell

Securities purchased under agreements to resell may include embedded call features. The valuation of these instruments is based on review of expected future cash flows, interest rates, funding spreads and the fair value ~~include notes issued by consolidated VIEs, which~~of the underlying collateral. Securities purchased under agreements to resell are categorized within ~~Level 2 or~~ Level 3 of the fair value ~~hierarchy. Fair value is based on recent transaction prices for similar assets.~~hierarchy due to limited observability of the embedded derivative and unobservable credit spreads.

~~Short-term Borrowings /~~ Long-term Debt

Short-term borrowings that are accounted for at fair value include equity-linked notes, which are generally categorized within Level 2 of the fair value hierarchy, as the fair value is based on the price of the underlying equity security. Long-term debt includes variable rate, fixed-to-floating rate, ~~CMS (constant~~constant maturity ~~swap),~~swap, digital and Bermudan structured notes. These are valued using various valuation models that incorporate our own credit spread, market price quotations from external pricing sources referencing the appropriate interest rate curves, volatilities and other inputs as well as prices for transactions in a given note during the period. Long-term debt notes are generally categorized within Level 2 of the fair value hierarchy where market trades have been observed during the quarter, otherwise categorized within Level 3.

2018

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(Unaudited)

Level 3 Rollforwards

The following is a summary of changes in fair value of our financial assets and liabilities that have been categorized within Level 3 of the fair value hierarchy for the three months ended August 31, ~~2018~~2019 (in thousands):


	Three Months Ended August 31, 2018																																		Three Months Ended August 31, 2019
			Total gains/losses (realized and unrealized) (1)																		Net transfers into/ (out of) Level 3							For instruments still held at August 31, 2018, changes in unrealized gains/(losses) included in:									Total gains/losses (realized and unrealized) (1)																		Net transfers into/ (out of) Level 3							For instruments still held at August 31, 2019, changes in unrealized gains/(losses) included in:
	Balance at May 31, 2018					Purchases				Sales				Settlements				Issuances						Balance at August 31, 2018			earnings (1)				other comprehensive income (1)			Balance at May 31, 2019						Purchases				Sales				Settlements				Issuances						Balance at August 31, 2019			Earnings (1)				Other comprehensive income (1)
Assets:
Financial instruments owned:
Corporate equity securities	$	42,901	$	12,128			$	17,652			$	(23,010	)		$	(302	)		$	—	$	(1,324	)		$	48,045		$	9,468			$	—		$	59,307	$	12,542			$	16,508			$	(17,502	)		$	—			$	—	$	(20,255	)		$	50,600		$	12,062			$	—
Corporate debt securities	28,066		1,057				507				(21,403		)		(59		)		—		1,483				9,651			(165		)		—			7,429		(3,072		)		1,175				(1,942		)		(85		)		—		5,783				9,288			(3,047		)		—
CDOs and CLOs	30,603		567				238,281				(240,002		)		(2,127		)		—		(3,721		)		23,601			(2,338		)		—			16,195		(1,514		)		—				—				—				—		6,454				21,135			(1,503		)		—
RMBS	3,655		(66		)		72				(1,597		)		(1		)		—		2,891				4,954			90				—			17,266		(1,917		)		—				(65		)		(22		)		—		2,667				17,929			(1,435		)		—
CMBS	27,239		(222		)		8				—				(1,156		)		—		(1,953		)		23,916			(288		)		—			12,530		(2,003		)		—				(1,703		)		(3,362		)		—		—				5,462			(3,143		)		—
Other ABS	55,535		(2,269		)		307,358				(290,838		)		(4,356		)		—		3,875				69,305			(1,124		)		—			43,185		(1,689		)		13,497				(6,975		)		(5,500		)		—		(7,920		)		34,598			(1,068		)		—
Loans and other receivables	64,036		(1,353		)		14,932				(23,700		)		(3,453		)		—		(1,477		)		48,985			1,007				—			98,484		(2,847		)		26,921				(33,409		)		(1,287		)		—		(12,299		)		75,563			(2,392		)		—
Investments at fair value	79,488		—				51				—				—				—		—				79,539			—				—			103,833		(6,407		)		240				(296		)		—				—		35,135				132,505			(6,407		)		—
Securities purchased under agreements to resell																																			25,000		—				—				—				—				—		—				25,000			—				—
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	87	$	326			$	—			$	—			$	—			$	—	$	—			$	413		$	(326	)		$	—		$	221	$	401			$	(221	)		$	—			$	(190	)		$	—	$	—			$	211		$	(35	)		$	—
Corporate debt securities	522		39				—				—				996				—		—				1,557			(39		)		—			669		(650		)		(34		)		—				(369		)		—		1,586				1,202			649				—
Sovereign obligations	—		3				(598		)		629				—				—		21				55			(124		)		—
CMBS	—		70				—				—				—				—		—				70			(70		)		—			—		—				—				35				—				—		—				35			—				—
Loans	12,881		(148		)		(4,871		)		1,787				—				—		(988		)		8,661			149				—			9,428		(520		)		(10,281		)		5,384				—				—		12,619				16,630			531				—
Net derivatives (2)	5,874		1,107				—				—				1,990				—		26				8,997			(2,090		)		—			47,449		(19,519		)		—				6,766				(14		)		—		16,081				50,763			18,507				—
Long-term debt	160,626		3,004				—				—				—				—		—				163,630			(2,953		)		(51		)	236,562		7,455				—				—				—				114,641		(10,595		)		348,063			(8,162		)		706


(1)	Realized and unrealized gains/losses are primarily reported in Principal ~~transaction~~transactions revenues in our Consolidated Statements of Earnings. Changes in instrument-specific credit risk related to structured notes are included in our Consolidated Statements of Comprehensive Income, net of tax.


(2)	Net derivatives represent Financial instruments owned—Derivatives and Financial instruments sold, not yet purchased—Derivatives.

Analysis of Level 3 Assets and Liabilities for the Three Months Ended August 31, 2019

During the three months ended August 31, 2019, transfers of assets of $79.0 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

Investments as fair value of $35.1 million and Loans and other receivables of $23.7 million due to reduced pricing transparency.

During the three months ended August 31, 2019, transfers of assets of $69.4 million from Level 3 to Level 2 are primarily attributed to:

Loans and other receivables of $36.0 million and Corporate equity securities of $22.1 million due to greater pricing transparency supporting classification into Level 2.

During the three months ended August 31, 2019, transfers of liabilities of $43.5 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

Net derivatives of $17.6 million, Loans of $13.3 million and structured notes of $11.0 million due to reduced market and pricing transparency.

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(Unaudited)

During the three months ended August 31, 2019, transfers of liabilities of $23.8 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

Structured notes of $21.6 million due to greater market transparency.

Net losses on Level 3 assets were $6.9 million and net gains on Level 3 liabilities were $12.8 million for the three months ended August 31, 2019. Net losses on Level 3 assets were primarily due to decreased market values across Investments at fair value, Corporate debt securities, loans and other receivables and CMBS, partially offset by increased market values across Corporate equity securities. Net gains on Level 3 liabilities were primarily due to decreased market values across certain derivatives.

The following is a summary of changes in fair value of our financial assets and liabilities that have been categorized within Level 3 of the fair value hierarchy for the nine months ended August 31, 2019 (in thousands):



	Nine Months Ended August 31, 2019
			Total gains/losses (realized and unrealized) (1)														Net transfers into/ (out of) Level 3					For instruments still held at August 31, 2019, changes in unrealized gains/(losses) included in:
	Balance at November 30, 2018					Purchases			Sales			Settlements			Issuances					Balance at August 31, 2019		Earnings (1)			Other comprehensive income (1)
Assets:
Financial instruments owned:
Corporate equity securities	$	51,040	$	16,381		$	23,172		$	(25,431	)	$	(669	)	$	—	$	(13,893	)	$	50,600	$	14,953		$	—
Corporate debt securities	9,484		(4,904		)	6,080			(10,544		)	(553		)	—		9,725			9,288		(5,325		)	—
CDOs and CLOs	25,815		(5,892		)	48,112			(43,230		)	(275		)	—		(3,395		)	21,135		(5,614		)	—
RMBS	19,603		(2,573		)	2,166			(2,022		)	(171		)	—		926			17,929		(2,166		)	—
CMBS	10,886		(2,196		)	11			(2,023		)	(6,638		)	—		5,422			5,462		(4,326		)	—
Other ABS	53,175		(929		)	14,698			(2,494		)	(30,623		)	—		771			34,598		(961		)	—
Loans and other receivables	46,985		3,933			178,069			(166,496		)	(8,379		)	—		21,451			75,563		682			—
Investments at fair value	113,831		(3,971		)	31,583			(296		)	—			—		(8,642		)	132,505		(3,971		)	—
Securities purchased under agreements to resell	—		—			—			—			—			25,000		—			25,000		—			—
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	—	$	401		$	—		$	—		$	(190	)	$	—	$	—		$	211	$	(35	)	$	—
Corporate debt securities	522		(867		)	—			—			(524		)	—		2,071			1,202		867			—
CMBS	—		—			—			35			—			—		—			35		—			—
Loans	6,376		(1,342		)	(8,553		)	9,929			—			—		10,220			16,630		1,583			—
Net derivatives (2)	21,614		(48,746		)	(2,829		)	16,313			1,609			—		62,802			50,763		40,052			—
Long-term debt	200,745		(5,286		)	—			—			(11,250		)	204,710		(40,856		)	348,063		(4,517		)	9,804


(1)	Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in our Consolidated Statements of Earnings. Changes in instrument-specific credit risk related to structured notes are included in our Consolidated Statements of Comprehensive Income, net of tax.


(2)	Net derivatives represent Financial instruments owned—Derivatives and Financial instruments sold, not yet purchased—Derivatives.

Analysis of Level 3 Assets and Liabilities for the Nine Months Ended August 31, 2019

During the nine months ended August 31, 2019, transfers of assets of $60.2 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

Loans and other receivables of $30.6 million, other ABS of $10.8 million and Corporate debt securities of $10.5 million due to reduced pricing transparency.

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During the nine months ended August 31, 2019, transfers of assets of $47.8 million from Level 3 to Level 2 are primarily attributed to:

Corporate equity securities of $14.8 million, other ABS of $10.0 million, Loans and other receivables of $9.2 million and Investments at fair value of $8.6 million due to greater pricing transparency supporting classification into Level 2.

During the nine months ended August 31, 2019, transfers of liabilities of $98.3 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

Net derivatives of $64.5 million and structured notes of $20.8 million due to reduced market and pricing transparency.

During the nine months ended August 31, 2019, transfers of liabilities of $64.1 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

Structured notes of $61.7 million due to greater market transparency.

Net losses on Level 3 assets were $0.2 million and net gains on Level 3 liabilities were $55.8 million for the nine months ended August 31, 2019. Net losses on Level 3 assets were primarily due to decreased market values across Corporate debt securities, CDOs and CLOs and Investments at fair value, partially offset by increased market values across Corporate equity securities. Net gains on Level 3 liabilities were primarily due to decreased market values across derivatives and valuations of certain structured notes.



	Three Months Ended August 31, 2018
	Balance at May 31, 2018		Total gains/losses (realized and unrealized) (1)			Purchases			Sales			Settlements			Issuances		Net transfers into/ (out of) Level 3			Balance at August 31, 2018		For instruments still held at August 31, 2018, changes in unrealized gains/(losses) included in:
																						earnings (1)			other comprehensive income (1)
Assets:
Financial instruments owned:
Corporate equity securities	$	42,901	$	12,128		$	17,652		$	(23,010	)	$	(302	)	$	—	$	(1,324	)	$	48,045	$	9,468		$	—
Corporate debt securities	28,066		1,057			507			(21,403		)	(59		)	—		1,483			9,651		(165		)	—
CDOs and CLOs	30,603		567			238,281			(240,002		)	(2,127		)	—		(3,721		)	23,601		(2,338		)	—
RMBS	3,655		(66		)	72			(1,597		)	(1		)	—		2,891			4,954		90			—
CMBS	27,239		(222		)	8			—			(1,156		)	—		(1,953		)	23,916		(288		)	—
Other ABS	55,535		(2,269		)	307,358			(290,838		)	(4,356		)	—		3,875			69,305		(1,124		)	—
Loans and other receivables	64,036		(1,353		)	14,932			(23,700		)	(3,453		)	—		(1,477		)	48,985		1,007			—
Investments at fair value	79,488		—			51			—			—			—		—			79,539		—			—
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	87	$	326		$	—		$	—		$	—		$	—	$	—		$	413	$	(326	)	$	—
Corporate debt securities	522		39			—			—			996			—		—			1,557		(39		)	—
Sovereign obligations	—		3			(598		)	629			—					21			55		(124		)	—
CMBS	—		70			—			—			—			—		—			70		(70		)	—
Loans	12,881		(148		)	(4,871		)	1,787			—			—		(988		)	8,661		149			—
Net derivatives (2)	5,874		1,107			—			—			1,990			—		26			8,997		(2,090		)	—
Long-term debt	160,626		3,004			—			—			—			—		—			163,630		(2,953		)	(51		)

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(Unaudited)


(1)	Realized and unrealized gains/losses are reported in Principal transactions revenues in our Consolidated Statements of Earnings. Changes in instrument-specific credit risk related to structured notes are included in our Consolidated Statement of Comprehensive Income, net of tax.


(2)	Net derivatives represent Financial instruments owned—Derivatives and Financial instruments sold, not yet purchased—Derivatives.

Analysis of Level 3 Assets and Liabilities for the three months ended August 31, 2018

During the three months ended August 31, 2018, transfers of assets of $13.6 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

Other ABS of $3.9 million, RMBS of $2.9 million and CMBS of $2.6 million due to reduced pricing transparency.

During the three months ended August 31, 2018, transfers of assets of $13.8 million from Level 3 to Level 2 are primarily attributed to:

CMBS of $4.6 million, CDOs and CLOs of $3.7 million and corporate equity securities of $2.6 million due to greater pricing transparency supporting classification into Level 2.

Net gains on Level 3 assets were $9.8 million and net losses on Level 3 liabilities were $4.4 million for the three months ended August 31, 2018. Net gains on Level 3 assets were primarily due to increased market values in corporate equity securities. Net losses on Level 3 liabilities were primarily due to increased valuations of certain structured notes.

~~Table of Contents~~

~~JEFFERIES GROUP LLC AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(Unaudited)~~

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(Unaudited)


	Nine Months Ended August 31, 2018																																		Nine Months Ended August 31, 2018
			Total gains/losses (realized and unrealized) (1)																		Net transfers into/ (out of) Level 3							For instruments still held at August 31, 2018, changes in unrealized gains/(losses) included in:							Balance at November 30, 2017		Total gains/losses (realized and unrealized) (1)			Purchases			Sales			Settlements			Issuances		Net transfers into/ (out of) Level 3			Balance at August 31, 2018		For instruments still held at August 31, 2018, changes in unrealized gains/(loses) included in:
	Balance at November 30, 2017					Purchases				Sales				Settlements				Issuances						Balance at August 31, 2018			earnings (1)				other comprehensive income (1)			earnings (1)																							other comprehensive income (1)
Assets:
Financial instruments owned:
Corporate equity securities	$	22,009	$	30,098			$	35,993			$	(39,008	)		$	(2,082	)		$	—	$	1,035			$	48,045		$	25,475			$	—		$	22,009	$	30,098		$	35,993		$	(39,008	)	$	(2,082	)	$	—	$	1,035		$	48,045	$	25,475		$	—
Corporate debt securities	26,036		1,090				22,204				(38,553		)		(2,066		)		—		940				9,651			(1,738		)		—			26,036		1,090			22,204			(38,553		)	(2,066		)	—		940			9,651		(1,738		)	—
CDOs and CLOs	30,004		(2,323		)		242,864				(249,691		)		(5,859		)		—		8,606				23,601			(5,533		)		—			30,004		(2,323		)	242,864			(249,691		)	(5,859		)	—		8,606			23,601		(5,533		)	—
RMBS	26,077		(7,334		)		2,018				(12,621		)		(6		)		—		(3,180		)		4,954			316				—			26,077		(7,334		)	2,018			(12,621		)	(6		)	—		(3,180		)	4,954		316			—
CMBS	12,419		(1,236		)		1,720				(548		)		(5,415		)		—		16,976				23,916			(2,272		)		—			12,419		(1,236		)	1,720			(548		)	(5,415		)	—		16,976			23,916		(2,272		)	—
Other ABS	61,129		(7,528		)		523,045				(495,055		)		(12,281		)		—		(5		)		69,305			(3,307		)		—			61,129		(7,528		)	523,045			(495,055		)	(12,281		)	—		(5		)	69,305		(3,307		)	—
Loans and other receivables	47,304		(2,812		)		104,009				(98,733		)		(14,610		)		—		13,827				48,985			(3,769		)		—			47,304		(2,812		)	104,009			(98,733		)	(14,610		)	—		13,827			48,985		(3,769		)	—
Investments at fair value	93,454		417				2,291				(17,569		)		—				—		946				79,539			(177		)		—			93,454		417			2,291			(17,569		)	—			—		946			79,539		(177		)	—
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	48	$	365			$	—			$	—			$	—			$	—	$	—			$	413		$	(365	)		$	—		$	48	$	365		$	—		$	—		$	—		$	—	$	—		$	413	$	(365	)	$	—
Corporate debt securities	522		39				—				—				996				—		—				1,557			(39		)		—			522		39			—			—			996			—		—			1,557		(39		)	—
Sovereign obligations	—		3				(598		)		629				—				—		21				55			(124		)		—			—		3			(598		)	629			—					21			55		(124		)	—
CMBS	105		(35		)		—				—				—				—		—				70			(70		)		—			105		(35		)	—			—			—			—		—			70		(70		)	—
Loans	3,486		(1,059		)		(15,702		)		19,409				—				—		2,527				8,661			1,059				—			3,486		(1,059		)	(15,702		)	19,409			—			—		2,527			8,661		1,059			—
Net derivatives (2)	6,746		(1,034		)		(6		)		—				2,984				296		11				8,997			(2,660		)		—			6,746		(1,034		)	(6		)	—			2,984			296		11			8,997		(2,660		)	—
Long-term debt	—		(25,078		)		—				—				—				81,284		107,424				163,630			36,921				(11,843		)	—		(25,078		)	—			—			—			81,284		107,424			163,630		13,235			11,843


(1)	Realized and unrealized gains/losses are ~~primarily~~ reported in Principal ~~transaction~~transactions revenues in our Consolidated Statements of Earnings. Changes in instrument-specific credit risk related to structured notes are included in our Consolidated ~~Statements~~Statement of Comprehensive Income, net of tax.


(2)	Net derivatives represent Financial instruments owned—Derivatives and Financial instruments sold, not yet purchased—Derivatives.

Analysis of Level 3 Assets and Liabilities for the Nine Months Ended August 31, 2018

During the nine months ended August 31, 2018, transfers of assets of $49.1 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

CMBS of $17.0 million, loans and other receivables of $15.3 million and CDOs and CLOs of $8.7 million due to reduced pricing transparency.

During the nine months ended August 31, 2018, transfers of assets of $10.0 million from Level 3 to Level 2 are primarily attributed to:

RMBS of $4.6 million and corporate equity securities of $2.5 million due to greater pricing transparency supporting classification into Level 2.

During the nine months ended August 31, 2018, there were transfers of structured notes of $107.4 million from Level 2 to Level 3 due to a decrease in market observability.

Net gains on Level 3 assets were $10.4 million and net gains on Level 3 liabilities were $26.8 million for the nine months ended August 31, 2018. Net gains on Level 3 assets were primarily due to increased market values in corporate equity securities, partially offset by decreased market values across other ABS, RMBS and certain loans and other receivables. Net gains on Level 3 liabilities were primarily due to decreased valuations of certain structured notes.

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(Unaudited)

Three Months Ended August 31, 2017
Balance at
May 31, 2017 Total gains/losses (realized and unrealized) (1) Purchases Sales Settlements Issuances
Net transfers into/
(out of) Level 3
Balance at August 31, 2017 Change in
unrealized gains/
(losses) relating
to instruments
still held at
August 31, 2017 (1)
Assets:
Financial instruments owned:
Corporate equity securities $ 20,548
$ 4,344
$ 4
$ (645 ) $ (55 ) $ —
$ (2,022 ) $ 22,174
$ 4,319
Corporate debt securities 24,727
(2,350 ) 5,901
(5,551 ) (31 ) —
2,319
25,015
(2,224 )
CDOs and CLOs 27,255
(6,119 ) 52,918
(36,564 ) 245
—
468
38,203
(3,552 )
RMBS 33,032
(263 ) 494
(732 ) (291 ) —
(11,591 ) 20,649
188
CMBS 16,263
(125 ) —
(676 ) (637 ) —
2,811
17,636
(161 )
Other ABS 43,349
(6,454 ) 5,798
(3,789 ) (2,924 ) —
32,966
68,946
(3,570 )
Loans and other receivables 49,365
15,261
9,265
(5,854 ) (8,249 ) —
2,868
62,656
14,005
Investments at fair value 89,006
1,703
—
—
(292 ) —
—
90,417
1,703
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities $ 354
$ 107
$ (369 ) $ 27
$ —
$ —
$ —
$ 119
$ (92 )
Corporate debt securities 522
—
—
—
—
—
—
522
—
CMBS 70
(35 ) —
—
—
—
—
35
(35 )
Loans 4,967
(3,071 ) —
333
—
—
1,056
3,285
3,018
Net derivatives (2) 3,022
(2,980 ) —
—
5,040
—
—
5,082
(2,474 )


~~(1)~~	~~Realized and unrealized gains/losses are reported in Principal transaction revenues in our Consolidated Statements of Earnings.~~


~~(2)~~	~~Net derivatives represent Financial instruments owned—Derivatives and Financial instruments sold, not yet purchased—Derivatives.~~

~~Analysis of Level 3 Assets and Liabilities for the Three Months Ended August 31, 2017~~

~~During the three months ended August 31, 2017, transfers of assets of $63.5 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:~~

~~Other ABS of $46.4 million due to a lack of observable market transactions.~~

~~During the three months ended August 31, 2017, transfers of assets of $35.7 million from Level 3 to Level 2 are primarily attributed to:~~

~~RMBS of $14.6 million and other ABS of $13.5 million due to greater pricing transparency supporting classification into Level 2.~~

Net gains on Level 3 assets were $6.0 million and net gains on Level 3 liabilities were $6.0 million for the three months ended August 31, 2017. Net gains on Level 3 assets were primarily due to increased valuations of loans and other receivables, corporate equity securities and certain investments at fair value, partially offset by decreased valuations of other ABS, CDOs and CLOs and corporate debt securities. Net gains on Level 3 liabilities were primarily due to increased valuations of certain net derivatives and decreased valuations of certain loans.

~~Table of Contents~~

~~JEFFERIES GROUP LLC AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(Unaudited)~~

Nine Months Ended August 31, 2017
Balance at
November 30, 2016 Total gains/losses (realized and unrealized) (1) Purchases Sales Settlements Issuances
Net transfers into/
(out of) Level 3
Balance at
August 31, 2017 Change in
unrealized gains/
(losses) relating
to instruments
still held at
August 31, 2017 (1)
Assets:
Financial instruments owned:
Corporate equity securities $ 21,739
$ 3,416
$ 945
$ (1,502 ) $ (356 ) $ —
$ (2,068 ) $ 22,174
$ 2,689
Corporate debt securities 25,005
(3,280 ) 19,610
(18,364 ) (1,724 ) —
3,768
25,015
(3,424 )
CDOs and CLOs 54,354
(13,902 ) 65,523
(72,122 ) 239
—
4,111
38,203
(3,685 )
Municipal securities 27,257
(1,547 ) —
(25,710 ) —
—
—
—
—
RMBS 38,772
(1,446 ) 113,391
(125,731 ) (572 ) —
(3,765 ) 20,649
(2,005 )
CMBS 20,580
(1,180 ) 2,033
(5,199 ) (985 ) —
2,387
17,636
(952 )
Other ABS 40,911
(15,338 ) 67,611
(4,121 ) (16,891 ) —
(3,226 ) 68,946
(8,872 )
Loans and other receivables 81,872
27,709
84,342
(83,791 ) (23,241 ) —
(24,235 ) 62,656
16,294
Investments at fair value 96,369
4,698
300
(10,119 ) (831 ) —
—
90,417
6,721
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities $ 313
$ 134
$ (355 ) $ 27
$ —
$ —
$ —
$ 119
$ (92 )
Corporate debt securities 523
(1 ) —
—
—
—
—
522
1
CMBS —
35
—
—
—
—
—
35
(35 )
Loans 378
1,604
(364 ) 333
—
—
1,334
3,285
(1,583 )
Net derivatives (2) 3,441
(2,854 ) —
—
5,162
404
(1,071 ) 5,082
(2,333 )
Other secured financings 418
(418 ) —
—
—
—
—
—
—


~~(1)~~	~~Realized and unrealized gains/losses are reported in Principal transaction revenues in our Consolidated Statements of Earnings.~~


~~(2)~~	~~Net derivatives represent Financial instruments owned—Derivatives and Financial instruments sold, not yet purchased—Derivatives.~~

~~Analysis of Level 3 Assets and Liabilities for the Nine Months Ended August 31, 2017~~

~~During the nine months ended August 31, 2017, transfers of assets of $26.5 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:~~

~~CDOs and CLOs of $9.6 million and corporate debt securities of $8.1 million due to a lack of observable market transactions.~~

~~During the nine months ended August 31, 2017, transfers of assets of $49.5 million from Level 3 to Level 2 are primarily attributed to:~~

~~Loans and other receivables of $28.3 million due to greater pricing transparency supporting classification into Level 2.~~

Net losses on Level 3 assets were $0.9 million and net gains on Level 3 liabilities were $1.5 million for the nine months ended August 31, 2017. Net losses on Level 3 assets were primarily due to decreased valuations of other ABS and CDOs and CLOs, partially offset by increased valuations of certain loans and other receivables. Net gains on Level 3 liabilities were primarily due to increased valuations of certain net derivatives, partially offset by increased valuations of certain loans.

~~Table of Contents~~

~~JEFFERIES GROUP LLC AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(Unaudited)~~

Quantitative Information about Significant Unobservable Inputs used in Level 3 Fair Value Measurements at August 31, ~~2018~~2019 and November 30, ~~2017~~2018

The tables below present information on the valuation techniques, significant unobservable inputs and their ranges for our financial assets and liabilities, subject to threshold levels related to the market value of the positions held, measured at fair value on a recurring basis with a significant Level 3 balance. The range of unobservable inputs could differ significantly across different firms given the range of products across different firms in the financial services sector. The inputs are not representative of the inputs that could have been used in the valuation of any one financial instrument (i.e., the input used for valuing one financial instrument within a particular class of financial instruments may not be appropriate for valuing other financial instruments within that given class). Additionally, the ranges of inputs presented below should not be construed to represent uncertainty regarding the fair values of our financial instruments; rather, the range of inputs is reflective of the differences in the underlying characteristics of the financial instruments in each category.

For certain categories, we have provided a weighted average of the inputs allocated based on the fair values of the financial instruments comprising the category. We do not believe that the range or weighted average of the inputs is indicative of the reasonableness of uncertainty of our Level 3 fair values. The range and weighted average are driven by the individual financial instruments within each category and their relative distribution in the population. The disclosed inputs when compared with the inputs as disclosed in other periods should not be expected to necessarily be indicative of changes in our estimates of unobservable inputs for a particular financial instrument as the population of financial instruments comprising the category will vary from period to period based on purchases and sales of financial instruments during the period as well as transfers into and out of Level 3 each period.

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(Unaudited)


August 31, 2018
August 31, 2019										August 31, 2019
Financial Instruments Owned:		Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input(s)	Input / Range	Weighted Average				Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input(s)	Input / Range	Weighted Average
Corporate equity securities		$	41,038								$	45,344
Non-exchange-traded securities	Non-exchange-traded securities			Market approach	Price	$3-$75	$	25		Non-exchange-traded securities			Market approach	Price	$3-$177	$	143
					Underlying stock price	$1-$11	$	9						Underlying stock price	$3-$5	$	4
Corporate debt securities		$	9,651	Market approach	Discount rate/yield	19%	—				$	9,288	Scenario analysis	Estimated recovery percentage	38%-49%	42		%
					Estimated recovery percentage	46%	—							Volatility	44%	—
					Price	$10	—							Credit Spread	750	—
					Comparable asset price	$101	—							Underlying stock price	£0.4	—
CDOs and CLOs		$	23,601	Discounted cash flows	Constant prepayment rate	20%	—				$	21,135	Discounted cash flows	Constant prepayment rate	15%-20%	19		%
					Constant default rate	1%-2%	2		%					Constant default rate	1%-2%	2		%
					Loss severity	30%	—							Loss severity	25%-30%	27		%
					Discount rate/yield	5%-41%	16		%					Discount rate/yield	13%-16%	14		%
				Scenario analysis	Estimated recovery percentage	2%	—
RMBS		$	4,954	Discounted cash flows	Cumulative loss rate	23%	—				$	17,929	Discounted cash flows	Cumulative loss rate	2%	—
					Duration (years)	15	—
					Discount rate/yield	9%	—							Duration (years)	7	—
				Market approach	Price	$100	—							Discount rate/yield	3%	—
CMBS		$	23,916	Discounted cash flows	Cumulative loss rate	8%-84%	33		%		$	5,462	Discounted cash flows	Cumulative loss rate	80%	—
					Duration (years)	0-3	1							Duration (years)	1	—
					Discount rate/yield	3%-38%	12		%					Discount rate/yield	5%	—
				Scenario analysis	Estimated recovery percentage	26%	—						Scenario analysis	Estimated recovery percentage	44%	—
					Price	$49	—
Other ABS		$	69,305	Discounted cash flows	Cumulative loss rate	0%-29%	18		%		$	34,598	Discounted cash flows	Cumulative loss rate	7%-31%	18		%
					Duration (years)	1-5	2
					Discount rate/yield	5%-12%	7		%					Duration (years)	1-3	2
				Market approach	Price	$100	—							Discount rate/yield	7%-12%	11		%
Loans and other receivables		$	48,985	Market approach	Estimated recovery percentage	0%	—				$	74,057	Market approach	Price	$41-$100	$	81
					Price	$50-$100	$	95					Scenario analysis	Estimated recovery percentage	1%-117%	68		%
				Scenario analysis	Estimated recovery percentage	57%-107%	88		%
Derivatives		$	3,137								$	13,538
Total return swaps				Market approach	Price	$100	—
Interest rate swaps													Market approach	Basis points upfront	0-7	3
Investments at fair value		$	79,539								$	106,386
Private equity securities				Market approach	Price	$3-$250	$	105					Market approach	Price	$8-$250	$	125
													Scenario analysis	Discount rate/yield	20%	—
														Revenue growth	0%	—
Securities purchased under agreements to resell											$	25,000	Market approach	Spread to 6 month LIBOR	500	—
														Duration (years)	2	—
Financial Instruments Sold, Not Yet Purchased:	Financial Instruments Sold, Not Yet Purchased:									Financial Instruments Sold, Not Yet Purchased:
Corporate debt securities		$	1,557	Market approach	Estimated recovery percentage	53%	—
Loans		$	8,661	Market approach	Estimated recovery percentage	0%	—				$	16,630	Market approach	Price	$50-$98	$	78
					Price	$50	—						Scenario analysis	Estimated recovery percentage	1%-75%	27		%
Derivatives		$	12,134								$	65,927
Equity options				Option model/default rate	Default probability	0%	—						Volatility benchmarking	Volatility	29%-59%	42		%
Interest rate swaps													Market approach	Basis points upfront	0-10	4
Cross currency swaps														Basis points upfront	2	—
Unfunded commitments				Market approach	Price	$99	—							Price	$90	—
Total return swaps				Market approach	Price	$95-$100	$	97
Variable funding note swaps				Discounted cash flows	Constant prepayment rate	20%	—
					Constant default rate	2%	—
					Loss severity	30%	—
					Discount rate/yield	41%	—
Long-term debt
Structured notes		$	163,630	Market approach	Price	$70-$100	$	80			$	348,063	Market approach	Price	$89-$102	$	97
					Price	€80-€112	€ 96							Price	€70-€103	€	89

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(Unaudited)


November 30, 2017
November 30, 2018										November 30, 2018
Financial Instruments Owned:		Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input(s)	Input / Range	Weighted Average				Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input(s)	Input / Range	Weighted Average
Corporate equity securities		$	18,109								$	43,664
Non-exchange-traded securities	Non-exchange-traded securities			Market approach	Price	$3-$75	$	33		Non-exchange-traded securities			Market approach	Price	$1-$75	$	12
					Underlying stock price	$6	—							Transaction level	$47	—
				Comparable pricing	Comparable asset price	$7	—
Corporate debt securities		$	26,036	Convertible bond model	Discount rate/yield	8%	—				$	9,484	Market approach	Estimated recovery percentage	46%	—
					Volatility	40%	—
				Market approach	Estimated recovery percentage	17%	—
					Price	$10	—							Transaction level	$80	—
CDOs and CLOs		$	30,004	Discounted cash flows	Constant prepayment rate	20%	—				$	25,815	Discounted cash flows	Constant prepayment rate	10%-20%	18		%
					Constant default rate	2%	—							Constant default rate	1%-2%	2		%
					Loss severity	25%-30%	26		%					Loss severity	25%-30%	26		%
					Discount rate/yield	3%-26%	12		%					Discount rate/yield	11%-16%	14		%
				Scenario analysis	Estimated recovery percentage	8%-40%	22		%				Scenario analysis	Estimated recovery percentage	2%	—
RMBS		$	26,077	Discounted cash flows	Cumulative loss rate	3%-19%	10		%		$	19,603	Discounted cash flows	Cumulative loss rate	4%	—
					Duration (years)	2-4	3							Duration (years)	13	—
					Discount rate/yield	6%-10%	8		%					Loss severity	0%	—
														Discount rate/yield	3%	—
													Market approach	Price	$100	—
CMBS		$	12,419	Discounted cash flows	Cumulative loss rate	8%-65%	44		%		$	9,444	Discounted cash flows	Cumulative loss rate	8%-85%	45		%
														Duration (years)	1-3	1
					Duration (years)	1-3	2							Loss severity	64%	—
					Discount rate/yield	2%-26%	12		%					Discount rate/yield	2%-15%	6		%
				Scenario analysis	Estimated recovery percentage	26%-32%	28		%				Scenario analysis	Estimated recovery percentage	26%	—
					Price	$52-$56	$	54						Price	$49	—
Other ABS		$	61,129	Discounted cash flows	Cumulative loss rate	0%-33%	23		%		$	53,175	Discounted cash flows	Cumulative loss rate	12%-30%	22		%
					Duration (years)	1-6	2							Duration (years)	1-2	1
					Discount rate/yield	5%-39%	9		%					Discount rate/yield	6%-12%	8		%
				Market approach	Price	$100	—						Market approach	Price	$100	—
				Scenario analysis	Estimated recovery percentage	14%	—
Loans and other receivables		$	46,121	Market approach	Estimated recovery percentage	76%	—				$	46,078	Market approach	Price	$50-$100	$	96
					Price	$54-$100	$	95
				Scenario analysis	Estimated recovery percentage	13%-107%	78		%				Scenario analysis	Estimated recovery percentage	13%-117%	105		%
Derivatives		$	9,295								$	4,602
Total return swaps				Market approach	Price	$101-$106	$	103					Market approach	Price	$97	—
Interest rate swaps				Market approach	Credit spread	800 bps	—
Investments at fair value		$	77,423								$	113,831
Private equity securities				Market approach	Transaction level	$3-$250	$	172					Market approach	Price	$3-$250	$	108
					Price	$7	—							Transaction level	$169	—
													Scenario analysis	Discount rate/yield	20%	—
														Revenue growth	0%	—
Financial Instruments Sold, Not Yet Purchased:	Financial Instruments Sold, Not Yet Purchased:									Financial Instruments Sold, Not Yet Purchased:
Loans											$	6,376	Market approach	Price	$50-$101	$	74
Derivatives		$	16,041								$	27,536
Equity options				Option model/default rate	Default probability	0%	—						Option model/default rate	Default probability	0%	—
Unfunded commitments				Market approach	Price	$99	—
													Volatility benchmarking	Volatility	39%-62%	50		%
Interest rate swaps													Market approach	Price	$20	—
Total return swaps				Market approach	Price	$101-$106	$	103					Market approach	Price	$97	—
Variable funding note swaps				Discounted cash flows	Constant prepayment rate	20%	—
Long-term debt
Structured notes											$	200,745	Market approach	Price	$78-$94	$	86
					Constant default rate	2%	—							Price	€68-€110	€	96
					Loss severity	25%	—
					Discount rate/yield	26%	—

The fair values of certain Level 3 assets and liabilities that were determined based on third-party pricing information, unadjusted past transaction prices, reported NAV or a percentage of the reported enterprise fair value are excluded from the above tables. At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, asset exclusions consisted of ~~$7.0~~$35.4 million and ~~$21.1~~$11.1 million, respectively, primarily comprised of private equity securities, ~~non-exchange-traded~~corporate equity securities, ~~and~~ loans and other ~~receivables.~~receivables and certain derivatives. At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, liability exclusions consisted of $2.3 million and $0.5 million, ~~and $4.2 million,~~ respectively, primarily comprised of ~~loans, CMBS, sovereign obligations and~~ corporate debt and ~~equity securities.~~certain derivatives.

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(Unaudited)

Uncertainty of Fair Value Measurement ~~From~~from Use of Significant Unobservable Inputs

For recurring fair value measurements categorized within Level 3 of the fair value hierarchy, the uncertainty of the fair value measurement due to the use of significant unobservable inputs and interrelationships between those unobservable inputs (if any) are described below:

Non-exchange-traded securities using comparable pricing valuation techniques. A significant increase (decrease) in the comparable asset price in isolation would result in a significantly higher (lower) fair value measurement.

Corporate debt securities using a convertible bond model. A significant increase (decrease) in the bond discount rate/yield would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in volatility would result in a significantly higher (lower) fair value measurement.

~~Non-exchange-traded~~equity securities, corporate debt securities, loans and other receivables, ~~unfunded commitments, interest rate swaps, total return swaps,~~certain derivatives, RMBS, other ABS, private equity securities, securities purchased under agreements to resell and structured notes using a market approach valuation technique. A significant increase (decrease) in the transaction level of a non-exchange-traded security, corporate debt security and private equity security would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the underlying stock price of the non-exchange-traded securities would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the ~~credit spread of certain derivatives would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in the~~ price of the private equity securities, non-exchange-traded securities, ~~corporate debt securities, unfunded commitments,~~ total return swaps, interest rate swaps, unfunded commitments, RMBS, other ABS, loans and other receivables or structured notes would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the estimated recovery rates of the cash flow outcomes underlying the corporate debt securities or loans and other receivables would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the ~~bond discount rate/~~yield or duration, in isolation, of securities purchased under agreements to resell would result in a significantly lower (higher) fair value measurement. ADepending on whether we are a receiver or (payer) of basis points upfront, a significant increase in basis points would result in a significant increase (decrease) in the ~~comparable asset price of the corporate debt securities in isolation would result in a significantly higher (lower) fair value measurement.~~

Loans and other receivables, CDOs and CLOs, CMBS and other ABS using scenario analysis. A significant increase (decrease) in the possible recovery rates of the cash flow outcomes underlying the investment would result in a significantly higher (lower) fair value measurement ~~for the financial instrument. A significant increase (decrease) in the price~~ of ~~the CMBS would result in a significantly higher (lower) fair value measurement.~~cross currency and interest rate swaps.

•

Loans and other receivables, CDOs and CLOs, CMBS, corporate debt and private equity securities using scenario analysis. A significant increase (decrease) in the possible recovery rates of the cash flow outcomes underlying the financial instrument would result in a significantly higher (lower) fair value measurement for the financial instrument. A significant increase (decrease) in the price of the underlying stock price orunderlying assets of the financial instrumentwould result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the volatility of the underlying stock price would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the credit spread of the financial instrument would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in the discount rate/yield underlying the investment would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in the revenue growth underlying the investment would result in a significantly higher (lower) fair value measurement.

CDOs and CLOs, RMBS, ~~and~~ CMBS and other ABS ~~and variable funding note swaps~~ using a discounted cash flow valuation technique. A significant increase (decrease) in isolation in the constant default rate, loss severity or cumulative loss rate would result in a significantly lower (higher) fair value measurement. The impact of changes in the constant prepayment rate and duration would have differing impacts depending on the capital structure and type of security. A significant increase (decrease) in the discount rate/security yield would result in a significantly lower (higher) fair value measurement.

Derivative equity options using an option/default rate model. A significant increase (decrease) in default probability would result in a significantly lower (higher) fair value measurement.

Derivative equity options using volatility benchmarking. A significant increase (decrease) in volatility would result in a significantly higher (lower) fair value measurement.

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Fair Value Option Election

We have elected the fair value option for all loans and loan commitments made by our capital markets businesses. These loans and loan commitments include loans entered into by our investment banking division in connection with client bridge financing and loan syndications, loans purchased by our leveraged credit trading desk as part of its bank loan trading activities and mortgage and consumer loan commitments, purchases and fundings in connection with mortgage- and other asset-backed securitization activities. Loans and loan commitments originated or purchased by our leveraged credit and mortgage-backed businesses are managed on a fair value basis. Loans are included in Financial instruments owned and loan commitments are included in Financial instruments owned and Financial instruments sold, not yet purchased in our Consolidated Statements of Financial Condition. The fair value option election is not applied to loans made to affiliate entities as such loans are entered into as part of ongoing, strategic business ventures. Loans to affiliate entities are included in Loans to and investments in related parties in our Consolidated Statements of Financial Condition and are accounted for on an amortized cost basis. We have also elected the fair value option for certain of our structured notes and securities purchased under agreements to resell, which are managed by our capital markets ~~business~~businesses and are included in Long-term debt and ~~Short-term borrowings~~Securities purchased under agreements to resell in our Consolidated Statements of Financial ~~Condition.~~Condition, respectively. We have elected the fair value option for certain financial instruments held by subsidiaries as the investments are risk managed by us on a fair value basis. The fair value option ~~has also been~~may be elected for certain secured financings that arise in connection with our securitization activities and other structured financings. Other secured financings, Receivables – Brokers, dealers and clearing organizations, Receivables – Customers, Receivables – Fees, interest and other, Payables – Brokers, dealers and clearing organizations and Payables – Customers, are accounted for at cost plus accrued interest rather than at fair value; however, the recorded amounts approximate fair value due to their liquid or short-term nature.

The following is a summary of gains (losses) due to changes in instrument specific credit risk on loans, other receivables and debt instruments and gains (losses) due to other changes in fair value on Long-term debt ~~and Short-term borrowings~~ measured at fair value under the fair value option (in thousands):


	Three Months Ended August 31,						Nine Months Ended August 31,						Three Months Ended August 31,						Nine Months Ended August 31,
	2018			2017			2018			2017			2019			2018			2019			2018
Financial instruments owned:
Loans and other receivables	$	14,002		$	24,846		$	7,495		$	27,715		$	2,040		$	14,002		$	(5,458	)	$	7,495
Financial instruments sold:
Financial instruments sold, not yet purchased:
Loans	$	(2,708	)	$	3,436		$	(2,467	)	$	(7,286	)	$	—		$	(2,708	)	$	—		$	(2,467	)
Loan commitments	(1,695		)	82			(1,964		)	229			(443		)	(1,695		)	(1,200		)	(1,964		)
Long-term debt:
Changes in instrument specific credit risk (1)	$	1,401		$	5,638		$	19,986		$	(14,141	)	$	6,922		$	1,401		$	34,414		$	19,986
Other changes in fair value (2)	(6,842		)	(1,854		)	33,626			2,786			(46,003		)	(6,842		)	(93,311		)	33,626
Short-term borrowings:
Changes in instrument specific credit risk (1)	$	—		$	19		$	—		$	1
Other changes in fair value (2)	—			(2,570		)	—			(37		)


(1)	Changes in instrument-specific credit risk related to structured notes are included in our Consolidated Statements of Comprehensive Income, net of tax.


(2)	Other changes in fair value are included in Principal transactions revenues in our Consolidated Statements of Earnings.

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The following is a summary of the amount by which contractual principal exceeds fair value for loans and other receivables and long-term debt ~~and short-term borrowings~~ measured at fair value under the fair value option (in thousands):


	August 31, 2018		November 30, 2017		August 31, 2019		November 30, 2018
Financial instruments owned:
Loans and other receivables (1)	$	896,470	$	752,076	$	1,356,508	$	961,554
Loans and other receivables on nonaccrual status and/or 90 days or greater past due (1) (2)	167,355		159,462		139,795		158,392
Long-term debt and short-term borrowings	89,345		32,839
Long-term debt					59,370		114,669


(1)	Interest income is recognized separately from other changes in fair value and is included in Interest revenues in our Consolidated Statements of Earnings.

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(2)	Amounts include loans and other receivables 90 days or greater past due by which contractual principal exceeds fair value of ~~$33.7~~$20.9 million and ~~$38.7~~$20.5 million at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively.

The aggregate fair value of loans and other receivables on nonaccrual status and/or 90 days or greater past due was ~~$77.0~~$113.4 million and ~~$55.1~~$105.3 million at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively, which includes loans and other receivables 90 days or greater past due of ~~$25.6~~$31.9 million and ~~$37.4~~$19.4 million at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively.

Financial Instruments Not Measured at Fair Value

Certain of our financial instruments are not carried at fair value but are recorded at amounts that approximate fair value due to their liquid or short-term nature and generally negligible credit risk. These financial assets include Cash and cash equivalents and Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations and would generally be presented inwithin Level 1 of the fair value hierarchy. Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations includes U.S. Treasury securities with a fair value of ~~$34.8~~$35.0 million and ~~$99.7~~$34.8 million at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively.

Note 5. Derivative Financial Instruments

Derivative Financial Instruments

Our derivative activities are recorded at fair value in our Consolidated Statements of Financial Condition in Financial instruments owned and Financial instruments sold, not yet purchased, net of cash paid or received under credit support agreements and on a net counterparty basis when a legally enforceable right to offset exists under a master netting agreement. We enter into derivative transactions to satisfy the needs of our clients and to manage our own exposure to market and credit risks resulting from our trading activities. In addition, we apply hedge accounting to an interest rate swap that has been designated as a fair value hedge of the changes in fair value due to the benchmark interest rate for certain fixed rate senior long-term debt.

See Note 4, Fair Value Disclosures, and Note 16, Commitments, Contingencies and Guarantees, for additional disclosures about derivative financial instruments.

Derivatives are subject to various risks similar to other financial instruments, including market, credit and operational risk. The risks of derivatives should not be viewed in isolation, but rather should be considered on an aggregate basis along with our other trading-related activities. We manage the risks associated with derivatives on an aggregate basis along with the risks associated with proprietary trading as part of our firm wide risk management policies.

In connection with our derivative activities, we may enter into International Swaps and Derivatives Association, Inc. ~~(“ISDA”)~~ master netting agreements or similar agreements with counterparties. See Note 2, Summary of Significant Accounting Policies, in our consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended November 30, ~~2017~~2018 for additional information regarding the offsetting of derivative contracts.

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The following tables present the fair value and related number of derivative contracts at August 31, ~~2018~~2019 and November 30, ~~2017~~2018 categorized by type of derivative contract and the platform on which these derivatives are transacted. The fair value of assets/liabilities represents our receivable/payable for derivative financial instruments, gross of counterparty netting and cash collateral received and pledged. The following tables also provide information regarding 1) the extent to which, under enforceable master netting arrangements, such balances are presented net in our Consolidated Statements of Financial Condition as appropriate under U.S. GAAP and 2) the extent to which other rights of setoff associated with these arrangements exist and could have an effect on our financial position (in thousands, except contract amounts).

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	August 31, 2018 (1)								August 31, 2019 (1)
	Assets				Liabilities				Assets				Liabilities
	Fair Value			Number of Contracts (2)	Fair Value			Number of Contracts (2)	Fair Value			Number of Contracts (2)	Fair Value			Number of Contracts (2)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC	$	—		—	$	30,018		1	$	38,588		1	$	—		—
Total derivatives designated as accounting hedges	—				30,018				38,588				—

Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded	1,047			17,218	12			35,304	1,766			39,912	873			45,448
Cleared OTC	411,969			2,116	405,580			2,325	863,437			3,335	903,989			3,947
Bilateral OTC	353,217			1,533	486,970			702	539,158			1,865	241,817			474
Foreign exchange contracts:
Exchange-traded	232			2,073	127			901	—			191	—			87
Bilateral OTC	234,331			6,488	223,397			6,580	550,737			8,564	548,854			8,319
Equity contracts:
Exchange-traded	2,332,241			1,765,239	2,718,615			1,632,359	741,307			1,998,268	1,091,142			1,611,110
Bilateral OTC	150,206			2,610	259,262			5,266	228,415			4,073	357,356			4,428
Commodity contracts:
Exchange-traded	17			1,218	89			1,366	1,418			9,523	—			6,239
Credit contracts:
Cleared OTC	15,076			13	5,166			16	5,210			12	7,988			16
Bilateral OTC	8,235			123	13,868			54	10,183			34	9,993			21
Total derivatives not designated as accounting hedges	3,506,571				4,113,086				2,941,631				3,162,012
Total gross derivative assets/ liabilities:
Exchange-traded	2,333,537				2,718,843				744,491				1,092,015
Cleared OTC	427,045				440,764				907,235				911,977
Bilateral OTC	745,989				983,497				1,328,493				1,158,020
Amounts offset in our Consolidated Statements of Financial Condition (3):
Exchange-traded	(2,248,951		)		(2,248,951		)		(723,158		)		(723,158		)
Cleared OTC	(405,840		)		(425,242		)		(871,162		)		(881,963		)
Bilateral OTC	(676,352		)		(777,338		)		(900,155		)		(994,085		)
Net amounts per Consolidated Statements of Financial Condition (4)	$	175,428			$	691,573			$	485,744			$	562,806


(1)	Exchange-traded derivatives include derivatives executed on an organized exchange. Cleared OTC derivatives include derivatives executed bilaterally and subsequently novated to and cleared through central clearing counterparties. Bilateral OTC derivatives include derivatives executed and settled bilaterally without the use of an organized exchange or central clearing counterparty.


(2)	Number of exchange traded contracts may include open futures contracts. The unsettled fair value of these futures contracts is included in Receivables from/Payables to brokers, dealers and clearing organizations in our Consolidated Statements of Financial Condition.

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(3)	Amounts netted include both netting by counterparty and for cash collateral paid or received.


(4)	We have not received or pledged additional collateral under master netting agreements and/or other credit support agreements that is eligible to be offset beyond what has been offset in our Consolidated Statements of Financial Condition.

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	November 30, 2017 (1)								November 30, 2018 (1)
	Assets				Liabilities				Assets				Liabilities
	Fair Value			Number of Contracts (2)	Fair Value			Number of Contracts (2)	Fair Value			Number of Contracts (2)	Fair Value			Number of Contracts (2)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC (3)	$	—		—	$	2,420		1
Cleared OTC									$	—		—	$	29,647		1
Total derivatives designated as accounting hedges	—				2,420				—				29,647

Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded	1,957			33,972	66			8,515	924			32,159	513			66,095
Cleared OTC (3)	1,334,878			2,711	1,263,994			2,948
Cleared OTC									422,670			2,095	411,833			2,394
Bilateral OTC	380,223			1,804	444,716			1,346	372,899			1,398	491,697			816
Foreign exchange contracts:
Exchange-traded	157			2,045	20			101	42			538	2			690
Cleared OTC									—			—	36			3
Bilateral OTC	303,091			4,338	286,582			4,361	311,228			9,548	314,951			9,909
Equity contracts:
Exchange-traded	1,288,295			2,654,555	1,375,832			2,090,935	1,202,927			2,104,684	2,061,137			1,779,836
Bilateral OTC	78,812			1,847	247,750			1,722	207,221			5,126	315,996			2,764
Commodity contracts:
Exchange-traded	209			3,723	18			3,819	213			3,927	270			4,012
Credit contracts:
Cleared OTC	5,506			18	8,613			27	11,204			7	1,556			14
Bilateral OTC	24,921			110	33,188			164	13,768			123	11,618			79
Total derivatives not designated as accounting hedges	3,418,049				3,660,779				2,543,096				3,609,609
Total gross derivative assets/liabilities:
Exchange-traded	1,290,618				1,375,936				1,204,106				2,061,922
Cleared OTC	1,340,384				1,275,027				433,874				443,072
Bilateral OTC	787,047				1,012,236				905,116				1,134,262
Amounts offset in our Consolidated Statements of Financial Condition (4):
Amounts offset in our Consolidated Statements of Financial Condition (3):
Exchange-traded	(1,268,043		)		(1,268,043		)		(1,190,951		)		(1,190,951		)
Cleared OTC (3)	(1,319,895		)		(1,274,900		)
Cleared OTC									(407,351		)		(418,779		)
Bilateral OTC	(666,278		)		(883,306		)		(814,184		)		(901,875		)
Net amounts per Consolidated Statements of Financial Condition (5)	$	163,833			$	236,950
Net amounts per Consolidated Statements of Financial Condition (4)									$	130,610			$	1,127,651


(1)	Exchange-traded derivatives include derivatives executed on an organized exchange. Cleared OTC derivatives include derivatives executed bilaterally and subsequently novated to and cleared through central clearing counterparties. Bilateral OTC derivatives include derivatives executed and settled bilaterally without the use of an organized exchange or central clearing counterparty.


(2)	Number of exchange traded contracts may include open futures contracts. The unsettled fair value of these futures contracts is included in Receivables from/Payables to brokers, dealers and clearing organizations in our Consolidated Statements of Financial Condition.

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(3)

Pursuant to a rule change by the London Clearing House in the first fiscal quarter of 2018, variation margin exchanged each day with this clearing organization on certain interest rate derivatives is characterized as settlement payments as opposed to cash posted as collateral. The impact of this rule change would have been a reduction in gross interest rate derivative assets and liabilities as of November 30, 2017 of approximately $800 million, and a corresponding decrease in counterparty and cash collateral netting, with no impact to our Consolidated Statement of Financial Condition.


~~(4)~~	Amounts netted include both netting by counterparty and for cash collateral paid or received.


~~(5)~~(4)	We have not received or pledged additional collateral under master netting agreements and/or other credit support agreements that is eligible to be offset beyond what has been offset in our Consolidated Statements of Financial Condition.

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The following table provides information related to gains (losses) recognized in Interest expense in our Consolidated Statements of Earnings on a fair value hedge (in thousands):


	Three Months Ended August 31,						Nine Months Ended August 31,						Three Months Ended August 31,						Nine Months Ended August 31,
Gains (Losses)	2018			2017			2018			2017			2019			2018			2019			2018
Interest rate swaps	$	(1,161	)	$	6,217		$	(22,363	)	$	13,960		$	28,052		$	(1,161	)	$	69,843		$	(22,363	)
Long-term debt	1,221			(4,680		)	24,055			(9,570		)	(28,519		)	1,221			(72,288		)	24,055
Total	$	60		$	1,537		$	1,692		$	4,390		$	(467	)	$	60		$	(2,445	)	$	1,692

The following table presents unrealized and realized gains (losses) on derivative contracts recognized in Principal transactions ~~revenue~~revenues in our Consolidated Statements of Earnings, which are utilized in connection with our client activities and our economic risk management activities (in thousands):



	Three Months Ended August 31,						Nine Months Ended August 31,
Gains (Losses)	2019			2018			2019			2018
Interest rate contracts	$	(89,864	)	$	13,951		$	(193,715	)	$	36,053
Foreign exchange contracts	(3,022		)	(4,421		)	(1,604		)	6,207
Equity contracts	2,236			1,807			(118,354		)	(215,232		)
Commodity contracts	3,400			281			4,775			3,025
Credit contracts	2,687			620			11,600			3,026
Total	$	(84,563	)	$	12,238		$	(297,298	)	$	(166,921	)

Three Months Ended
August 31, Nine Months Ended
August 31,
Gains (Losses) 2018 2017 2018 2017
Interest rate contracts $ 13,951
$ (6,432 ) $ 36,053
$ 2,605
Foreign exchange contracts (4,421 ) 1,028
6,207
4,135
Equity contracts 1,807
(106,425 ) (215,232 ) (275,124 )
Commodity contracts 281
1,508
3,025
(5,398 )
Credit contracts 620
311
3,026
11,218
Total $ 12,238
$ (110,010 ) $ (166,921 ) $ (262,564 )

The net gains (losses) on derivative contracts in the table above are one of a number of activities comprising our business activities and are before consideration of economic hedging transactions, which generally offset the net gains (losses) included above. We substantially mitigate our exposure to market risk on our cash instruments through derivative contracts, which generally provide offsetting revenues, and we manage the risk associated with these contracts in the context of our overall risk management framework.

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OTC Derivatives. The following tables set forth by remaining contract maturity the fair value of OTC derivative assets and liabilities at August 31, ~~2018~~2019 (in thousands):


	OTC Derivative Assets (1) (2) (3)												OTC Derivative Assets (1) (2) (3)
	0 – 12 Months		1 – 5 Years		Greater Than 5 Years		Cross-Maturity Netting (4)			Total			0 – 12 Months		1 – 5 Years		Greater Than 5 Years		Cross-Maturity Netting (4)			Total
Equity swaps and options	$	10,226	$	8,071	$	2,195	$	—		$	20,492		$	57,345	$	1	$	3,579	$	(3,572	)	$	57,353
Credit default swaps	82		17,846		—		(11		)	17,917			887		826		—		(81		)	1,632
Total return swaps	46,036		29,910		—		(4,334		)	71,612			25,166		70,022		—		(334		)	94,854
Foreign currency forwards, swaps and options	42,326		22,130		—		(9,550		)	54,906			111,325		4,740		7		(3,538		)	112,534
Fixed income forwards	2,113		—		—		—			2,113			556		—		—		—			556
Interest rate swaps, options and forwards	13,104		96,631		95,973		(91,673		)	114,035			76,320		225,447		183,737		(56,767		)	428,737
Total	$	113,887	$	174,588	$	98,168	$	(105,568	)	281,075			$	271,599	$	301,036	$	187,323	$	(64,292	)	695,666
Cross product counterparty netting										(32,615		)										(26,934		)
Total OTC derivative assets included in Financial instruments owned										$	248,460											$	668,732


(1)	At August 31, ~~2018,~~2019, we held net exchange-traded derivative assets and other credit agreements with a fair value of ~~$85.2~~$30.3 million, which are not included in this table.


(2)	OTC derivative assets in the table above are gross of collateral received. OTC derivative assets are recorded net of collateral received in our Consolidated Statements of Financial Condition. At August 31, ~~2018,~~2019, cash collateral received was ~~$158.2~~$213.2 million.


(3)	Derivative fair values include counterparty netting within product category.


(4)	Amounts represent the netting of receivable balances with payable balances for the same counterparty within product category across maturity categories.

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	OTC Derivative Liabilities (1) (2) (3)												OTC Derivative Liabilities (1) (2) (3)
	0 – 12 Months		1 – 5 Years		Greater Than 5 Years		Cross-Maturity Netting (4)			Total			0 – 12 Months		1 – 5 Years		Greater Than 5 Years		Cross-Maturity Netting (4)			Total
Equity swaps and options	$	15,125	$	92,491	$	13,048	$	—		$	120,664		$	8,679	$	123,854	$	49,873	$	(3,572	)	$	178,834
Credit default swaps	17		10,374		—		(11		)	10,380			35		6,291		—		(81		)	6,245
Total return swaps	67,526		19,806		—		(4,334		)	82,998			77,259		25,160		—		(334		)	102,085
Foreign currency forwards, swaps and options	36,176		17,496		—		(9,550		)	44,122			108,267		2,758		2,984		(3,538		)	110,471
Fixed income forwards	685		—		—		—			685			868		—		—		—			868
Interest rate swaps, options and forwards	16,388		148,685		198,569		(91,673		)	271,969			42,416		43,161		109,564		(56,767		)	138,374
Total	$	135,917	$	288,852	$	211,617	$	(105,568	)	530,818			$	237,524	$	201,224	$	162,421	$	(64,292	)	536,877
Cross product counterparty netting										(32,615		)										(26,934		)
Total OTC derivative liabilities included in Financial instruments sold, not yet purchased										$	498,203											$	509,943


(1)	At August 31, ~~2018,~~2019, we held net exchange-traded derivative liabilities and other credit agreements with a fair value of ~~$472.0~~$370.8 million, which are not included in this table.


(2)	OTC derivative liabilities in the table above are gross of collateral pledged. OTC derivative liabilities are recorded net of collateral pledged in our Consolidated Statements of Financial Condition. At August 31, ~~2018,~~2019, cash collateral pledged was ~~$278.6~~$318.0 million.


(3)	Derivative fair values include counterparty netting within product category.


(4)	Amounts represent the netting of receivable balances with payable balances for the same counterparty within product category across maturity categories.

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The following table presents the counterparty credit quality with respect to the fair value of our OTC derivative assets at August 31, ~~2018~~2019 (in thousands):


Counterparty credit quality (1):
A- or higher	$	135,060	$	146,495
BBB- to BBB+	20,490		42,072
BB+ or lower	74,097		275,252
Unrated	18,813		204,913
Total	$	248,460	$	668,732


(1)	We utilize internal credit ratings determined by our Risk Management department. Credit ratings determined by Risk Management use methodologies that produce ratings generally consistent with those produced by external rating agencies.

Credit Related Derivative Contracts

The external credit ratings of the underlyings or referenced assets for our written credit related derivative contracts (in millions):


	August 31, 2018								August 31, 2019
	External Credit Rating								External Credit Rating
	Investment Grade		Non-investment Grade		Unrated		Total Notional		Investment Grade		Non-investment Grade		Unrated		Total Notional
Credit protection sold:
Index credit default swaps	$	3.0	$	15.0	$	—	$	18.0	$	—	$	96.8	$	—	$	96.8
Single name credit default swaps	32.5		34.8		2.9		70.2		7.6		31.6		32.9		72.1

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November 30, 2017
External Credit Rating
Investment Grade Non-investment Grade Total Notional
Credit protection sold:
Index credit default swaps $ 3.0
$ 46.0
$ 49.0
Single name credit default swaps 129.1
89.1
218.2



	November 30, 2018
	External Credit Rating
	Investment Grade		Non-investment Grade		Unrated		Total Notional
Credit protection sold:
Index credit default swaps	$	25.7	$	167.4	$	—	$	193.1
Single name credit default swaps	57.7		84.5		3.0		145.2

Contingent Features

Certain of our derivative instruments contain provisions that require our debt to maintain an investment grade credit rating from each of the major credit rating agencies. If our debt were to fall below investment grade, it would be in violation of these provisions and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full overnight collateralization on our derivative instruments in liability positions. The following table presents the aggregate fair value of all derivative instruments with such credit-risk-related contingent features that are in a liability position, the collateral amounts we have posted or received in the normal course of business and the potential collateral we would have been required to return and/or post additionally to our counterparties if the credit-risk-related contingent features underlying these agreements were triggered (in millions):



	August 31, 2019			November 30, 2018
Derivative instrument liabilities with credit-risk-related contingent features	$	113.7		$	93.5
Collateral posted	(80.0		)	(61.5		)
Collateral received	57.0			91.5
Return of and additional collateral required in the event of a credit rating downgrade below investment grade (1)	90.6			123.3

August 31, 2018 November 30, 2017
Derivative instrument liabilities with credit-risk-related contingent features $ 106.3
$ 95.1
Collateral posted (59.3 ) (86.4 )
Collateral received 129.7
5.6
Return of and additional collateral required in the event of a credit rating downgrade below investment grade (1) 176.6
14.3


(1)	These potential outflows include initial margin received from counterparties at the execution of the derivative contract. The initial margin will be returned if counterparties elect to terminate the contract after a downgrade.

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Note 6. Collateralized Transactions

We enter into secured borrowing and lending arrangements to obtain collateral necessary to effect settlement, finance inventory positions, meet customer needs or re-lend as part of our dealer operations. We monitor the fair value of the securities loaned and borrowed on a daily basis as compared with the related payable or receivable, and request additional collateral or return of excess collateral, as appropriate. We pledge financial instruments as collateral under repurchase agreements, securities lending agreements and other secured arrangements, including clearing arrangements. Our agreements with counterparties generally contain contractual provisions allowing the counterparty the right to sell or repledge the collateral. Pledged securities owned that can be sold or repledged by the counterparty are included in Financial instruments owned, at fair value and noted parenthetically as Securities pledged in our Consolidated Statements of Financial Condition.

In instances where we receive securities as collateral in connection with securities-for-securities transactions in which we are the lender of securities and are permitted to sell or repledge the securities received as collateral, we report the fair value of the collateral received and the related obligation to return the collateral in the Consolidated Statements of Financial Condition. At August 31, 2018 and November 30, 2017, $0 and $103,000, respectively, were reported as Securities received as collateral and as Obligation to return securities received as collateral.

The following tables set forth the carrying value of securities lending arrangements, repurchase agreements and obligation to return securities received as collateral by class of collateral pledged (in thousands):

August 31, 2018
Securities Lending Arrangements Repurchase Agreements Total
Collateral Pledged:
Cash $ —
$ 4,361
$ 4,361
Corporate equity securities 2,214,433
490,609
2,705,042
Corporate debt securities 315,718
1,496,127
1,811,845
Mortgage- and asset-backed securities —
2,667,439
2,667,439
U.S. government and federal agency securities 1,353
10,124,642
10,125,995
Municipal securities —
582,699
582,699
Sovereign obligations —
1,955,879
1,955,879
Loans and other receivables —
517,703
517,703
Total $ 2,531,504
$ 17,839,459
$ 20,370,963

November 30, 2017
Securities Lending Arrangements Repurchase Agreements Obligation To Return Securities Received As Collateral Total
Collateral Pledged:
Corporate equity securities $ 2,353,798
$ 214,413
$ —
$ 2,568,211
Corporate debt securities 470,908
2,336,702
—
2,807,610
Mortgage- and asset-backed securities —
2,562,268
—
2,562,268
U.S. government and federal agency securities 19,205
11,792,534
—
11,811,739
Municipal securities —
444,861
—
444,861
Sovereign obligations —
2,023,530
103
2,023,633
Loans and other receivables —
454,941
—
454,941
Total $ 2,843,911
$ 19,829,249
$ 103
$ 22,673,263

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The following tables set forth the carrying value of securities lending arrangements and repurchase agreements by class of collateral pledged (in thousands):



	August 31, 2019
	Securities Lending Arrangements		Repurchase Agreements		Total
Collateral Pledged:
Corporate equity securities	$	1,952,304	$	147,845	$	2,100,149
Corporate debt securities	174,936		1,946,659		2,121,595
Mortgage- and asset-backed securities	—		2,041,563		2,041,563
U.S. government and federal agency securities	55,625		13,423,223		13,478,848
Municipal securities	—		429,925		429,925
Sovereign obligations	—		2,433,727		2,433,727
Loans and other receivables	—		900,140		900,140
Total	$	2,182,865	$	21,323,082	$	23,505,947



	November 30, 2018
	Securities Lending Arrangements		Repurchase Agreements		Total
Collateral Pledged:
Corporate equity securities	$	1,505,218	$	487,124	$	1,992,342
Corporate debt securities	333,221		1,853,309		2,186,530
Mortgage- and asset-backed securities	249		2,820,543		2,820,792
U.S. government and federal agency securities	—		8,181,947		8,181,947
Municipal securities	—		604,274		604,274
Sovereign obligations	—		2,945,521		2,945,521
Loans and other receivables	—		300,768		300,768
Total	$	1,838,688	$	17,193,486	$	19,032,174

The following tables set forth the carrying value of securities lending arrangements and ~~obligation to return securities received as collateral~~repurchase agreements by remaining contractual maturity (in thousands):


	August 31, 2018										August 31, 2019
	Overnight and Continuous		Up to 30 Days		31-90 Days		Greater than 90 Days		Total		Overnight and Continuous		Up to 30 Days		31-90 Days		Greater than 90 Days		Total
Securities lending arrangements	$	1,354,136	$	—	$	847,577	$	329,791	$	2,531,504	$	1,305,512	$	70,319	$	635,864	$	171,170	$	2,182,865
Repurchase agreements	8,122,962		2,733,400		4,342,923		2,640,174		17,839,459		9,207,762		2,376,018		3,897,096		5,842,206		21,323,082
Total	$	9,477,098	$	2,733,400	$	5,190,500	$	2,969,965	$	20,370,963	$	10,513,274	$	2,446,337	$	4,532,960	$	6,013,376	$	23,505,947



	November 30, 2018
	Overnight and Continuous		Up to 30 Days		31-90 Days		Greater than 90 Days		Total
Securities lending arrangements	$	807,347	$	—	$	560,417	$	470,924	$	1,838,688
Repurchase agreements	7,849,052		1,915,325		6,042,951		1,386,158		17,193,486
Total	$	8,656,399	$	1,915,325	$	6,603,368	$	1,857,082	$	19,032,174

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November 30, 2017
Overnight and Continuous Up to 30 Days 31-90 Days Greater than 90 Days Total
Securities lending arrangements $ 1,676,940
$ —
$ 741,971
$ 425,000
$ 2,843,911
Repurchase agreements 10,780,474
4,058,228
3,211,464
1,779,083
19,829,249
Obligation to return securities received as collateral 103
—
—
—
103
Total $ 12,457,517
$ 4,058,228
$ 3,953,435
$ 2,204,083
$ 22,673,263

We receive securities as collateral under resale agreements, securities borrowing transactions and customer margin loans. We also receive securities as collateral in connection with securities-for-securities transactions in which we are the lender of securities. In many instances, we are permitted by contract to rehypothecate the securities received as collateral. These securities may be used to secure repurchase agreements, enter into securities lending transactions, satisfy margin requirements on derivative transactions or cover short positions. At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, the approximate fair value of securities received as collateral by us that may be sold or repledged was ~~$25.2~~$31.1 billion and ~~$27.1~~$23.1 billion, respectively. At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, a substantial portion of the securities received by us had been sold or repledged.

Offsetting of Securities Financing Agreements

To manage our exposure to credit risk associated with securities financing transactions, we may enter into master netting agreements and collateral arrangements with counterparties. Generally, transactions are executed under standard industry agreements, including, but not limited to, master securities lending agreements (securities lending transactions) and master repurchase agreements (repurchase transactions). See Note 2, Summary of Significant Accounting Policies, in our consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended November 30, ~~2017~~2018 for additional information regarding the offsetting of securities financing agreements.

The following tables provide information regarding repurchase agreements and securities borrowing and lending arrangements ~~and securities received as collateral and obligation to return securities received as collateral~~ that are recognized in our Consolidated Statements of Financial Condition and 1) the extent to which, under enforceable master netting arrangements, such balances are presented net in our Consolidated Statements of Financial Condition as appropriate under U.S. GAAP and 2) the extent to which other rights of setoff associated with these arrangements exist and could have an effect on our financial position (in thousands).

August 31, 2018
Gross Amounts Netting in Consolidated Statement of Financial Condition Net Amounts in Consolidated Statement of Financial Condition Additional Amounts Available for Setoff (1) Available Collateral (2) Net Amount (3)
Assets:
Securities borrowing arrangements $ 7,369,908
$ —
$ 7,369,908
$ (529,662 ) $ (1,088,612 ) $ 5,751,634
Reverse repurchase agreements 11,634,035
(7,974,976 ) 3,659,059
(187,426 ) (3,441,009 ) 30,624
Liabilities:
Securities lending arrangements $ 2,531,504
$ —
$ 2,531,504
$ (529,662 ) $ (1,977,558 ) $ 24,284
Repurchase agreements 17,839,459
(7,974,976 ) 9,864,483
(187,426 ) (8,632,482 ) 1,044,575

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	August 31, 2019
	Gross Amounts		Netting in Consolidated Statement of Financial Condition			Net Amounts in Consolidated Statement of Financial Condition		Additional Amounts Available for Setoff (1)			Available Collateral (2)			Net Amount (3)
Assets:
Securities borrowing arrangements	$	7,895,149	$	—		$	7,895,149	$	(707,436	)	$	(1,653,688	)	$	5,534,025
Reverse repurchase agreements	17,586,096		(13,086,101		)	4,499,995		(454,507		)	(3,817,544		)	227,944
Liabilities:
Securities lending arrangements	$	2,182,865	$	—		$	2,182,865	$	(707,436	)	$	(1,452,911	)	$	22,518
Repurchase agreements	21,323,082		(13,086,101		)	8,236,981		(454,507		)	(6,269,894		)	1,512,580


	November 30, 2017															November 30, 2018
	Gross Amounts		Netting in Consolidated Statement of Financial Condition			Net Amounts in Consolidated Statement of Financial Condition		Additional Amounts Available for Setoff (1)			Available Collateral (2)			Net Amount (4)		Gross Amounts		Netting in Consolidated Statement of Financial Condition			Net Amounts in Consolidated Statement of Financial Condition		Additional Amounts Available for Setoff (1)			Available Collateral (2)			Net Amount (4)
Assets:
Securities borrowing arrangements	$	7,721,803	$	—		$	7,721,803	$	(966,712	)	$	(1,032,629	)	$	5,722,462	$	6,538,212	$	—		$	6,538,212	$	(468,778	)	$	(1,193,986	)	$	4,875,448
Reverse repurchase agreements	14,858,297		(11,168,738		)	3,689,559		(463,973		)	(3,207,147		)	18,439		11,336,175		(8,550,417		)	2,785,758		(609,225		)	(2,126,730		)	49,803
Securities received as collateral	103		—			103		—			(103		)	—
Liabilities:
Securities lending arrangements	$	2,843,911	$	—		$	2,843,911	$	(966,712	)	$	(1,795,408	)	$	81,791	$	1,838,688	$	—		$	1,838,688	$	(468,778	)	$	(1,343,704	)	$	26,206
Repurchase agreements	19,829,249		(11,168,738		)	8,660,511		(463,973		)	(7,067,512		)	1,129,026		17,193,486		(8,550,417		)	8,643,069		(609,225		)	(7,070,967		)	962,877
Obligation to return securities received as collateral	103		—			103		—			(103		)	—

(1)

Under master netting agreements with our counterparties, we have the legal right of offset with a counterparty, which incorporates all of the counterparty’s outstanding rights and obligations under the arrangement. These balances reflect additional credit risk mitigation that is available by a counterparty in the event of a counterparty’s default, but which are not netted in the balance sheet because other netting provisions of U.S. GAAP are not met.


(2)	Includes securities received or paid under collateral arrangements with counterparties that could be liquidated in the event of a counterparty default and thus offset against a counterparty’s rights and obligations under the respective repurchase agreements or securities borrowing or lending arrangements.

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(3)

Amounts include ~~$5,717.1~~$5,473.0 million of securities borrowing arrangements, for which we have received securities collateral of ~~$5,544.1~~$5,322.7 million, and ~~$1,019.6~~$382.9 million of repurchase agreements, for which we have pledged securities collateral of ~~$1,054.1~~$392.4 million, which are subject to master netting agreements, but we have not determined the agreements to be legally enforceable.

(4)

Amounts include ~~$5,678.6~~$4,825.7 million of securities borrowing arrangements, for which we have received securities collateral of ~~$5,516.7~~$4,711.7 million, and ~~$1,084.4~~$931.7 million of repurchase agreements, for which we have pledged securities collateral of ~~$1,115.9~~$963.6 million, which are subject to master netting agreements, but we have not determined the agreements to be legally enforceable.

Cash and Securities Segregated and on Deposit for Regulatory Purposes or Deposited with Clearing and Depository Organizations

Cash and securities deposited with clearing and depository organizations and segregated in accordance with regulatory regulations totaled ~~$913.5~~$658.3 million and ~~$578.0~~$708.0 million at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively. Segregated cash and securities consist of deposits in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, which subjects Jefferies LLC as a broker-dealer carrying customer accounts to requirements related to maintaining cash or qualified securities in segregated special reserve bank accounts for the exclusive benefit of its customers.

Note 7. Securitization Activities

We engage in securitization activities related to corporate loans, commercial mortgage loans, consumer loans and mortgage-backed and other asset-backed securities. In our securitization transactions, we transfer these assets to special purpose entities (“SPEs”) and act as the placement or structuring agent for the beneficial interests sold to investors by the SPE. A significant portion of our securitization transactions are the securitization of assets issued or guaranteed by U.S. government agencies. These SPEs generally meet the criteria of VIEs; however, we generally do not consolidate the SPEs as we are not considered the primary beneficiary for these SPEs. See Note 8, Variable Interest Entities, for further discussion on VIEs and our determination of the primary beneficiary.

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We account for our securitization transactions as sales, provided we have relinquished control over the transferred assets. Transferred assets are carried at fair value with unrealized gains and losses reflected in Principal transactions revenues in our Consolidated Statements of Earnings prior to the identification and isolation for securitization. Subsequently, revenues recognized upon securitization are reflected as net underwriting revenues. We generally receive cash proceeds in connection with the transfer of assets to an SPE. We may, however, have continuing involvement with the transferred assets, which is limited to retaining one or more tranches of the securitization (primarily senior and subordinated debt securities in the form of mortgage- and other-asset backed securities or CLOs)~~, which~~. These securities are included in Financial instruments owned, at fair value in our Consolidated Statements of Financial Condition and are generally initially categorized as Level 2 within the fair value hierarchy. ~~We apply fair value accounting to the securities.~~ For further information on fair value measurements and the fair value hierarchy, refer to Note 4, Fair Value Disclosures, herein, and Note 2, Summary of Significant Accounting Policies, in our consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended November 30, ~~2017.~~2018.

The following table presents activity related to our securitizations that were accounted for as sales in which we had continuing involvement (in millions):



	Three Months Ended August 31,				Nine Months Ended August 31,
	2019		2018		2019		2018
Transferred assets	$	789.3	$	1,865.5	$	2,894.4	$	5,665.9
Proceeds on new securitizations	789.3		1,866.2		2,966.3		5,668.6
Cash flows received on retained interests	16.8		17.2		47.2		35.7

Three Months Ended
August 31, Nine Months Ended
August 31,
2018 2017 2018 2017
Transferred assets $ 1,865.5
$ 1,009.1
$ 5,665.9
$ 2,677.7
Proceeds on new securitizations 1,866.2
1,017.2
5,668.6
2,703.3
Cash flows received on retained interests 17.2
8.7
35.7
22.7

We have no explicit or implicit arrangements to provide additional financial support to these SPEs, have no liabilities related to these SPEs and do not have any outstanding derivative contracts executed in connection with these securitization activities at August 31, ~~2018~~2019 and November 30, ~~2017.~~2018.

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The following tables summarize our retained interests in SPEs where we transferred assets and have continuing involvement and received sale accounting treatment (in millions):



	August 31, 2019				November 30, 2018
Securitization Type	Total Assets		Retained Interests		Total Assets		Retained Interests
U.S. government agency RMBS	$	11,351.8	$	123.8	$	13,633.5	$	365.3
U.S. government agency CMBS	1,374.9		48.4		2,027.6		185.6
CLOs	3,430.0		29.8		3,512.0		20.9
Consumer and other loans	975.0		56.8		604.1		48.9

August 31, 2018 November 30, 2017
Securitization Type Total Assets Retained Interests Total Assets Retained Interests
U.S. government agency RMBS $ 13,306.0
$ 192.7
$ 6,383.5
$ 28.2
U.S. government agency CMBS 2,101.5
276.1
2,075.7
81.4
CLOs 3,442.3
26.4
3,957.8
20.3
Consumer and other loans 648.9
53.0
247.6
47.8

Total assets represent the unpaid principal amount of assets in the SPEs in which we have continuing involvement and are presented solely to provide information regarding the size of the transactions and the size of the underlying assets supporting our retained interests, and are not considered representative of the risk of potential loss. Assets retained in connection with a securitization transaction represent the fair value of the securities of one or more tranches issued by an SPE, including senior and subordinated tranches. Our risk of loss is limited to this fair value amount which is included in total Financial instruments owned in our Consolidated Statements of Financial Condition.

Although not obligated, in connection with secondary market-making activities we may make a market in the securities issued by these SPEs. In these market-making transactions, we buy these securities from and sell these securities to investors. Securities purchased through these market-making activities are not considered to be continuing involvement in these SPEs. To the extent we purchased securities through these market-making activities and we are not deemed to be the primary beneficiary of the VIE, these securities are included in agency and non-agency mortgage- and asset-backed securitizations in the nonconsolidated VIEs section presented in Note 8, Variable Interest Entities.

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Note 8. Variable Interest Entities

VIEs are entities in which equity investors lack the characteristics of a controlling financial interest. VIEs are consolidated by the primary beneficiary. The primary beneficiary is the party who has both (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity.

Our variable interests in VIEs include debt and equity interests, commitments, guarantees and certain fees. Our involvement with VIEs arises primarily from:

Purchases of securities in connection with our trading and secondary market-making activities;

Retained interests held as a result of securitization activities, including the resecuritization of mortgage- and other asset-backed securities and the securitization of commercial mortgage, corporate and consumer loans;

Acting as placement agent and/or underwriter in connection with client-sponsored securitizations;

Financing of agency and non-agency mortgage- and other asset-backed securities;

Warehouse funding arrangements for client-sponsored consumer loan vehicles and CLOs through participation certificates, forward sale agreements and revolving loan and note commitments; and

Loans to, investments in and fees from various investment vehicles.

We determine whether we are the primary beneficiary of a VIE upon our initial involvement with the VIE and we reassess whether we are the primary beneficiary of a VIE on an ongoing basis. Our determination of whether we are the primary beneficiary of a VIE is based upon the facts and circumstances for each VIE and requires ~~significant~~ judgment. Our considerations in determining the VIE’s most significant activities and whether we have power to direct those activities include, but are not limited to, the VIE’s purpose and design and the risks passed through to investors, the voting interests of the VIE, management, service and/or other agreements of the VIE, involvement in the VIE’s initial design and the existence of explicit or implicit financial guarantees. In situations where we have determined that the power over the VIE’s significant activities is shared, we assess whether we are the party with the power over the most significant activities. If we are the party with the power over the most significant activities, we meet the “power” criteria of the primary beneficiary. If we do not have the power over the most significant activities or we determine that decisions require consent of each sharing party, we do not meet the “power” criteria of the primary beneficiary.

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We assess our variable interests in a VIE both individually and in aggregate to determine whether we have an obligation to absorb losses of or a right to receive benefits from the VIE that could potentially be significant to the VIE. The determination of whether our variable interest is significant to the VIE requires ~~significant~~ judgment. In determining the significance of our variable interest, we consider the terms, characteristics and size of the variable interests, the design and characteristics of the VIE, our involvement in the VIE and our market-making activities related to the variable interests.

Consolidated VIEs

The following table presents information about our consolidated VIEs at August 31, ~~2018~~2019 and November 30, ~~2017~~2018 (in millions). The assets and liabilities in the tables below are presented prior to consolidation and thus a portion of these assets and liabilities are eliminated in consolidation.

August 31, 2018 November 30, 2017
Securitization Vehicles Other Securitization Vehicles Other
Cash $ —
$ 1.1
$ 6.5
$ 1.1
Financial instruments owned —
0.4
37.6
0.4
Securities purchased under agreements to resell (1) 1,043.4
—
729.3
—
Fees, interest and other receivables —
—
0.2
—
Total assets $ 1,043.4
$ 1.5
$ 773.6
$ 1.5
Other secured financings (2) $ 1,042.5
$ —
$ 766.2
$ —
Other liabilities 0.9
0.2
5.9
0.2
Total liabilities $ 1,043.4
$ 0.2
$ 772.1
$ 0.2

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	August 31, 2019				November 30, 2018
	Securitization Vehicles		Other		Securitization Vehicles		Other
Cash	$	—	$	1.2	$	—	$	1.1
Financial instruments owned	—		0.3		—		0.4
Securities purchased under agreements to resell (1)	1,822.1		—		883.1		—
Total assets	$	1,822.1	$	1.5	$	883.1	$	1.5
Other secured financings (2)	$	1,820.8	$	—	$	882.5	$	—
Other liabilities	1.3		0.2		0.6		0.2
Total liabilities	$	1,822.1	$	0.2	$	883.1	$	0.2


(1)	Securities purchased under agreements to resell represent amounts due under collateralized transactions on related consolidated entities, which are eliminated in consolidation.


(2)	Approximately ~~$37.7 million and $44.1~~$1.0 million of the secured financing ~~represents an amount~~represent amounts held by us in inventory and isare eliminated in consolidation at ~~August 31, 2018 and~~ November 30, ~~2017, respectively.~~2018.

Securitization Vehicles. We are the primary beneficiary of asset-backed financing vehicles to which we sell agency and non-agency residential and commercial mortgage loans, and mortgage-backed securities, and consumer loans pursuant to the terms of a master repurchase agreement. ~~We manage the assets within these vehicles.~~ Our variable interests in these vehicles consist of our collateral margin maintenance obligations under the master repurchase agreement, which we manage, and retained interests in securities issued. The assets of these VIEs consist of reverse repurchase agreements, which are available for the benefit of the vehicle’s debt holders. The creditors of these VIEs do not have recourse to our general credit and each such VIE’s assets are not available to satisfy any other debt.

We were previously the primary beneficiary of a securitization vehicle associated with our financing of small business loans. In the creation of the securitization vehicle, we were involved in the decisions made during the establishment and design of the entity and held variable interests consisting of the securities retained that could potentially be significant. The assets of the VIE consisted of small business loans, which were available for the benefit of the vehicles’ beneficial interest holders. The creditors of the VIE did not have recourse to our general credit and the assets of the VIE were not available to satisfy any other debt.

Other. We are the primary beneficiary of certain investment vehicles set up for the benefit of our employees. We manage and invest alongside our employees in these vehicles. The assets of these VIEs consist of private equity securities and are available for the benefit of the entities’ equity holders. Our variable interests in these vehicles consist of equity securities. The creditors of these VIEs do not have recourse to our general credit and each such VIE’s assets are not available to satisfy any other debt.

Nonconsolidated VIEs

The following tables present information about our variable interests in nonconsolidated VIEs (in millions):


	August 31, 2018										August 31, 2019
	Carrying Amount				Maximum Exposure to Loss				VIE Assets		Carrying Amount						Maximum Exposure to Loss			VIE Assets
	Assets		Liabilities					Assets				Liabilities					Maximum Exposure to Loss			VIE Assets
CLOs	$	53.9	$	0.7	Maximum Exposure to Loss	$	780.9		VIE Assets		$	3,155.3	$	124.0		$	0.9		$	801.5		$	7,889.6
Consumer loan vehicles	323.5		—		602.4				3,441.8
Consumer loan and other asset-backed vehicles											525.1			—			668.8			3,020.6
Related party private equity vehicles	34.1		—		52.0				107.2		28.7			—			46.2			83.7
Other private investment vehicles	50.1		—		53.4				3,179.9
Other investment vehicles											399.1			—			410.0			6,550.7
Total	$	461.6	$	0.7	$	1,488.7			$	9,884.2	$	1,076.9		$	0.9		$	1,926.5		$	17,544.6

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	November 30, 2017										November 30, 2018
	Carrying Amount				Maximum Exposure to Loss				VIE Assets		Carrying Amount						Maximum Exposure to Loss			VIE Assets
	Assets		Liabilities					Assets				Liabilities					Maximum Exposure to Loss			VIE Assets
CLOs	$	163.5	$	8.9	Maximum Exposure to Loss	$	1,020.5		VIE Assets		$	5,210.4	$	42.1		$	—		$	568.3		$	3,088.9
Consumer loan vehicles	254.8		—		759.8				2,322.7
Consumer loan and other asset-backed vehicles											462.1			—			807.1			3,273.1
Related party private equity vehicles	23.7		—		45.4				75.0		35.5			—			53.5			108.3
Other private investment vehicles	48.0		—		48.7				2,938.4
Other investment vehicles											95.0			—			99.1			3,558.1
Total	$	490.0	$	8.9	$	1,874.4			$	10,546.5	$	634.7		$	—		$	1,528.0		$	10,028.4

Our maximum exposure to loss often differs from the carrying value of the variable interests. The maximum exposure to loss is dependent on the nature of our variable interests in the VIEs and is limited to the notional amounts of certain loan and equity commitments and guarantees. Our maximum exposure to loss does not include the offsetting benefit of any financial instruments that may be utilized to hedge the risks associated with our variable interests and is not reduced by the amount of collateral held as part of a transaction with a VIE.

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Collateralized Loan Obligations. Assets collateralizing the CLOs include bank loans, participation interests and sub-investment grade and senior secured U.S. loans. We underwrite securities issued in CLO transactions on behalf of sponsors and provide advisory services to the sponsors. We may also sell corporate loans to the CLOs. Our variable interests in connection with CLOs where we have been involved in providing underwriting and/or advisory services consist of the following:

Forward sale agreements whereby we commit to sell, at a fixed price, corporate loans and ownership interests in an entity holding such corporate loans to CLOs;

Warehouse funding arrangements in the form of participation interests in corporate loans held by CLOs and commitments to fund such participation interests;

Trading positions in securities issued in a CLO transaction; and

Investments in variable funding notes issued by CLOs.

Consumer Loan and other Asset-Backed Vehicles. We provide financing and lending related services to certain client-sponsored VIEs in the form of revolving funding note agreements, revolving credit facilities, ~~and~~ forward purchase agreements and reverse repurchase agreements. The underlying assets, which are collateralizing the vehicles, are primarily composed of unsecured consumer and small business ~~loans.~~loans, and trade claims. In addition, we may provide structuring and advisory services and act as an underwriter or placement agent for securities issued by the vehicles. We do not control the activities of these entities.

Related Party Private Equity Vehicles. We committed to invest ~~equity~~ in private equity funds, (the “JCP Funds”, including JCP Fund V (see Note 9, Investments)) managed by Jefferies Capital Partners, LLC (the “JCP Manager”). Additionally, we committed to invest ~~equity~~ in the general partners of the JCP Funds (the “JCP General Partners”) and the JCP Manager. Our variable interests in the JCP Funds, JCP General Partners and JCP Manager (collectively, the “JCP Entities”) consist of equity interests that, in total, provide us with limited and general partner investment returns of the JCP Funds, a portion of the carried interest earned by the JCP General Partners and a portion of the management fees earned by the JCP Manager. At both August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, our total equity commitment in the JCP Entities was $139.3 million, ~~and $148.1 million, respectively,~~ of which ~~$121.3~~$121.7 million and ~~$126.3~~$121.3 million had been funded, respectively. The carrying value of our equity investments in the JCP Entities was ~~$34.1~~$28.7 million and ~~$23.7~~$35.5 million at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively. Our exposure to loss is limited to the total of our carrying value and unfunded equity commitment. The assets of the JCP Entities primarily consist of private equity and equity related investments.

Other ~~Private~~ Investment Vehicles. At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, we had equity commitments to invest ~~$65.3~~$400.2 million and ~~$61.8~~$112.2 million, respectively, in various other ~~private~~ investment vehicles, of which ~~$62.0~~$389.2 million and ~~$61.0~~$108.1 million was funded, respectively. The carrying value of our equity investments was ~~$50.1~~$399.1 million and ~~$48.0~~$95.0 million at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively. Our exposure to loss is limited to the total of our carrying value and unfunded equity commitment. These ~~private~~ investment vehicles have assets primarily consisting of private and public equity investments, debt instruments, trade and insurance claims and various oil and gas assets.

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Mortgage- and Other Asset-Backed Securitization Vehicles. In connection with our secondary trading and market-making activities, we buy and sell agency and non-agency mortgage-backed securities and other asset-backed securities, which are issued by third-party securitization SPEs and are generally considered variable interests in VIEs. Securities issued by securitization SPEs are backed by residential mortgage loans, U.S. agency collateralized mortgage obligations, commercial mortgage loans, CDOs and CLOs and other consumer loans, such as installment receivables, auto loans and student loans. These securities are accounted for at fair value and included in Financial instruments owned in our Consolidated Statements of Financial Condition. We have no other involvement with the related SPEs and therefore do not consolidate these entities.

We also engage in underwriting, placement and structuring activities for third-party-sponsored securitization trusts generally through agency (FNMA (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) or GNMA (“Ginnie Mae”)) or non-agency-sponsored SPEs and may purchase loans or mortgage-backed securities from third parties that are subsequently transferred into the securitization trusts. The securitizations are backed by residential and commercial mortgage, home equity and auto loans. We do not consolidate agency-sponsored securitizations as we do not have the power to direct the activities of the SPEs that most significantly impact their economic performance. Further, we are not the servicer of non-agency-sponsored securitizations and therefore do not have power to direct the most significant activities of the SPEs and accordingly, do not consolidate these entities. We may retain unsold senior and/or subordinated interests at the time of securitization in the form of securities issued by the SPEs.

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We transfer existing securities, typically mortgage-backed securities, into resecuritization vehicles. These transactions in which debt securities are transferred to a VIE in exchange for new beneficial interests occur in connection with both agency and non-agency-sponsored VIEs. Our consolidation analysis is largely dependent on our role and interest in the resecuritization trusts. Most resecuritizations in which we are involved are in connection with investors seeking securities with specific risk and return characteristics. As such, we have concluded that the decision-making power is shared between us and the investor(s), considering the joint efforts involved in structuring the trust and selecting the underlying assets as well as the level of security interests the investor(s) hold in the SPE; therefore, we do not consolidate the resecuritization VIEs.

At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, we held ~~$2,622.2~~$1,712.9 million and ~~$1,829.6~~$2,913.0 million of agency mortgage-backed securities, respectively, and ~~$156.6~~$191.2 million and ~~$253.2~~$170.5 million of non-agency mortgage and other asset-backed securities, respectively, as a result of our secondary trading and market-making activities, and underwriting, placement and structuring ~~activities and resecuritization~~ activities. Our maximum exposure to loss on these securities is limited to the carrying value of our investments in these securities. These mortgage- and other asset-backed securitization vehicles discussed are not included in the above table containing information about our variable interests in nonconsolidated VIEs.

Note 9. Investments

~~We have~~At August 31, 2019, we had investments in Jefferies Finance LLC (“Jefferies Finance”) and Berkadia. In addition, we had an investment in Epic Gas, ~~Ltd. (“Epic Gas”).~~which was sold on March 19, 2019. Our investments in Jefferies Finance, Berkadia and Epic Gas have been accounted for under the equity method and have been included in Loans to and investments in related parties in our Consolidated Statements of Financial Condition with our share of the investees’ earnings recognized in Other revenues in our Consolidated Statements of Earnings. We have limited partnership interests of 11% and 50% in Jefferies Capital Partners V L.P. and the Jefferies SBI USA Fund L.P. (together, “JCP Fund V”), respectively, which are private equity funds managed by a team led by ~~Brian P. Friedman,~~ one of our directors and our Chairman of the Executive Committee. In addition, we had investments in KCG Holdings, Inc. (“KCG”) and Jefferies LoanCore LLC (“Jefferies LoanCore”), which were sold on July 20, 2017 and October 31, 2017, respectively. Our investment in KCG was accounted for at fair value by electing the fair value option available under U.S. GAAP with changes in fair value recognized in Principal transaction revenues in our Consolidated Statements of Earnings. Our investment in Jefferies LoanCore was accounted for under the equity method with our share of the investees’ earnings recognized in Other revenues in our Consolidated Statements of Earnings.

Jefferies Finance

Jefferies Finance, a joint venture entity pursuant to an agreement with Massachusetts Mutual Life Insurance Company (“MassMutual”), is a commercial finance company whose primary focus is the origination and syndication of senior secured debt to middle market and growth companies in the form of term and revolving loans. Loans are originated primarily through the investment banking efforts of Jefferies LLC. Jefferies Finance may also originate other debt products such as second lien term, bridge and mezzanine loans, as well as related equity co-investments. Jefferies Finance also purchases syndicated loans in the secondary market and acts as an investment advisor for various loan funds.

At August 31, ~~2018,~~2019, we and MassMutual each had equity commitments to Jefferies Finance of $750.0 million, for a combined total commitment of $1.5 billion. At August 31, ~~2018,~~2019, we had funded ~~$706.5~~$643.7 million of our $750.0 million commitment, leaving ~~$43.5~~$106.3 million unfunded. The investment commitment is scheduled to expire on March 1, ~~2019~~2020 with automatic one year extensions absent a 60 ~~day~~days termination notice by either party.

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Jefferies Finance has executed a Secured Revolving Credit Facility with us and MassMutual, to be funded equally, to support loan underwritings by Jefferies Finance, which bears interest based on the interest rates of the related Jefferies Finance underwritten loans and is secured by the underlying loans funded by the proceeds of the facility. The total Secured Revolving Credit Facility is a committed amount of $500.0 million at August 31, ~~2018.~~2019. Advances are shared equally between us and MassMutual. The facility is scheduled to mature on March 1, ~~2019~~2020 with automatic one year extensions absent a 60 ~~day~~days termination notice by either party. At August 31, ~~2018,~~2019, we had funded $0.0 million of our $250.0 million commitment. The following summarizes the activity included in our Consolidated Statements of Earnings related to the facility (in millions):

Three Months Ended
August 31, Nine Months Ended
August 31,
2018 2017 2018 2017
Interest income $ —
$ 0.2
$ 1.2
$ 2.5
Unfunded commitment fees 0.3
0.3
0.8
0.8

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	Three Months Ended August 31,				Nine Months Ended August 31,
	2019		2018		2019		2018
Interest income	$	—	$	—	$	—	$	1.2
Unfunded commitment fees	0.3		0.3		0.9		0.8

The following is a summary of selected financial information for Jefferies Finance (in millions):



	August 31, 2019		November 30, 2018
Our total equity balance	$	635.5	$	694.8

August 31, 2018 November 30, 2017
Our total equity balance $ 706.5
$ 636.2

Three Months Ended
August 31, Nine Months Ended
August 31,
2018 2017 2018 2017
Net earnings $ 38.0
$ 40.8
$ 140.7
$ 133.5



	Three Months Ended August 31,					Nine Months Ended August 31,
	2019			2018		2019		2018
Net earnings (loss)	$	(16.3	)	$	38.0	$	31.5	$	140.7

The following summarizes activity related to our other transactions with Jefferies Finance (in millions):


	Three Months Ended August 31,						Nine Months Ended August 31,						Three Months Ended August 31,					Nine Months Ended August 31,
	2018			2017			2018			2017			2019		2018			2019		2018
Origination and syndication fee revenues (1)	$	71.1		$	104.2		$	282.1		$	243.5		$	44.6	$	71.1		$	135.8	$	282.1
Origination fee expenses (1)	12.1			—			45.5			2.5			8.2		12.1			21.8		45.5
CLO placement fee revenues (2)	0.4			0.8			3.1			4.7			1.0		0.4			2.3		3.1
Derivative losses (3)	(0.3		)	(0.2		)	(0.9		)	(0.6		)	—		(0.3		)	—		(0.9		)
Underwriting fees (4)	—			—			0.3			—			2.9		—			3.9		0.3
Service fees (5)	13.3			7.9			48.3			37.4			12.3		13.3			50.6		48.3

(1)

We engage in debt capital markets transactions with Jefferies Finance related to the originations and syndications of loans by Jefferies Finance. In connection with such services, we earned fees, which are recognized in Investment banking revenues in our Consolidated Statements of Earnings. In addition, we paid fees to Jefferies Finance in respect of certain loans originated by Jefferies Finance, which are recognized as Business development expenses in our Consolidated Statements of Earnings.

(2)

We act as a placement agent for CLOs managed by Jefferies Finance, for which we recognized fees, which are included in Investment banking revenues in our Consolidated Statements of Earnings. At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, we held securities issued by CLOs managed by Jefferies Finance, which are included in Financial instruments owned. At November 30, 2016, we provided a guarantee whereby we were required to make certain payments to a CLO in the event that Jefferies Finance was unable to meet its obligations to the CLO, which was terminated in October 2017.owned, at fair value.


(3)	We have entered into participation agreements and derivative contracts with Jefferies Finance based upon certain securities issued by ~~the CLO~~CLOs and we have recognized gains (losses) relating to the derivative contracts.


(4)	We acted as underwriter in connection with term loans issued by Jefferies Finance.


(5)	Under a service agreement, we charge Jefferies Finance for services provided.

Receivables from Jefferies Finance, included in Other assets in our Consolidated Statements of Financial Condition, were ~~$36.3~~$12.9 million and ~~$20.5~~$35.2 million at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively. Payables ~~from~~to Jefferies Finance, related to cash deposited with us and included in Accrued expenses and other liabilities in our Consolidated Statements of Financial Condition, were $13.7 million and $14.1 million at August 31, ~~2018.~~2019 and November 30, 2018, respectively.

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We enter into OTC foreign exchange contracts with Jefferies Finance. In connection with these contracts we had ~~$0.2 million recorded in Payables—brokers, dealers and clearing organizations and $1.5~~$2.1 million recorded in Financial instruments ~~owned,~~sold, at fair value in our Consolidated Statements of Financial Condition at August 31, 2019. We recorded $0.2 million in Payables—brokers, dealers and clearing organizations and $0.4 million in Financial instruments sold, not yet purchased, at fair value in connection with these contracts in our Consolidated Statements of Financial Condition at November 30, 2018.

On March 28, 2019, we entered into a promissory note with Jefferies Finance with a principal amount of $1.0 billion, the proceeds of which were used in connection with our investment banking loan syndication activities. We repaid Jefferies Finance the entire outstanding principal amount of this note on May 15, 2019. Interest paid on the note of $3.8 million is included in Interest expense within our Consolidated Statements of Earnings.

Berkadia

Berkadia is a commercial mortgage banking and servicing joint venture that was formed in 2009 by Jefferies and Berkshire Hathaway Inc. On October 1, 2018, Jefferies transferred its 50% voting equity interest in Berkadia and related arrangements to us. As a result, we are entitled to receive 45% of the profits of Berkadia. Berkadia originates commercial/multifamily real estate loans that are sold to U.S. government agencies, and originates and brokers commercial/multifamily mortgage loans which are not part of government agency programs. Berkadia is an investment sales advisor focused on the multifamily industry. Berkadia is a servicer of commercial real estate loans in the U.S., performing primary, master and special servicing functions for U.S. government agency programs, commercial mortgage-backed securities transactions, banks, insurance companies and other financial institutions.

The following is a summary of selected financial information for Berkadia (in millions):



	August 31, 2019		November 30, 2018
Our total equity balance	$	270.5	$	245.2



	Three Months Ended August 31, 2019		Nine Months Ended August 31, 2019
Net earnings	$	53.8	$	160.3

At August 31, 2019 and November 30, ~~2017, respectively.~~2018, we had commitments to purchase $464.4 million and $723.8 million, respectively, in agency CMBS from Berkadia. During the three and nine months ended August 31, 2019, we received $29.6 million and $47.7 million, respectively, in distributions from Berkadia on our equity interest.

JCP Fund V

The amount of our investments in JCP Fund V included in Financial instruments owned, at fair value in our Consolidated Statements of Financial Condition was ~~$30.0~~$26.0 million and ~~$19.6~~$31.9 million at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively. We account for these investments at fair value based on the NAV of the funds provided by the fund managers (see Note 2, Summary of Significant Accounting Policies, in our consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended November 30, ~~2017)~~2018). The following summarizes the results from these investments which are included in Principal transactions revenues in our Consolidated Statements of Earnings (in millions):



	Three Months Ended August 31,					Nine Months Ended August 31,
	2019			2018		2019			2018
Net gains (losses) from our investments in JCP Fund V	$	(2.5	)	$	0.3	$	(1.9	)	$	10.1

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Three Months Ended
August 31, Nine Months Ended
August 31,
2018 2017 2018 2017
Net gains (losses) from our investments in JCP Fund V $ 0.3
$ (1.2 ) $ 10.1
$ (9.1 )

At both August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, we were committed to invest equity of up to $85.0 million in JCP Fund V. At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, our unfunded commitment relating to JCP Fund V was $9.4 million and $9.7 million, ~~and $10.1 million,~~ respectively.

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The following is a summary of the Net ~~increase (decrease)~~change in net assets resulting from operations for 100.0% of JCP Fund V, in which we owned effectively ~~35.1% and~~ 35.2% of the combined equity interests ~~at August 31, 2018 and November 30, 2017, respectively~~ (in thousands):

Three Months Ended
June 30, 2018 (1) March 31, 2018 (1) December 31, 2017 (1) June 30, 2017 (1) March 31, 2017 (1) December 31, 2016 (1)
Net increase (decrease) in net assets resulting from operations $ 1,663
$ 8,463
$ 19,712
$ (552 ) $ (19,552 ) $ (2,294 )



	Three Months Ended
	June 30, 2019 (1)			March 31, 2019 (1)			December 31, 2018 (1)			June 30, 2018 (1)		March 31, 2018 (1)		December 31, 2017 (1)
Net increase (decrease) in net assets resulting from operations	$	(7,174	)	$	(1,169	)	$	(8,412	)	$	1,663	$	8,463	$	19,712


(1)	Financial information for JCP Fund V within our results of operations for the three and nine months ended August 31, ~~2018~~2019 and ~~2017~~2018 is included based on the presented periods.

Epic Gas

On July 14, 2015, Jefferies LLC purchased common shares of Epic Gas. ~~In addition, one of our directors serves on the Board of Directors of Epic Gas and owns common shares of Epic Gas.~~ At ~~August 31, 2018 and~~ November 30, ~~2017,~~2018, we owned approximately 21.1% of the outstanding common stock of Epic ~~Gas.~~

~~The following is a summary~~Gas and one of ~~selected financial information for~~our directors served on the Board of Directors of Epic Gas ~~(in millions):~~

August 31, 2018 November 30, 2017
Our investment in Epic Gas (1) $ 21.2
$ 22.2

Three Months Ended
June 30, 2018 (2) March 31, 2018 (2) December 31, 2017 (2) June 30, 2017 (2) March 31, 2017 (2) December 31, 2016 (2)
Net losses $ (2.3 ) $ (2.7 ) $ (16.4 ) $ (5.4 ) $ (3.4 ) $ (15.9 )


~~(1)~~	~~Included in Loans to and investments in related parties in our Consolidated Statements of Financial Condition.~~


~~(2)~~	~~Financial information for Epic Gas in our results of operations for the three and nine months ended August 31, 2018 and 2017 is included based on the presented periods.~~

~~Jefferies LoanCore~~

~~Jefferies LoanCore, a commercial real estate finance company~~ and ~~a joint venture with~~owned common shares of Epic Gas. During the Government of Singapore Investment Corporation, the Canada Pension Plan Investment Board and LoanCore, LLC, originates and purchases commercial real estate loans throughout the U.S. and Europe. On Octobernine months ended August 31, ~~2017,~~2019, we sold all of our ~~membership interests (which constituted~~common shares of Epic Gas, at fair value, for a ~~48.5% voting interest) in Jefferies LoanCore for approximately $173.1~~total of $24.6 million. There was a gain of $2.8 million ~~the estimated book value at October 31, 2017. In addition, we may be entitled to additional cash consideration over the next five years in the event Jefferies LoanCore’s yearly return~~ on ~~equity exceeds certain thresholds.~~

~~The net earnings of Jefferies LoanCore were $3.8 million and $12.4 million for the three and nine months ended August 31, 2017, respectively, and were recognized~~this transaction, which is included in Other ~~revenues in our Consolidated Statements of Earnings.~~

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~~KCG~~

Our investment in KCG was sold on July 20, 2017. The change in the fair value of our investment in KCG was a net gain of $2.2 million and $93.4 million for the three and nine months ended August 31, 2017, respectively, and was included in Principal transaction revenuesrevenue in our Consolidated Statements of Earnings. ~~We had elected to record~~At November 30, 2018, our investment in ~~KCG at fair value under the fair value option, as the investment~~Epic Gas of $21.7 million was ~~acquired as part of our capital markets activities. The valuation of our investment was based on the closing exchange price of KCG and~~ included in ~~Level 1~~Loans to and investments in related parties in our Consolidated Statements of ~~the fair value hierarchy.~~Financial Condition. For the three months ended December 31, 2018, March 31, ~~2017~~2018 and December 31, ~~2016, KCG~~2017, Epic Gas reported net earnings (losses) of ~~$3.2~~$0.9 million, $(2.7) million, and ~~$196.2~~$(16.4) million, respectively.

Note 10. Goodwill and Intangible Assets

Goodwill

Goodwill attributed to our reportable business segments are as follows (in thousands):


	August 31, 2018		November 30, 2017		August 31, 2019		November 30, 2018
Capital Markets	$	1,640,058	$	1,644,089	$	1,635,200	$	1,638,778
Asset Management	3,000		3,000		3,374		3,392
Total goodwill	$	1,643,058	$	1,647,089	$	1,638,574	$	1,642,170

The following table is a summary of the changes to goodwill for the nine months ended August 31, ~~2018~~2019 (in thousands):



Balance at November 30, 2018	$	1,642,170
Translation adjustments	(3,596		)
Balance at August 31, 2019	$	1,638,574

Balance at November 30, 2017 $ 1,647,089
Translation adjustments (4,031 )
Balance at August 31, 2018 $ 1,643,058

Goodwill Impairment Testing

A reporting unit is an operating segment or one level below an operating segment. The quantitative goodwill impairment test is performed at the level of the reporting unit and consists of two steps. In the first step, the fair value of each reporting unit is compared with its carrying value, including goodwill and allocated intangible assets. If the fair value is in excess of the carrying value, the goodwill for the reporting unit is considered not to be impaired. If the fair value is less than the carrying value, then a second step is performed in order to measure the amount of the impairment loss, if any, which is based on comparing the implied fair value of the reporting unit’s goodwill to the carrying value of the reporting unit’s goodwill.

Allocated tangible equity plus allocated goodwill and intangible assets are used for the carrying amount of each reporting unit. The amount of tangible equity allocated to a reporting unit is based on our cash capital model deployed in managing our businesses, which seeks to approximate the capital a business would require if it were operating independently. Intangible assets are allocated to a reporting unit based on either specifically identifying a particular intangible asset as pertaining to a reporting unit or, if shared among reporting units, based on an assessment of the reporting unit’s benefit from the intangible asset in order to generate results.

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Estimating the fair value of a reporting unit requires management judgment. Estimated fair values for our reporting units were determined using a market valuation method that ~~incorporate~~incorporates price-to-earnings and price-to-book multiples of comparable public companies. In addition, as the fair values determined under the market approach represent a noncontrolling interest, we applied a control premium to arrive at the estimated fair value of each reporting unit on a controlling basis. We engaged an independent valuation specialist to assist us in our valuation process at August 1, ~~2018.~~2019.

Our annual goodwill impairment testing at August 1, ~~2018~~2019 did not indicate any goodwill impairment in any of our reporting units. Substantially all of our goodwill is allocated to our Investment Banking, Equities and Fixed Income reporting units, which are part of our Capital Markets reportable business segment, for which the results of our assessment indicated that these reporting units had a fair value in excess of their carrying amounts based on current projections. At August 31, ~~2018,~~2019, goodwill allocated to these reporting units is ~~$1,640.1~~$1,635.2 million of total goodwill of ~~$1,643.1~~$1,638.6 million.

Intangible Assets

Intangible assets are included in Other assets in our Consolidated Statements of Financial Condition. The following tables present the gross carrying amount, changes in carrying amount, net carrying amount and weighted average amortization period of identifiable intangible assets at August 31, ~~2018~~2019 and November 30, ~~2017~~2018 (dollars in thousands):

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	August 31, 2018										Weighted average remaining lives (years)	August 31, 2019										Weighted average remaining lives (years)
	Gross cost		Impairment losses			Accumulated amortization			Net carrying amount		Weighted average remaining lives (years)	Gross cost		Impairment losses			Accumulated amortization			Net carrying amount		Weighted average remaining lives (years)
Customer relationships	$	125,763	$	—		$	(56,923	)	$	68,840	10.7	$	125,066	$	—		$	(64,792	)	$	60,274	10.1
Trade name	128,617		—			(20,211		)	108,406		29.5	127,600		—			(23,697		)	103,903		28.5
Exchange and clearing organization membership interests and registrations	8,484		(9		)	—			8,475		N/A	8,516		(291		)	—			8,225		N/A
Total	$	262,864	$	(9	)	$	(77,134	)	$	185,721		$	261,182	$	(291	)	$	(88,489	)	$	172,402



	November 30, 2018							Weighted average remaining lives (years)
	Gross cost		Accumulated amortization			Net carrying amount		Weighted average remaining lives (years)
Customer relationships	$	125,574	$	(58,892	)	$	66,682	10.6
Trade name	128,348		(21,086		)	107,262		29.3
Exchange and clearing organization membership interests and registrations	8,524		—			8,524		N/A
Total	$	262,446	$	(79,978	)	$	182,468

November 30, 2017 Weighted average remaining lives (years)
Gross cost Accumulated amortization Net carrying amount
Customer relationships $ 126,412
$ (50,983 ) $ 75,429
11.3
Trade name 129,370
(17,557 ) 111,813
30.3
Exchange and clearing organization membership interests and registrations 8,551
—
8,551
N/A
Total $ 264,333
$ (68,540 ) $ 195,793

We performed our annual impairment testing of intangible assets with an indefinite useful life, which consists of exchange and clearing organization membership interests and registrations, at August 1, ~~2018.~~2019. We elected to perform a quantitative assessment of membership interests and registrations that have available quoted sales prices as well as certain other membership interests and registrations that have declined in utilization. A qualitative assessment was performed on the remainder of our indefinite-life intangible assets. In applying our quantitative assessment at August 1, 2019, we recognized an impairment loss of ~~$9,000~~$291,000 on certain exchange membership interests and registrations. With regard to our qualitative assessment of the remaining indefinite-life intangible assets, based on our assessment of market conditions, the utilization of the assets and the replacement costs associated with the assets, we have concluded that it is not more likely than not that the intangible assets are impaired.

Amortization Expense

For finite life intangible assets, aggregate amortization expense amounted to $3.0 million and $9.0 million for ~~both~~ the three and nine months ended August 31, ~~2018~~2019 and ~~2017,~~2018, respectively. These expenses are included in Other expenses in our Consolidated Statements of Earnings.

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The estimated future amortization expense for the five succeeding fiscal years is as follows (in thousands):



Remainder of fiscal 2019	$	3,049
Year ending November 30, 2020	12,198
Year ending November 30, 2021	12,198
Year ending November 30, 2022	9,256
Year ending November 30, 2023	8,268

Remainder of fiscal 2018 $ 3,049
Year ending November 30, 2019 12,198
Year ending November 30, 2020 12,198
Year ending November 30, 2021 12,198
Year ending November 30, 2022 12,198

Note 11. Short-Term Borrowings

Short-term borrowings at August 31, ~~2018~~2019 and November 30, ~~2017~~2018 include the following and mature in one year or less (in thousands):



	August 31, 2019		November 30, 2018
Bank loans	$	518,914	$	330,942
Floating rate puttable notes	—		56,550
Total short-term borrowings	$	518,914	$	387,492

August 31, 2018 November 30, 2017
Bank loans (1) $ 324,021
$ 304,651
Floating rate puttable notes 57,985
108,240
Equity-linked notes —
23,324
Total short-term borrowings $ 382,006
$ 436,215

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~~(1)~~	~~Bank loans include loans entered into, pursuant to a Master Loan Agreement, between the Bank of New York Mellon and us.~~

At August 31, ~~2018,~~2019, the weighted average interest rate on short-term borrowings outstanding is ~~3.39%~~3.42% per annum. Average daily short-term borrowings outstanding were $496.5 million and $580.8 million for the three and nine months ended August 31, 2019, respectively, $422.9 million and $498.6 million for the three and nine months ended August 31, 2018, ~~respectively, $436.7~~respectively.

Our floating rate puttable notes with a principal amount of €50.0 million matured on July 29, 2019.

On March 28, 2019, we entered into a promissory note with Jefferies Finance, which was repaid on May 15, 2019. For further information on this promissory note, refer to Note 9, Investments.

On December 27, 2018, one of our subsidiaries entered into a credit facility agreement (“Credit Facility”) with JPMorgan Chase Bank, N.A. for a committed amount of $135.0 million, which is included in bank loans. Interest is based on an annual alternative base rate or an adjusted London Interbank Offered Rate (“LIBOR”), as defined in the Credit Facility. The Credit Facility contains certain covenants that, among other things, require Jefferies Group LLC to maintain a specified level of tangible net worth. The covenants also require the borrower to maintain specified leverage amounts and ~~$474.2 million for~~impose certain restrictions on the ~~three and nine months ended August 31, 2017, respectively.~~

borrower’s future indebtedness. During the nine months ended August 31, ~~2018,~~2019, we ~~issued equity-linked notes~~were in compliance with ~~a principal amount of $70.5 million, which matured on July 12, 2018. In addition, during~~all debt covenants under the nine months ended August 31, 2018, our floating rate puttable notes with principal amounts of €30.0 million and €11.0 million matured on April 8, 2018 and May 3, 2018, respectively and our equity-linked notes with a principal amount of $23.3 million matured on December 7, 2017. See Note 4, Fair Value Disclosures, for further information.

During the nine months ended August 31, 2017, we issued equity-linked notes with principal amounts of $30.6 million, which matured on July 18, 2017, and $4.2 million, which matured on September 20, 2017. See Note 4, Fair Value Disclosures, for further information.Credit Facility.

The Bank of New York Mellon has agreed to make revolving intraday credit advances (“Intraday Credit Facility”) for an aggregate committed amount of $150.0 million. The Intraday Credit Facility contains financial covenants, which ~~includes~~include a minimum regulatory net capital requirement for Jefferies LLC. Interest is based on the higher of the Federal funds effective rate plus 0.5% or the prime rate. ~~During the nine months ended~~At August 31, ~~2018,~~2019, we were in compliance with debt covenants under the Intraday Credit Facility.

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Note 12. Long-Term Debt

The following summarizes our long-term debt carrying values (including unamortized discounts and premiums, valuation adjustments and debt issuance costs, where applicable) (in thousands):


	Maturity	Effective Interest Rate	August 31, 2018		November 30, 2017		Maturity	Effective Interest Rate	August 31, 2019		November 30, 2018
Unsecured long-term debt
5.125% Senior Notes	April 13, 2018	—%	$	—	$	682,338
Unsecured long-term debt:
8.500% Senior Notes	July 15, 2019	3.99%	707,072		728,872		July 15, 2019	—%	$	—	$	699,659
2.375% Euro Medium Term Notes	May 20, 2020	2.42%	578,896		593,334		May 20, 2020	2.42%	548,566		564,702
6.875% Senior Notes	April 15, 2021	4.40%	795,967		808,157		April 15, 2021	4.40%	779,078		791,814
2.250% Euro Medium Term Notes	July 13, 2022	4.08%	4,332		4,389		July 13, 2022	4.08%	4,171		4,243
5.125% Senior Notes	January 20, 2023	4.55%	613,634		615,703		January 20, 2023	4.55%	610,762		612,928
1.000% Euro Medium Term Notes							July 19, 2024	1.00%	546,855		—
4.850% Senior Notes (1)	January 15, 2027	4.93%	712,667		736,357		January 15, 2027	4.93%	782,156		709,484
6.450% Senior Debentures	June 8, 2027	5.46%	374,211		375,794		June 8, 2027	5.46%	371,998		373,669
3.875% Convertible Senior Debentures (2)	November 1, 2029	—%	—		324,779
4.150% Senior Notes	January 23, 2030	4.26%	987,576		—		January 23, 2030	4.26%	988,440		987,788
6.250% Senior Debentures	January 15, 2036	6.03%	511,758		512,040		January 15, 2036	6.03%	511,363		511,662
6.500% Senior Notes	January 20, 2043	6.09%	420,718		420,990		January 20, 2043	6.09%	420,338		420,625
Structured notes (3)	Various	Various	709,557		614,091
Structured notes (2)							Various	Various	1,014,509		686,170
Total unsecured long-term debt			6,416,388		6,416,844				6,578,236		6,362,744
Secured long-term debt
Secured long-term debt:
Revolving Credit Facility			158,478		—				188,927		183,539
Total long-term debt			$	6,574,866	$	6,416,844
Total long-term debt (3)									$	6,767,163	$	6,546,283

(1)

These senior notes with a principal amount of $750.0 million were issued on January 17, 2017. The carrying value includes a ~~gain~~loss of ~~$24.1~~$72.3 million and a ~~loss~~gain of ~~$9.6~~$24.1 million in the nine months ended August 31, ~~2018~~2019 and ~~2017,~~2018, respectively, associated with an interest rate swap based on its designation as a fair value hedge. See Note 5, Derivative Financial Instruments, for further information.

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(2)	The change in fair value of the conversion feature embedded in the debentures, which is included in Principal transaction revenues in our Consolidated Statements of Earnings, was not material for the three and nine months ended August 31, 2017.

~~(3)~~

~~The carrying value includes $709.6 million and $607.0 million of notes carried at fair value at August 31, 2018 and November 30, 2017, respectively.~~ These structured notes contain various interest rate payment terms and are accounted for at fair value, with changes in fair value resulting from a change in the instrument-specific credit risk presented in other comprehensive income and changes in fair value resulting from non-credit components recognized in Principal ~~transaction~~transactions revenues. A weighted average coupon rate is not meaningful, as ~~substantially~~ all of the structured notes are carried at fair value.


(3)	The total Long-term debt has a fair value of $7,046.6 million and $6,423.6 million at August 31, 2019 and November 30, 2018, respectively, which would be classified as Level 2 and Level 3 in the fair value hierarchy.

During the nine months ended August 31, 2019, long-term debt increased $220.9 million. This increase is primarily due to structured notes issuances with a total principal amount of approximately $283.2 million, net of retirements. In addition, on July 19, 2019, under our $2.5 billion Euro Medium Term Note Program, we issued 1.000% senior unsecured notes with a principal amount of $553.6 million, due 2024. Proceeds amounted to $551.4 million. The increase in long-term debt was partially offset by repayments of $680.8 million of our 8.500% senior notes. During the nine months ended August 31, 2018, we issued 4.150% senior notes with a total principal amount of $1.0 billion, due ~~2030. Additionally,~~2030, and structured notes with a total principal amount of approximately $162.6 million, net of retirements, were issued during the period. During the nine months ended August 31, 2017, we issued senior notes with a total principal amount of $641.0 million, net of retirements, and structured notes with a total principal amount of approximately $287.5 million, net of retirements.

~~On November 22, 2017, all of~~In addition, on January 5, 2018, our remaining convertible debentures ($324.8 million at November 30, 2017) were ~~called for optional redemption, with a redemption date of January 5, 2018,~~redeemed at a redemption price equal to 100% of the principal amount of the convertible debentures redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. ~~All of these remaining convertible debentures were redeemed on January 5, 2018.~~ In addition, in April 2018, our remaining 5.125% senior notes with a principal amount of $668.3 million were ~~redeemed in April 2018.~~redeemed.

~~On May 16, 2018, we entered into~~

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We have a senior secured revolving credit facility (“Revolving Credit Facility”) with a group of commercial banks for an aggregate principal amount of ~~$160.0~~$190.0 million. The Revolving Credit Facility contains certain ~~financial~~ covenants ~~including, but not limited~~that, among other things, requires Jefferies Group LLC to maintain specified level of tangible net worth and liquidity amounts, and imposes certain restrictions on future indebtedness of and requires specified levels of regulated capital for certain of our ~~subsidiaries and its’ minimum tangible net worth, liquidity requirements and minimum capital requirements.~~subsidiaries. Interest is based on an annual alternative base rate or an adjusted ~~London Interbank Offered Rate,~~LIBOR, as defined in the Revolving Credit Facility agreement. The obligations of certain of our subsidiaries under the Revolving Credit Facility are secured by substantially all its assets. At August 31, ~~2018,~~2019, we were in compliance with the debt covenants under the Revolving Credit Facility.

Note 13. Revenues from Contracts with Customers

The following table presents our total revenues separated for our revenues from contracts with customers and our other sources of revenues (in thousands):



	Three Months Ended August 31,				Nine Months Ended August 31,
	2019		2018		2019		2018
Revenues from contracts with customers:
Commissions and other fees (1)	$	171,003	$	162,700	$	493,843	$	482,194
Investment banking	412,533		465,326		1,128,216		1,405,614
Asset management fees	3,340		5,184		14,559		16,130
Total revenue from contracts with customers	586,876		633,210		1,636,618		1,903,938
Other sources of revenue:
Principal transactions	148,873		143,308		632,002		498,583
Interest	383,596		305,347		1,163,022		870,490
Other	22,286		6,420		79,354		58,678
Total revenues	$	1,141,631	$	1,088,285	$	3,510,996	$	3,331,689

(1)

During the third quarter of 2019, we have reclassified the presentation of certain other fees, primarily related to prime brokerage services offered to clients. These fees were previously presented as Other revenues in our Consolidated Statements of Earnings and are now presented within Commissions and other fees. There is no impact on Total revenues as a result of this change in presentation. Previously reported results are presented on a comparable basis.

Three Months Ended August 31, 2018 Nine Months Ended August 31, 2018
Revenues from contracts with customers:
Commissions and other fees $ 155,539
$ 461,545
Investment banking 465,326
1,405,614
Asset management fees 5,184
16,130
Other 7,161
20,649
Total revenue from contracts with customers 633,210
1,903,938
Other sources of revenue:
Principal transactions 143,308
498,583
Interest 305,347
870,490
Other 6,420
58,678
Total revenues $ 1,088,285
$ 3,331,689

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Revenue from contracts with customers is recognized when, or as, we satisfy our performance obligations by transferring the promised goods or services to the customers. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring our progress in satisfying the performance obligation in a manner that depicts the transfer of the goods or services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that we determine the customer obtains control over the promised good or service. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for those promised goods or services (i.e., the “transaction price”). In determining the transaction price, we consider multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, we consider the range of possible outcomes, the predictive value of our past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of our influence, such as market volatility or the judgment and actions of third parties.

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The following provides detailed information on the recognition of our revenues from contracts with customers:

Commissions and Other Fees. We earn commission and other fee revenue by executing, settling and clearing transactions for clients primarily in equity, equity-related and futures products. Trade execution and clearing services, when provided together, represent a single performance obligation as the services are not separately identifiable in the context of the contract. Commission revenues associated with combined trade execution and clearing services, as well as trade execution services on a standalone basis, are recognized at a point in time on trade-date. Commissions revenues are generally paid on settlement date and we record a receivable between trade-date and payment on settlement date. We permit institutional customers to allocate a portion of their gross commissions to pay for research products and other services provided by third parties. The amounts allocated for those purposes are commonly referred to as soft dollar arrangements. We act as an agent in the soft dollar arrangements as the customer controls the use of the soft dollars and directs our payments to third-party service providers on its behalf. Accordingly, amounts allocated to soft dollar arrangements are netted against commission revenues in our Consolidated Statements of Earnings.

We earn account advisory and distribution fees in connection with wealth management services. Account advisory fees are recognized over time using the time-elapsed method as we determined that the customer simultaneously receives and consumes the benefits of investment advisory services as they are provided. Account advisory fees may be paid in advance of a specified service period or in arrears at the end of the specified service period (e.g., quarterly). Account advisory fees paid in advance are initially deferred within Accrued expenses and other liabilities in the Consolidated Statements of Financial Condition. Distribution fees are variable and recognized when the uncertainties with respect to the amounts are resolved.

Investment Banking. We provide our clients with a full range of capital markets and financial advisory services. Capital markets services include underwriting and placement agent services in both the equity and debt capital markets, including private equity placements, initial public offerings, follow-on offerings and equity-linked convertible securities transactions and structuring, underwriting and distributing public and private debt, including investment grade debt, high yield bonds, leveraged loans, municipal bonds and mortgage- and asset-backed securities. Underwriting and placement agent revenues are recognized at a point in time on trade-date, as the client obtains the control and benefit of the capital markets offering at that point. Costs associated with capital markets transactions are deferred until the related revenue is recognized or the engagement is otherwise concluded, and are recorded on a gross basis within Underwriting costs in the Consolidated Statements of Earnings as we are acting as a principal in the arrangement. Any expenses reimbursed by our clients are recognized as Investment banking revenues.

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Revenues from financial advisory services primarily consist of fees generated in connection with merger, acquisition and restructuring transactions. Advisory fees from mergers and acquisitions engagements are recognized at a point in time when the related transaction is completed, as the performance obligation is to successfully broker a specific transaction. Fees received prior to the completion of the transaction are deferred within Accrued expenses and other liabilities in the Consolidated Statements of Financial Condition. Advisory fees from restructuring engagements are recognized over time using a time elapsed measure of progress as our clients simultaneously receive and consume the benefits of those services as they are provided. A significant portion of the fees we receive for our advisory services are considered variable as they are contingent upon a future event (e.g., completion of a transaction or third-party emergence from bankruptcy) and are excluded from the transaction price until the uncertainty associated with the variable consideration is subsequently resolved, which is expected to occur upon achievement of the specified milestone. Payment for advisory services are generally due promptly upon completion of a specified milestone or, for retainer fees, periodically over the course of the engagement. We recognize a receivable between the date of completion of the milestone and payment by the customer. Expenses associated with investment banking advisory engagements are deferred only to the extent they are explicitly reimbursable by the client and the related revenue is recognized at a point in time. All other investment banking advisory related expenses, including expenses incurred related to restructuring assignments, are expensed as incurred. All investment banking advisory expenses are recognized within their respective expense category in the Consolidated Statements of Earnings and any expenses reimbursed by our clients are recognized as Investment banking revenues.

Asset Management Fees. We earn management and performance fees in connection with investment advisory services provided to various funds and accounts, which are satisfied over time and measured using a time elapsed measure of progress as the customer receives the benefits of the services evenly throughout the term of the contract. Management and performance fees are considered variable as they are subject to fluctuation (e.g., changes in assets under management, market performance) and/ or are contingent on a future event during the measurement period (e.g., meeting a specified benchmark) and are recognized only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved. Management fees are generally based on month-end assets under management or an agreed upon notional amount and are included in the transaction price at the end of each month when the assets under management or notional amount is known. Performance fees are received when the return on assets under management for a specified performance period exceed certain benchmark returns, “high-water marks” or other performance targets. The performance period related to our performance fees is annual or semi-annual. Accordingly, performance fee revenue will generally be recognized only at the end of the performance period to the extent that the benchmark return has been met.

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Disaggregation of Revenue

The following presents our revenues from contracts with customers disaggregated by major business activity and primary geographic regions ~~for the three and nine months ended August 31, 2018~~ (in thousands):


													Three Months Ended August 31,												Nine Months Ended August 31,
	Reportable Segment												2019						2018						2019						2018
	Three Months Ended August 31, 2018						Nine Months Ended August 31, 2018						Reportable Segment						Reportable Segment						Reportable Segment						Reportable Segment
	Capital Markets		Asset Management		Total		Capital Markets		Asset Management		Total		Capital Markets		Asset Management		Total		Capital Markets		Asset Management		Total		Capital Markets		Asset Management		Total		Capital Markets		Asset Management		Total
Major business activity:
Equities (1)	$	159,693	$	—	$	159,693	$	471,683	$	—	$	471,683	$	167,528	$	—	$	167,528	$	159,693	$	—	$	159,693	$	483,771	$	—	$	483,771	$	471,683	$	—	$	471,683
Fixed income (1)	3,007		—		3,007		10,511		—		10,511		3,475		—		3,475		3,007		—		3,007		10,072		—		10,072		10,511		—		10,511
Investment banking - Capital markets	277,735		—		277,735		809,884		—		809,884		199,183		—		199,183		277,735		—		277,735		555,830		—		555,830		809,884		—		809,884
Investment banking - Advisory	187,591		—		187,591		595,730		—		595,730		213,350		—		213,350		187,591		—		187,591		572,386		—		572,386		595,730		—		595,730
Asset management	—		5,184		5,184		—		16,130		16,130		—		3,340		3,340		—		5,184		5,184		—		14,559		14,559		—		16,130		16,130
Total	$	628,026	$	5,184	$	633,210	$	1,887,808	$	16,130	$	1,903,938	$	583,536	$	3,340	$	586,876	$	628,026	$	5,184	$	633,210	$	1,622,059	$	14,559	$	1,636,618	$	1,887,808	$	16,130	$	1,903,938
Primary geographic region:
Americas	$	546,219	$	5,184	$	551,403	$	1,628,503	$	16,130	$	1,644,633	$	476,983	$	1,937	$	478,920	$	546,219	$	5,184	$	551,403	$	1,288,046	$	8,818	$	1,296,864	$	1,628,503	$	16,130	$	1,644,633
Europe	62,914		—		62,914		203,103		—		203,103		88,890		1,403		90,293		62,914		—		62,914		280,605		5,741		286,346		203,103		—		203,103
Asia	18,893		—		18,893		56,202		—		56,202		17,663		—		17,663		18,893		—		18,893		53,408		—		53,408		56,202		—		56,202
Total	$	628,026	$	5,184	$	633,210	$	1,887,808	$	16,130	$	1,903,938	$	583,536	$	3,340	$	586,876	$	628,026	$	5,184	$	633,210	$	1,622,059	$	14,559	$	1,636,618	$	1,887,808	$	16,130	$	1,903,938


(1)	Revenues from contracts with customers associated with the equities and fixed income businesses primarily represent commissions and other fee revenue.

Refer to Note 18, Segment Reporting, for a further discussion on the allocation of revenues to geographic regions.

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Information on Remaining Performance Obligations and Revenue Recognized from Past Performance

We do not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less. The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material at August 31, ~~2018~~.2019. Investment banking advisory fees that are contingent upon completion of a specific milestone and fees associated with certain distribution services are also excluded as the fees are considered variable and not included in the transaction price at August 31, ~~2018.~~2019.

During the three and nine months ended August 31, ~~2018,~~2019, we recognized $9.6 million and $27.2 million, respectively, compared with $4.4 million and $18.3 million, during the three and nine months ended August 31, 2018, respectively, of revenue related to performance obligations satisfied (or partially satisfied) in previous periods, mainly due to resolving uncertainties in variable consideration that was constrained in prior periods. In addition, we recognized $6.0 million and $15.8 million, during the three and nine months ended August 31, 2019, respectively, compared with $4.6 million and $13.5 million, ~~respectively, of revenues primarily associated with distribution services~~ during the three and nine months ended August 31, 2018, respectively, of revenues primarily associated with distribution services, a portion of which relates to prior periods.

Contract Balances

The timing of our revenue recognition may differ from the timing of payment by our customers. We record a receivable when revenue is recognized prior to payment and we have an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, we record deferred revenue until the performance obligations are satisfied.

We had receivables related to revenues from contracts with customers of ~~$191.4~~$205.8 million and ~~$246.0~~$199.0 million at August 31, ~~2018~~2019 and ~~December 1, 2017,~~November 30, 2018, respectively. We had no significant impairments related to these receivables during the three and nine months ended August 31, 2019 and 2018.

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Our deferred revenue primarily relates to retainer and milestone fees received in investment banking advisory engagements where the performance obligation has not yet been satisfied. Deferred ~~revenue~~revenues at August 31, 2019 and November 30, 2018 ~~and December 1, 2017 was $12.0~~were $8.5 million and ~~$8.8~~$10.6 million, respectively, which are recorded in Accrued expenses and other liabilities in the Consolidated Statements of Financial Condition. During the three and nine months ended August 31, ~~2018,~~2019, we recognized ~~revenue~~revenues of $9.4 million and $6.3 million, respectively, compared with $2.2 million and $4.0 million, during the three and nine months ended August 31, 2018, respectively, that ~~was~~were recorded as deferred revenue at the beginning of the periods.

Contract Costs

We capitalize costs to fulfill contracts associated with investment banking advisory engagements where the revenue is recognized at a point in time and the costs are determined to be recoverable. Capitalized ~~cost~~costs to fulfill a contract are recognized at the point in time that the related revenue is recognized.

At August 31, 2019 and November 30, 2018, capitalized costs to fulfill a contract were ~~$4.8~~$4.4 million and $4.7 million, respectively, which are recorded in Receivables – Fees, interest and other in the Consolidated ~~Statement~~Statements of Financial Condition. For the three and nine months ended August 31, 2019, we recognized expenses of $1.6 million and $3.8 million, respectively, compared with $1.5 million for both the three and nine months ended August 31, 2018, ~~we recognized expenses of $1.5 million,~~ related to costs to fulfill a contract that were capitalized as of the beginning of the period. There were no significant impairment charges recognized in relation to these capitalized costs during the three and nine months ended August 31, 2019 and 2018.

Note 14. Compensation Plans

Jefferies sponsors our following share-based compensation plans: Incentive Compensation Plan, Employee Stock Purchase Plan ~~(“ESPP”)~~ and the Deferred Compensation Plan. The outstanding and future share-based awards relating to these plans relate to Jefferies common shares. The fair value of share-based awards is estimated on the date of grant based on the market price of the underlying common stock less the impact of market conditions and selling restrictions subsequent to vesting, if any, and is amortized as compensation expense over the related requisite service periods. We are allocated costs associated with awards granted to our employees under such plans.

In addition, we sponsor non-share-based compensation plans. Non-share-based compensation plans sponsored by us include a profit sharing plan and other forms of restricted cash awards.

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The components of total compensation cost associated with certain of our compensation plans are as follows (in millions):


	Three Months Ended August 31,				Nine Months Ended August 31,				Three Months Ended August 31,				Nine Months Ended August 31,
	2018		2017		2018		2017		2019		2018		2019		2018
Components of compensation cost:
Restricted cash awards	$	60.0	$	65.2	$	183.6	$	188.5	$	72.3	$	60.0	$	205.1	$	183.6
Restricted stock and RSUs (1)	7.1		6.5		21.1		18.0		6.6		7.1		19.6		21.1
Profit sharing plan	1.1		1.2		5.6		5.2		1.2		1.1		6.4		5.6
Total compensation cost	$	68.2	$	72.9	$	210.3	$	211.7	$	80.1	$	68.2	$	231.1	$	210.3


(1)	Total compensation cost associated with restricted stock and restricted stock units (“RSUs”) includes the amortization of sign-on, retention and senior executive awards, less forfeitures and clawbacks.

Remaining unamortized amounts related to certain compensation plans at August 31, ~~2018~~2019 are as follows (dollars in millions):



	Remaining Unamortized Amounts		Weighted Average Vesting Period (in Years)
Non-vested share-based awards	$	53.7	3
Restricted cash awards	498.1		3
Total	$	551.8

Remaining Unamortized Amounts Weighted Average Vesting Period (in Years)
Non-vested share-based awards $ 71.7
3
Restricted cash awards 446.9
2
Total $ 518.6

~~The following are descriptions of the compensation plans:~~

~~Incentive Compensation Plan.~~ The Incentive Compensation Plan (“Incentive Plan”) allows for awards in the form of incentive stock options (within the meaning of Section 422 of the Internal Revenue Code), nonqualified stock options, stock appreciation rights, restricted stock, unrestricted stock, performance awards, restricted stock units, dividend equivalents or other share-based awards. RSUs give a participant the right to receive fully vested common shares at the end of a specified deferral period, allowing a participant to hold an interest tied to common stock on a tax deferred basis. Prior to settlement, RSUs carry no voting or dividend rights associated with the stock ownership, but dividend equivalents are accrued to the extent there are dividends declared on the underlying common shares as cash amounts or as deemed reinvestments in additional RSUs. Awards issued and outstanding related to the Incentive Plan relate to shares of Jefferies.

Restricted stock and RSUs may be granted to new employees as sign-on awards, to existing employees as “retention” awards and to certain executive officers as awards for multiple years. Sign-on and retention awards are generally subject to annual ratable vesting over a four-year service period and are amortized as compensation expense on a straight-line basis over the related four years. Restricted stock and RSUs are granted to certain senior executives with market, performance and service conditions. Market conditions are incorporated into the grant-date fair value of senior executive awards using a Monte Carlo valuation model. Compensation expense for awards with market conditions is recognized over the service period and is not reversed if the market condition is not met. Awards with performance conditions are amortized over the service period if we determine that it is probable that the performance condition will be achieved.

~~Employee Stock Purchase Plan.~~ There is also an ESPP which we consider noncompensatory effective January 1, 2007. The ESPP permits all regular full-time employees and employees who work part time over 20 hours per week to purchase, at a discount, Jefferies common shares. Annual employee contributions are limited to $21,250, are voluntary and made through payroll deduction. The stock purchase price is equal to 95% of the closing price of common stock on the last day of the applicable session (monthly).

~~Deferred Compensation Plan.~~ There is also a Deferred Compensation Plan (“Deferred Compensation Plan”), which was established in 2001. Eligible employees are able to defer compensation on a pre-tax basis, with deferred amounts deemed invested at a discount in Jefferies common shares, or by allocating among any combination of other investment funds available under the Deferred Compensation Plan. We often invest directly, as a principal, in investments corresponding to the other investment funds, relating to our obligations to perform under the Deferred Compensation Plan. The compensation deferred by our employees is expensed in the period earned. The change in fair value of our investments in assets corresponding to the specified other investment funds are recognized in Principal transaction revenues and changes in the corresponding deferred compensation liability are reflected as Compensation and benefits expense in our Consolidated Statements of Earnings.

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~~Profit Sharing Plan. We have a profit sharing plan, covering substantially all employees, which includes a salary reduction feature designed to qualify under Section 401(k)~~For detailed descriptions on the Company’s compensation plans, see Note 15, Compensation Plans, in our consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the ~~Internal Revenue Code.~~year ended November 30, 2018.

~~Restricted Cash Awards.~~ We provide compensation to new and existing employees in the form of loans and/or other cash awards which are subject to ratable vesting terms with service requirements. We amortize these awards to compensation expense over the relevant service period, which is generally considered to start at the beginning of the annual compensation year.

Note 15. Income Taxes

At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, we had approximately ~~$131.5~~$126.2 million and ~~$129.5~~$125.6 million, respectively, of total gross unrecognized tax benefits. The total amount of unrecognized benefits that, if recognized, would favorably affect the effective tax rate was ~~$104.1~~$99.8 million and ~~$86.1~~$99.4 million (net of Federal benefit) at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively.

We recognize interest accrued related to unrecognized tax benefits in Interest expense. Penalties, if any, are recognized in Other expenses in our Consolidated Statements of Earnings. At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, we had interest accrued of approximately ~~$52.5~~$53.9 million and ~~$48.3~~$49.3 million, respectively, included in Accrued expenses and other liabilities. NoNaN penalties were accrued for the nine months ended August 31, ~~2018~~2019 and the year ended November 30, ~~2017.~~2018.

During the nine months ended August 31, 2018, we closed Federal tax exams related to years 2007 - 2013 with the Internal Revenue Service. In the United Kingdom, we also closed an exam related to 2014, while the statute for the 2015 tax year has expired. The resolution of these examinations did not have a material effect on our consolidated financial position. We are ~~also~~ currently under examination in ~~other~~a number of major tax jurisdictions. Though we do not expect that the resolution of these examinations will have a material effect on our consolidated financial position, they may have a material impact on our consolidated results of operations for the period in which the resolution occurs.

The table below summarizes the earliest tax years that remain subject to examination in the major tax jurisdictions in which we operate:



Jurisdiction	Tax Year
United States	~~2014~~2016
California	~~2007~~2009
New Jersey	2010
New York State	2001
New York City	2003
United Kingdom	2016
Hong Kong	~~2012~~2013
India	2010
Italy	2012

OnDuring the quarter ended February 28, 2019, we increased the provisional tax charge that had been recorded during the year ended November 30, 2018 by $0.2 million resulting in a total tax charge of $165.3 million, as a result of the Tax Act. Of this amount, $112.7 million related to the write down of our deferred tax asset, reflecting the impact of a lower federal tax rate of 21% on our deferred tax items. The remaining part of the charge related to the transition tax on the deemed repatriation of unremitted foreign earnings. The measurement period as permitted by Staff Accounting Bulletin No. 118, which was issued by SEC staff on December 22, 2017, was closed during the ~~U.S. government enacted comprehensive tax legislation commonly referred~~quarter ended February 28, 2019 and we have completed our accounting as it relates to as the Tax Act.

The ~~Tax Act makes broad and complex changes to the U.S.~~new tax code that will impact many areas of taxation, including, but not limited to: (1) reduction of the U.S. federal corporate tax rate from 35% to 21%; (2) elimination of the corporate alternative minimum tax; (3) the introduction of the base erosion anti-abuse tax, a new minimum tax; (4) a general elimination of U.S. federal income taxes on ~~dividends from foreign subsidiaries; (5) a new provision designed to tax~~ global intangible low-taxed ~~income; (6)~~income ("GILTI"), became applicable in fiscal 2019. As a ~~new limitation on deductible interest expense; (7) limitations on~~result, we made an accounting policy election in the ~~deductibility~~first quarter of ~~certain executive compensation; (8) limitations on~~2019 to treat GILTI as a period cost if and when incurred.

For the ~~use~~nine months ended August 31, 2019, the provision for income taxes was $79.8 million, equating to an effective tax rate of ~~foreign~~26.5%. For the nine months ended August 31, 2018, the provision for income taxes was $234.3 million, equating to an effective tax ~~credits~~rate of 70.6%. The provision for income taxes for the nine months ended August 31, 2018 included a $160.2 million provisional tax charge related to ~~reduce U.S. income tax liability; (9) limitations on net operating losses generated after December 31, 2017, to 80%~~the enactment of taxable income; (10) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; and (11) bonus depreciation that will allow for full expensing of qualified property.the Tax Act.

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Also on December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under Accounting Standards Codification 740, Income Taxes (“ASC 740”). While the initial estimated impact of the Tax Act was calculated using all available information, we anticipate modifications based on the procedures set forth under SAB 118. This process is applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which the accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where the accounting is not complete, but a reasonable estimate has been determined; and (3) where a reasonable estimate cannot yet be made, taxes are reflected in accordance with the law prior to the enactment of the Tax Act.

Due to the complex nature of the Tax Act and the unavailability of certain information, we have not completed our accounting for the income tax effects of certain elements of the Tax Act. If we were able to make reasonable estimates of the effects of certain elements for which our analysis is not yet complete, we recorded a provisional estimate in our consolidated financial statements. If we were not yet able to make reasonable estimates of the impact of certain elements, we have not recorded any adjustments related to those elements and have continued accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the Tax Act. The ultimate impact of the Tax Act may differ from this estimate, possibly materially, due to refinement of our calculations based on updated information, changes in the interpretations and assumptions, guidance that may be issued and actions we may take in response to the Tax Act.

We consider the accounting for the deferred tax asset remeasurements, the transition tax and other items to be incomplete. In connection with our initial analysis, we have recorded a discrete tax expense of $163.7 million in the three months ended February 28, 2018, as a result of the enactment of the Tax Act, as a provisional estimate of the impact of the Tax Act. This provisional estimate was revised in the second quarter of 2018 by a reduction of $3.2 million and in the third quarter by a reduction of $0.3 million, which resulted in a total provisional tax charge of $160.2 million during the nine months ended August 31, 2018. This provisional estimate primarily consists of a $108.5 million expense related to the revaluation of our deferred tax asset and a $51.7 million expense related to the deemed repatriation of foreign earnings.

Note 16. Commitments, Contingencies and Guarantees

Commitments

The following table summarizes our commitments at August 31, ~~2018~~2019 (in millions):


	Expected Maturity Date (fiscal years)												Expected Maturity Date (fiscal years)
	2018		2019		2020 and 2021		2022 and 2023		2024 and Later		Maximum Payout		2019		2020		2021 and 2022		2023 and 2024		2025 and Later		Maximum Payout
Equity commitments (1)	$	—	$	43.7	$	18.4	$	—	$	2.9	$	65.0	$	—	$	123.5	$	—	$	—	$	11.5	$	135.0
Loan commitments (1)	—		250.0		54.4		31.9		—		336.3		—		250.0		54.1		12.0		—		316.1
Underwriting commitments	411.0		—		—		—		—		411.0		31.5		—		—		—		—		31.5
Forward starting reverse repos (2)	3,159.4		—		—		—		—		3,159.4		2,994.6		—		—		—		—		2,994.6
Forward starting repos (2)	2,057.8		—		—		—		—		2,057.8		4,082.9		—		—		—		—		4,082.9
Other unfunded commitments (1)	60.0		148.7		42.3		—		4.9		255.9		80.0		—		143.7		—		4.9		228.6
Total commitments	$	5,688.2	$	442.4	$	115.1	$	31.9	$	7.8	$	6,285.4	$	7,189.0	$	373.5	$	197.8	$	12.0	$	16.4	$	7,788.7


(1)	Equity, loan and other unfunded commitments are presented by contractual maturity date. The amounts, however, are available on demand.


(2)	~~At August 31, 2018, $3,141.9~~$2,991.6 million within forward starting securities purchased under agreements to resell and all of the securities sold under agreements to repurchase at August 31, 2019 settled within three business days.

Equity Commitments. Includes a commitment to invest in our joint venture, Jefferies Finance, and commitments to invest in private equity funds and in Jefferies Capital Partners, LLC, the manager of the private equity funds, which consists of a team led by ~~Brian P. Friedman,~~ one of our directors and Chairman of the Executive Committee. At August 31, ~~2018,~~2019, our outstanding commitments relating to Jefferies Capital Partners, LLC and its private equity funds ~~was $18.1~~were $17.7 million.

See Note 9, Investments, for additional information regarding our investments in Jefferies Finance.

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Additionally, at August 31, ~~2018,~~2019, we had other outstanding equity commitments to invest up to ~~$3.3~~$11.0 million in various other investments.

Loan Commitments. From time to time we make commitments to extend credit to investment banking and other clients in loan syndication, acquisition finance and securities transactions and to SPE sponsors in connection with the funding of CLO and other asset-backed transactions. These commitments and any related drawdowns of these facilities typically have fixed maturity dates and are contingent on certain representations, warranties and contractual conditions applicable to the borrower. At August 31, ~~2018,~~2019, we had ~~$86.3~~$66.1 million of outstanding loan commitments to clients.

Loan commitments outstanding at August 31, ~~2018~~2019 also include our portion of the outstanding secured revolving credit facility provided to Jefferies Finance to support loan underwritings by Jefferies Finance. See Note 9, Investments, for additional information.

Underwriting Commitments. In connection with investment banking activities, we may from time to time provide underwriting commitments to our clients in connection with capital raising transactions.

Forward Starting Reverse Repos and Repos. We enter into commitments to take possession of securities with agreements to resell on a forward starting basis and to sell securities with agreements to repurchase on a forward starting basis that are primarily secured by U.S. government and agency securities.

Other Unfunded Commitments. Other unfunded commitments include obligations in the form of revolving notes, warehouse financings and debt securities to provide financing to asset-backed and CLO vehicles. Upon advancing funds, drawn amounts are collateralized by the assets of an entity.

Guarantees

Derivative Contracts. As a dealer, we make markets and trade in a variety of derivative instruments. Certain derivative contracts that we have entered into meet the accounting definition of a guarantee under U.S. GAAP, including credit default swaps, written foreign currency options and written equity put options. On certain of these contracts, such as written interest rate caps and foreign currency options, the maximum payout cannot be quantified since the increase in interest or foreign exchange rates are not contractually limited by the terms of the contract. As such, we have disclosed notional values as a measure of our maximum potential payout under these contracts.

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The following table summarizes the notional amounts associated with our derivative contracts meeting the definition of a guarantee under U.S. GAAP at August 31, ~~2018~~2019 (in millions):



	Expected Maturity Date (Fiscal Years)
	2019		2020		2021 and 2022		2023 and 2024		2025 and Later		Notional/ Maximum Payout
Guarantee Type:
Derivative contracts—non-credit related	$	7,075.0	$	4,115.5	$	4,627.6	$	3,612.0	$	320.6	$	19,750.7
Written derivative contracts—credit related	—		32.9		—		39.2		—		72.1
Total derivative contracts	$	7,075.0	$	4,148.4	$	4,627.6	$	3,651.2	$	320.6	$	19,822.8

Expected Maturity Date (fiscal years)
2018 2019 2020
and
2021 2022
and
2023 2024
and
Later Notional/ Maximum Payout
Guarantee Type:
Derivative contracts—non-credit related $ 10,898.5
$ 5,978.6
$ 2,948.5
$ 1,015.0
$ 454.6
$ 21,295.2
Written derivative contracts—credit related —
—
36.4
33.8
—
70.2
Total derivative contracts $ 10,898.5
$ 5,978.6
$ 2,984.9
$ 1,048.8
$ 454.6
$ 21,365.4

The derivative contracts deemed to meet the definition of a guarantee under U.S. GAAP are before consideration of hedging transactions and only reflect a partial or “one-sided” component of any risk exposure. Written equity options and written credit default swaps are often executed in a strategy that is in tandem with long cash instruments (e.g., equity and debt securities). We substantially mitigate our exposure to market risk on these contracts through hedges, such as other derivative contracts and/or cash instruments, and we manage the risk associated with these contracts in the context of our overall risk management framework. We believe notional amounts overstate our expected payout and that fair value of these contracts is a more relevant measure of our obligations. At August 31, ~~2018,~~2019, the fair value of derivative contracts meeting the definition of a guarantee is approximately ~~$216.9~~$239.0 million.

Standby Letters of Credit. At August 31, ~~2018,~~2019, we provided guarantees to certain counterparties in the form of standby letters of credit ~~in the amount~~totaling $36.9 million, all of ~~$51.8 million,~~ which expire within one year. Standby letters of credit commit us to make payment to the beneficiary if the guaranteed party fails to fulfill its obligation under a contractual arrangement with that beneficiary. Since commitments associated with these collateral instruments may expire unused, the amount shown does not necessarily reflect the actual future cash funding requirement.

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Other Guarantees. We are members of various exchanges and clearing houses. In the normal course of business, we provide guarantees to securities clearing houses and exchanges. These guarantees generally are required under the standard membership agreements, such that members are required to guarantee the performance of other members. Additionally, if a member becomes unable to satisfy its obligations to the clearing house, other members would be required to meet these shortfalls. To mitigate these performance risks, the exchanges and clearing houses often require members to post collateral. Our obligations under such guarantees could exceed the collateral amounts posted. Our maximum potential liability under these arrangements cannot be quantified; however, the potential for us to be required to make payments under such guarantees is deemed remote. Accordingly, no liability has been recognized for these arrangements.

Note 17. Net Capital Requirements

As a broker-dealer registered with the SEC and member firms of the Financial Industry Regulatory Authority (“FINRA”), Jefferies LLC is subject to the SEC Uniform Net Capital Rule (“Rule 15c3-1”), which requires the maintenance of minimum net capital, and has elected to calculate minimum capital requirements using the alternative method permitted by Rule 15c3-1 in calculating net capital. Jefferies LLC, as a dually-registered U.S broker-dealer and futures commission merchant (“FCM”), is also subject to Rule 1.17 of the Commodity Futures Trading Commission (“CFTC”), which sets forth minimum financial requirements. The minimum net capital requirement in determining excess net capital for a dually-registered U.S. broker-dealer and FCM is equal to the greater of the requirement under Rule 15c3-1 or CFTC Rule 1.17.

At August 31, ~~2018,~~2019, Jefferies LLC’s net capital and excess net capital were as follows (in thousands):



	Net Capital		Excess Net Capital
Jefferies LLC	$	1,474,186	$	1,356,458

Net Capital Excess Net Capital
Jefferies LLC $ 1,917,634
$ 1,806,197

FINRA is the designated examining authority for our U.S. broker-dealer and the National Futures Association is the designated self-regulatory organization for Jefferies LLC as an FCM.

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The regulatory capital requirements referred to above may restrict our ability to withdraw capital from our regulated subsidiaries.

Note 18. Segment Reporting

We operate in ~~two~~2 reportable business segments – Capital Markets and Asset Management. The Capital Markets reportable business segment includes our securities, commodities, futures and foreign exchange trading activities and investment banking business, which is composed of underwriting and financial advisory activities. The Capital Markets reportable business segment provides the sales, trading, origination and advisory effort for various fixed income, equity and advisory products and services. The Asset Management reportable business segment provides investment management services to investors in the U.S. and ~~overseas.~~overseas and invests capital in hedge funds, separately managed accounts and third-party asset managers.

Our reportable business segment information is prepared using the following methodologies:

Net revenues and non-interest expenses directly associated with each reportable business segment are included in determining earnings (loss) before income taxes.

Net revenues and non-interest expenses not directly associated with specific reportable business segments are allocated based on the most relevant measures applicable, including each reportable business segment’s net revenues, headcount and other factors.

Reportable business segment assets include an allocation of indirect corporate assets that have been fully allocated to our reportable business segments, generally based on each reportable business segment’s capital utilization.

~~Table~~In the fourth quarter of ~~Contents~~

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~~(Unaudited)~~

2018, Jefferies transferred to us investments in certain separately managed accounts and funds. Due to this transfer, we have made changes to the presentation of our segment reporting in the fourth quarter of 2018 and are including investment income from our investments in these separately managed accounts and funds within our Asset Management business segment. Previously reported results are presented on a comparable basis. See Note 1, Organization and Basis of Presentation for further details on this transfer.

Our net revenues, non-interest expenses and earnings (loss) before income taxes by reportable business segment are summarized below (in millions):


	Three Months Ended August 31,						Nine Months Ended August 31,						Three Months Ended August 31,						Nine Months Ended August 31,
	2018			2017			2018			2017			2019			2018			2019		2018
Capital Markets:
Net revenues	$	771.1		$	788.4		$	2,388.8		$	2,349.6		$	757.4		$	767.0		$	2,274.9	$	2,389.0
Non-interest expenses	678.8			663.4			2,050.4			1,971.9			671.2			678.6			1,991.0		2,048.8
Earnings before income taxes	$	92.3		$	125.0		$	338.4		$	377.7		$	86.2		$	88.4		$	283.9	$	340.2
Asset Management:
Net revenues	$	6.5		$	12.3		$	32.6		$	25.9		$	19.8		$	10.6		$	89.8	$	32.4
Non-interest expenses	11.7			15.0			39.3			41.0			22.9			11.9			72.9		40.9
Loss before income taxes	$	(5.2	)	$	(2.7	)	$	(6.7	)	$	(15.1	)
Earnings (loss) before income taxes													$	(3.1	)	$	(1.3	)	$	16.9	$	(8.5	)
Total:
Net revenues	$	777.6		$	800.7		$	2,421.4		$	2,375.5		$	777.2		$	777.6		$	2,364.7	$	2,421.4
Non-interest expenses	690.5			678.4			2,089.7			2,012.9			694.1			690.5			2,063.9		2,089.7
Earnings before income taxes	$	87.1		$	122.3		$	331.7		$	362.6		$	83.1		$	87.1		$	300.8	$	331.7

The following table summarizes our total assets by reportable business segment (in millions):



	August 31, 2019		November 30, 2018
Capital Markets	$	39,945.6	$	38,700.7
Asset Management	3,148.0		2,468.1
Total assets	$	43,093.6	$	41,168.8

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

August 31, 2018 November 30, 2017
Total Assets by Reportable Business Segment:
Capital Markets $ 39,532.2
$ 38,620.4
Asset Management 1,040.3
1,085.3
Total assets $ 40,572.5
$ 39,705.7

Net Revenues by Geographic Region

Net revenues for the Capital Market reportable business segment are recorded in the geographic region in which the position was risk-managed or, in the case of investment banking, in which the senior coverage banker is located. For the Asset Management reportable business segment, net revenues are allocated according to the location of the investment advisor. Net revenues by geographic region were as follows (in millions):


	Three Months Ended August 31,				Nine Months Ended August 31,				Three Months Ended August 31,				Nine Months Ended August 31,
	2018		2017		2018		2017		2019		2018		2019		2018
Americas (1)	$	639.7	$	674.5	$	2,042.4	$	1,921.7	$	613.4	$	639.7	$	1,871.3	$	2,042.4
Europe (2)	115.9		99.1		313.4		378.4		136.9		115.9		413.6		313.4
Asia	22.0		27.1		65.6		75.4		26.9		22.0		79.8		65.6
Net revenues	$	777.6	$	800.7	$	2,421.4	$	2,375.5	$	777.2	$	777.6	$	2,364.7	$	2,421.4


(1)	Substantially all relates to U.S. results.


(2)	Substantially all relates to U.K. results.

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~~JEFFERIES GROUP LLC AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(Unaudited)~~

Note 19. Related Party Transactions

~~Jefferies Capital Partners Related Funds.~~ We have equity investments in the JCP Manager and in private equity funds, which are managed by a team led by Brian P. Friedman, one of our directors and our Chairman of the Executive Committee (“Private Equity Related Funds”). At August 31, 2018 and November 30, 2017, our equity investments in Private Equity Related Funds were in aggregate $34.1 million and $23.7 million, respectively. We also charge the JCP Manager for certain services under a service agreement. The following table presents revenues and service charges related to our investment in Private Equity Related Funds (in thousands):

Nine Months Ended
August 31, Nine Months Ended
August 31,
2018 2017 2018 2017
Other revenues and investment income (loss) $ 172
$ (373 ) $ 10,175
$ (9,793 )
Service charges 92
200
212
523

~~For further information regarding our commitments and funded amounts to the Private Equity Related Funds, see Note 16, Commitments, Contingencies and Guarantees~~.

~~Berkadia Commercial Mortgage, LLC (“Berkadia”).~~ ~~At August 31, 2018 and November 30, 2017, we had commitments to purchase $748.8 million and $864.1 million, respectively, in agency CMBS from Berkadia, which is partially owned by Jefferies.~~

~~HRG Group Inc. (“HRG”).~~ We recognized investment banking revenues of $3.0 million for the three and nine months ended August 31, 2018 in connection with the merger of HRG into Spectrum Brands Holdings, Inc., which is partially owned by Jefferies.

Officers, Directors and Employees. The following sets forth information regarding related party transactions with our officers, directors and employees:

At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, we had ~~$41.2~~$34.9 million and ~~$45.6~~$39.3 million, respectively, of loans outstanding to certain of our officers and employees (none of whom are executive officers or directors) that are included in Other assets in our Consolidated Statements of Financial Condition.

Receivables from and payables to customers include balances arising from officers’, directors’ and employees’ individual security transactions. These transactions are subject to the same regulations as all customer transactions and are provided on substantially the same terms.

One of our directors has investments in a hedge fund managed by us of approximately ~~$4.8~~$3.6 million and ~~$4.9~~$4.6 million at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively.

See Note 8, Variable Interest Entities, and Note 16, Commitments, Contingencies and Guarantees, for further information regarding related party transactions with our officers, directors and employees.

Jefferies. The following is a description of related party transactions with Jefferies and its affiliates:

We provide services to and receive services from Jefferies under service ~~agreements. We also receive revenues from Jefferies under a revenue sharing agreement~~agreements (in millions):


	Three Months Ended August 31,				Nine Months Ended August 31,				Three Months Ended August 31,				Nine Months Ended August 31,
	2018		2017		2018		2017		2019		2018		2019		2018
Charges to Jefferies for services provided	$	15.8	$	13.0	$	46.1	$	34.8	$	9.8	$	15.8	$	36.1	$	46.1
Charges from Jefferies for services received	2.2		4.9		6.9		13.8		6.4		2.2		7.8		6.9

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

We provide capital markets and asset management services to Jefferies and its affiliates. The following table presents the revenues earned by type of services provided (in millions):


	Three Months Ended August 31,				Nine Months Ended August 31,				Three Months Ended August 31,				Nine Months Ended August 31,
	2018		2017		2018		2017		2019		2018		2019		2018
Investment banking	$	5.6	$	—	$	5.6	$	—	$	2.4	$	5.6	$	10.3	$	5.6
Commissions and other fees	0.1		—		0.5		—		—		0.1		0.3		0.5
Principal transactions	—		—		0.1		—		—		—		—		0.1
Other revenues	0.3		—		0.7		—		1.1		0.3		2.0		0.7

Receivables from and payables to Jefferies, included in Other assets and Accrued expenses and other liabilities, respectively, in our Consolidated Statements of Financial ~~Condition (in millions):~~Condition:



	August 31, 2019		November 30, 2018
Receivable from Jefferies	$	2.1	$	1.2
Payable to Jefferies	8.7		2.9

August 31,
2018 November 30, 2017
Receivable from Jefferies $ 3.2
$ 2.5
Payable to Jefferies 0.6
3.1

On January 11, 2018, our Board of Directors approved a distribution to our sole limited liability company member, Jefferies, in the amount of $200.0 million, which was paid on January 31, 2018. In addition, our Board of Directors approved a quarterly distribution policy authorizing us to pay a quarterly distribution to our limited liability company members following the end of each of our fiscal quarters. Beginning at the end of our fiscal quarter ending February 28, 2018 and on a quarterly basis thereafter, we will pay our limited liability company members a quarterly dividend equal to 50% of our positive net earnings attributable to us (as adjusted for preceding loss quarters, if any). During the ~~three~~nine months ended August 31, ~~2018,~~2019, we paid ~~a dividend in the amount~~distributions of ~~$18.6~~$108.7 million to Jefferies, based on our results for the ~~six~~nine months ended May 31, ~~2018. Our results at~~2019. In addition, on January 29, 2019, our Board of Directors approved a distribution of $100.0 million to Jefferies, which was paid on January 30, 2019. At August 31, ~~2018 include~~2019, we have accrued a ~~dividend~~distribution payable inof $32.5 million based on our results for the ~~amount of $30.1 million.~~three months ended August 31, 2019.

Pursuant to a tax sharing agreement entered into between us and Jefferies, payments are made between us and Jefferies to settle current tax receivables and payables. At August 31, ~~2018~~2019, a net current tax receivable of $5.6 million is included in Other assets, and at November 30, ~~2017,~~2018, a net current tax payable to Jefferies of ~~$44.0~~$34.1 million ~~and $91.5 million, respectively,~~ is included in Accrued expenses and other liabilities, in our Consolidated Statements of Financial Condition. ~~On April 3, June 15 and September 25,~~In December 2018, we made ~~payments~~a payment of ~~$115.0~~$35.0 million ~~$36.0 million and $42.0 million, respectively,~~ to Jefferies, which reduced the cumulative net current tax payable balance.

~~We entered into a foreign exchange prime brokerage agreement with an affiliate of~~During the three and nine months ended August 31, 2019, we sold securities at fair value totaling $22.9 million and $40.8 million, respectively, to Jefferies. In addition, during the nine months ended August 31, 2019, we purchased securities totaling $885.6 million from Jefferies, ~~in 2017. The following table presents the balances relating to~~at fair value. There were 0 gains or losses on these ~~foreign exchange contracts, which are included in our Consolidated Statements of Financial Condition (in millions).~~transactions.

August 31,
2018 November 30,
2017
Payables-brokers, dealers and clearing organizations $ 12.3
$ 17.0

•

We entered into a foreign exchange prime brokerage agreement with an affiliate of Jefferies in 2017. In connection with the foreign exchange contracts entered into under this agreement we have $22.7 million and $9.9 million at August 31, 2019 and November 30, 2018, respectively, included in Payables— brokers, dealers and clearing organizations and $0.2 million at August 31, 2019 in Financial instruments sold, not yet purchased, at fair value, in our Consolidated Statements of Financial Condition.

Two of our directors have investments totaling ~~$2.8~~$2.5 million and ~~$3.6~~$2.7 million at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively, in a hedge fund managed by Jefferies.

We have investments in hedge funds managed by Jefferies of ~~$218.1~~$222.1 million and ~~$136.1~~$218.7 million at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively, included in Financial instruments owned, at fair value in our Consolidated Statements of Financial Condition. Net gains on our investments in these hedge funds, which are included in Principal transactions revenues in our Consolidated Statements of Earnings (in millions):



	Three Months Ended August 31,				Nine Months Ended August 31,
	2019		2018		2019		2018
Net gains on our investments	$	1.0	$	0.5	$	3.3	$	5.0

•

In connection with our sales and trading activities, from time to time we make a market in long-term debt securities of Jefferies (i.e., we buy and sell debt securities issued by Jefferies). At August 31, 2019 and November 30, 2018, approximately $3.1 million and $0.3 million, respectively, of debt issued by Jefferies are included in Financial instruments owned, at fair value, in our Consolidated Statements of Financial Condition.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

Three Months Ended
August 31, Nine Months Ended
August 31,
2018 2017 2018 2017
Net gains on our investments $ 0.5
$ 1.9
$ 5.0
$ 5.1

~~As a result~~HRG Group Inc. (“HRG”). We recognized investment banking revenues of ~~a public offering by Landcadia~~$3.0 million for the three and nine months ended August 31, 2018 in connection with the merger of HRG into Spectrum Brands Holdings, Inc., an affiliate of Jefferies, we own 638,561 public units (each unit consisting of one share of Class A common stock and one public warrant) at August 31, 2018 and November 30, 2017, with a fair value of $7.1 million and $6.8 million, respectively, included in Financial instrumentswhich is partially owned ~~in our Consolidated Statements of Financial Condition.~~

~~A subsidiary of Jefferies had an investment in a hedge fund managed~~ by us of $27.3 million at November 30, 2017. This investment was transferred to Jefferies LLC effective December 31, 2017, and we paid $26.7 million, the investment’s NAV, to Jefferies in January 2018.

~~We sold securities to Jefferies at fair value for cash during the following periods:~~

Date
Amount
(in millions) (1)
February 2017 $ 25.6
April 2017 21.9
August 2017 7.1

~~(1) There was no gain or loss on these transactions~~

~~In connection with our sales and trading activities, from time to time we make a market in long-term debt securities of Jefferies (i.e.,~~ we buy and sell debt securities issued by Jefferies). At August 31, 2018 and November 30, 2017, approximately $1.5 million and $0.2 million, respectively, is included in Financial instruments owned in our Consolidated Statements of Financial Condition.

Jefferies.

For information on transactions with our equity method investees, see Note 9, Investments.

~~Note 20. Subsequent Events~~

~~On October 1, 2018, Jefferies transferred its interest in the following assets to us (collectively, “the Transfer”):~~

~~Its entire 50% interest in Berkadia and~~

~~Its membership interests in certain funds and separately managed accounts (collectively, “membership interests”), which are managed by Leucadia Asset Management, a subsidiary of Jefferies.~~

The Transfer was accomplished as a capital contribution from Jefferies of approximately $596 million and a payment of $78.3 million to Jefferies on October 1, 2018. In connection with the Transfer, related deferred tax liabilities of approximately $45 million were transferred to us, for which Jefferies has indemnified us. In addition, we have agreed to invest an additional approximate $208 million in membership interests during the fourth quarter of 2018.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This report contains or incorporates by reference “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 “believe,” “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 forward-looking statements. Information regarding important factors that could cause actual results to differ, perhaps materially, from those in our forward looking statements is contained in this report and other documents we file. You should read and interpret any forward looking statement together with these documents, including the following:

the description of our business and risk factors contained in our Annual Report on Form 10-K for the year ended November 30, ~~2017~~2018 and filed with the Securities and Exchange Commission (“SEC”) on January ~~26, 2018;~~29, 2019;

the discussion of our analysis of financial condition and results of operations contained in this report under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein;

the discussion of our risk management policies, procedures and methodologies contained in this report under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management” herein;

the notes to the consolidated financial statements contained in this report; and

cautionary statements we make in our public documents, reports and announcements.

Any forward looking statement speaks only as of the date on which that statement is made. We will not update any forward looking statement to reflect events or circumstances that occur after the date on which the statement is made, except as required by applicable law.

Our business, by its nature, does not produce predictable or necessarily recurring earnings. Our results in any given period can be materially affected by conditions in global financial markets, economic conditions generally and our own activities and positions. For a further discussion of the factors that may affect our future operating results, see “Risk Factors” in Part I, Item IA of our Annual Report on Form 10-K for the year ended November 30, ~~2017.~~2018.

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~~JEFFERIES GROUP LLC AND SUBSIDIARIES~~

Consolidated Results of Operations

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted. We incurred a provisional tax charge of $163.7 million in the three months ended February 28, 2018, as a result of the enactment of the Tax Act. This provisional estimate was slightly adjusted in the second and third quarter of 2018, which resulted in a total provisional tax charge of $160.2 million during the nine months ended August 31, 2018. Of this amount, $108.5 million relates to the write down of our deferred tax asset, reflecting the impact of a lower federal tax rate of 21% on our deferred tax items. The remaining part of the provisional charge relates to a toll charge on the deemed repatriation of unremitted foreign earnings. Additionally, income expense for the three and nine months ended August 31, 2018 has been impacted due to certain tax planning actions taken with respect to our non-U.S. subsidiaries as a result of the Tax Act. Refer to our discussion of Income Taxes below for more information.Overview

The following table provides an overview of our consolidated results of operations (dollars in thousands):


	Three Months Ended August 31,						% Change			Nine Months Ended August 31,								% Change		Three Months Ended August 31,							% Change		Nine Months Ended August 31,						% Change
	2018			2017					2018				2017				2019				2018				2019				2018						% Change
Net revenues	$	777,615		$	800,692		% Change	(2.9	)%		$	2,421,418			$	2,375,499		% Change			1.9	%	$	777,159		$	% Change	777,615		(0.1	)%	$	2,364,728		$	2,421,418	(2.3	)%
Non-interest expenses	690,514			678,428			1.8	%		2,089,714				2,012,855				3.8	%	694,084				690,514			0.5	%	2,063,930			2,089,714			(1.2	)%
Earnings before income taxes	87,101			122,264			(28.8	)%		331,704				362,644				(8.5	)%	83,075				87,101			(4.6	)%	300,798			331,704			(9.3	)%
Income tax expense	26,923			38,439			(30.0	)%		234,337				95,009				146.6	%	18,250				26,923			(32.2	)%	79,789			234,337			(66.0	)%
Net earnings	60,178			83,825			(28.2	)%		97,367				267,635				(63.6	)%	64,825				60,178			7.7	%	221,009			97,367			127.0	%
Net earnings (loss) attributable to noncontrolling interests	(4		)	10			N/M			(1		)		50				N/M		(143		)		(4	)		N/M		140			(1		)	N/M
Net earnings attributable to Jefferies Group LLC	60,182			83,815			(28.2	)%		97,368				267,585				(63.6	)%	64,968				60,182			8.0	%	220,869			97,368			126.8	%
Effective tax rate	30.9		%	31.4		%	(1.6	)%		70.6		%		26.2		%		169.5	%	22.0		%		30.9	%		(28.8	)%	26.5		%	70.6		%	(62.5	)%

~~Impact of Adopting Revenue Recognition Guidance~~N/M — Not Meaningful

On December 1, 2017, we adopted Accounting Standards Update No. 2014-9, Revenue from Contracts with Customers (the “new revenue standard”), which provides accounting guidance on the recognition of revenues from contracts with customers and impacts the presentation of certain revenues and expenses in our Consolidated Statements of Earnings. The new revenue standard is applied prospectively from December 1, 2017 and reported financial information for historical comparable periods have not been revised. The adoption of the new revenue standard resulted in a reduction of beginning Member’s paid in capital of $6.1 million after-tax as a cumulative effect of adoption of an accounting change. The impact of adoption is primarily related to investment banking expenses that were deferred at November 30, 2017 under the previously existing accounting guidance, which would have been expensed in prior periods under the new revenue standard, and investment banking revenues that were previously recognized in prior periods, which would have been deferred at November 30, 2017 under the new revenue standard.

The new revenue guidance does not apply to revenue associated with financial instruments, including loans and securities, and as a result, did not have an impact on the elements of our Consolidated Statements of Earnings most closely associated with financial instruments, including Principal transaction revenues, Interest income and Interest expense.

There is no significant impact as a result of applying the new revenue standard to our results of operations for the three and nine months ended August 31, 2018, except as it relates to the presentation of certain investment banking expenses. Investment banking revenues have historically been recorded net of related out-of-pocket deal expenses directly related to investment banking engagements. Under the new revenue standard, all investment banking expenses are recognized within their respective expense category in our Consolidated Statement of Earnings and any expense reimbursements are recognized as Investment banking revenues (~~i.e.~~, revenues are no longer presented net of the related out-of-pocket deal expenses). Expenses directly associated with underwriting activities are recorded to a new non-compensation expense line item: "Underwriting costs". The impact of this change in presentation was an identical increase in both Investment banking revenues and Total non-compensation expenses for the three and nine months ended August 31, 2018 of $36.3 million and $101.1 million, respectively. This change in presentation has no impact on Net earnings.

Refer to Note 2, Summary of Significant Accounting Policies, and Note 3, Accounting Developments, in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further information.

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Executive Summary

Three Months Ended August 31, ~~2018~~2019

Consolidated Results

Net revenues for the three months ended August 31, ~~2018~~2019 were ~~$777.6~~$777.2 million, compared with ~~$800.7~~$777.6 million for the three months ended August 31, 2017, a decrease of $23.1 million, or 2.9%. The decrease reflects a $24.1 million decrease in investment banking revenues, partially offset by an increase in our equities net revenues. (Our investment banking revenues2018.

Our results in the three months ended August 31, 2018 included an increase of $36.3 million as a result of the new revenue standard. Refer to “Impact of Adopting Revenue Recognition Guidance” herein and Note 2, Summary of Significant Accounting Policies and Note 3, Accounting Developments2019 reflect solid performance in ~~our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on the new revenue standard.)~~

~~Business Results~~

~~Our~~ equities, ~~net revenues improved 4.7% compared to the prior year quarter.~~

~~Our~~ fixed income, ~~net revenues were relatively flat as compared with those of the prior year quarter.~~

~~Lower~~ investment banking ~~revenues~~and asset management.

We continued to maintain strong leverage ratios and liquidity and a strong capital base during the three months ended August 31, ~~2018~~2019.

Business Results

Our net revenues for the three months ended August 31, 2019 were relatively flat as compared to the three months ended August 31, 2018. The results reflect ~~a decrease in debt capital markets~~solid equities and ~~advisory~~fixed income net revenues, as well as increased asset management revenues due to higher investment returns, partially offset by lower investment banking revenues.

Our equities net revenues increased 13.3% compared to the prior year quarter, primarily due to ~~lower transaction levels,~~higher results across many of our core equities sales and trading businesses.

Our fixed income net revenues improved by 6.1% compared to the prior year quarter, primarily due to strong trading volumes during June and July, which were partially offset by ~~higher~~muted trading volumes in August as investors were sidelined across most asset classes by increased volatility in risk assets and a further inversion of the U.S. Treasury yield curve.

Our investment banking results during the three months ended August 31, 2019 reflect lower new issue revenues, as industry-wide U.S. and Europe equity and leverage finance capital market deal fees declined during the third quarter of 2019 compared with the prior year quarter. Our advisory revenues improved by 13.7%, or $25.8 million, to $213.4 million, while our capital markets ~~revenues.~~revenues for the quarter were $199.2 million, down $78.5 million, or 28.3%.

Investment banking revenues also include a net loss of $8.2 million in the current quarter from our share of the net results of the Jefferies Finance LLC (“Jefferies Finance”) joint venture, reflecting $12.5 million in costs from refinancing its debt. This compares with net revenues of $19.0 million in the prior year quarter.

Asset management revenues of $19.8 million for the three months ended August 31, 2019, compares with $10.7 million in the prior year quarter, primarily due to stronger investment returns.

Net revenues ~~from~~in our other business category in the three months ended August 31, ~~2018~~2019 were ~~$9.1~~$12.4 million, compared with ~~$9.4~~$4.9 million in the prior year quarter. ~~The results~~Results in the ~~prior~~current year quarter ~~included~~include net ~~gains~~revenues of ~~$2.2~~$24.3 million due to our share of income from ~~our investment in KCG Holdings, Inc.~~Berkadia Commercial Mortgage Holding LLC (“~~KCG”~~Berkadia”), which was ~~sold in July 2017.~~

~~Net revenues in the three months ended August 31,~~transferred to us on October 1, 2018 ~~also included asset management revenues of $6.5 million, compared with $12.4 million in the prior year quarter.~~from Jefferies Financial Group Inc. (“Jefferies”).

Expenses

~~Non-compensation~~Non-interest expenses for the three months ended August 31, ~~2018~~2019 increased ~~$47.0~~$3.6 million ~~or 21.8%,~~ to ~~$262.5~~$694.1 million, compared with ~~$215.5~~$690.5 million for the three months ended August 31, 2017, primarily due to an increase of $36.3 million across Business development expenses and Underwriting costs, as a result of applying the new revenue standard to our results of operations for the three months ended August 31, 2018. (Refer to “Impact of Adopting Revenue Recognition Guidance” herein and Note 2, Summary of Significant Accounting Policies, and Note 3, Accounting Developments, in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on the new revenue standard.)

Compensation and benefits expense for the three months ended August 31, ~~2018~~2019 was ~~$428.0~~$411.9 million, a decrease of ~~$34.9~~$16.1 million, or ~~7.5%~~3.8%, from the comparable prior year quarter. Compensation and benefits expense as a percentage of Net revenues was ~~55.0%~~53.0% for the three months ended August 31, ~~2018,~~2019, compared with ~~57.8%~~55.0% in the prior year quarter.

Non-compensation expenses for the three months ended August 31, 2019 increased $19.6 million, or 7.5%, to $282.1 million, compared with $262.5 million for the three months ended August 31, 2018.

Nine Months Ended August 31, ~~2018~~2019

Consolidated Results

Net revenues for the nine months ended August 31, ~~2018~~2019 were ~~$2,421.4~~$2,364.7 million, compared with ~~$2,375.5~~$2,421.4 million for the nine months ended August 31, ~~2017, an increase~~2018, a decrease of ~~$45.9~~$56.7 million, or ~~1.9%~~2.3%. Our investment banking revenues in the nine months ended August 31, 2018 included an increase of $101.1 million as a result of the new revenue standard. (Refer to “Impact of Adopting Revenue Recognition Guidance” herein and Note 2, Summary of Significant Accounting Policies and Note 3, Accounting Developments in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on the new revenue standard.)

Our results in the nine months ended August 31, ~~2018~~2019 reflect ~~continued~~ strong performance in equities, fixed income and asset management, but below-normal results in investment banking due to the severe market downturn in December, which heavily muted issuance activity. This was exacerbated by the five-week shutdown of the U.S. Government in late December and January, which further dampened new issue transactions in the capital markets and had a lag effect on our advisory revenues.

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Business Results

Net revenues ~~and~~for the nine months ended August 31, 2019, as compared to the nine months ended August 31, 2018, reflects solid performance in equities ~~net revenues, partially~~and fixed income as these businesses successfully navigated increased volatility, and benefited from increased investment returns in asset management. The results were offset by ~~a decline in fixed income net~~below-normal investment banking revenues.

~~Business Results~~

Our equities net revenues improved ~~1.6%~~14.4% compared to ~~the prior year period.~~

~~Our fixed income net revenues were below those of~~ the prior year period, primarily due to ~~soft market conditions~~increases across most of our core equities businesses and lower losses in block positions.

Our fixed income net revenues increased 9.6% compared to the ~~month~~prior year period, primarily due to more active markets throughout most of ~~March 2018. Further, performance in the first quarter of 2017 was bolstered by robust trading activity following the 2016 U.S. Presidential election, which was not repeated in~~ the current ~~year~~ period. The increase was partially offset by increased volatility in U.S. Rates markets and increased volatility in risk assets.

~~Higher~~Our investment banking ~~revenues~~results during the nine months ended August 31, ~~2018~~2019 reflect ~~higher~~lower capital markets and advisory revenues. During the current nine month period, industry-wide U.S. equity and leverage finance capital market activity declined significantly when compared with the prior year period, due to the severe market downturn in December, which heavily muted issuance activity. This was exacerbated by the five-week shutdown of the U.S. Government in late December and January, which further dampened new issue transactions in the capital markets. Our capital markets revenues ~~resulting~~for the period were $563.8 million, down $246.1 million, or 30.4%, from ~~continued strength~~the same period last year, while our advisory revenues declined 3.9%, or $23.3 million, to $572.4 million.

Investment banking revenues also include net revenues of $15.7 million in the current year period from our ~~mergers~~share of the net results of the Jefferies Finance joint venture, reflecting $12.5 million in costs from refinancing its debt. This compares with net revenues of $70.3 million in the prior year period, as overall loan origination activity declined in the current year period due to the volatility experienced in the leveraged finance markets during the first and ~~acquisitions business and strong equity issuance.~~

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this year.

Net revenues ~~from~~in the nine months ended August 31, 2019 also include asset management revenues of $89.8 million, compared with $32.5 million in the prior year period, primarily due to higher investment returns.

Net revenues in our other business category in the nine months ended August 31, ~~2018~~2019 were ~~$22.7~~$53.6 million, compared with ~~$95.9~~$22.9 million in the prior year period. ~~The prior~~Results in the current year period ~~included~~include net ~~gains of $93.4 million from our investment in KCG, which was sold in July 2017.~~

~~Net revenues in the nine months ended August 31, 2018 also included asset management~~ revenues of ~~$32.6~~$72.2 million due to our share of income from Berkadia, compared with ~~$25.9 million~~foreign currency gains, which were recognized in the prior year period.

Expenses

~~Non-compensation~~Non-interest expenses for the nine months ended August 31, ~~2018 increased $122.7~~2019 decreased $25.8 million, or ~~19.2%~~1.2%, to ~~$762.0~~$2,063.9 million, compared with ~~$639.2~~$2,089.7 million for the nine months ended August 31, 2017, primarily due to an increase of $101.1 million across Business development expenses and Underwriting costs, as a result of applying the new revenue standard to our results of operations for the nine months ended August 31, 2018. Refer to “Impact of Adopting Revenue Recognition Guidance” herein and Note 2, Summary of Significant Accounting Policies and Note 3, Accounting Developments in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on the new revenue standard.

Compensation and benefits expense for the nine months ended August 31, ~~2018~~2019 was ~~$1,327.8~~$1,261.5 million, a decrease of ~~$45.9~~$66.3 million, or ~~3.3%~~5.0%, from the comparable prior year period. Compensation and benefits expense as a percentage of Net revenues was ~~54.8%~~53.3% for the nine months ended August 31, ~~2018,~~2019, compared with ~~57.8%~~54.8% in the prior year period.

Non-compensation expenses for the nine months ended August 31, 2019 increased $40.4 million, or 5.3%, to $802.4 million, compared with $762.0 million for the nine months ended August 31, 2018.

Headcount

At August 31, ~~2018,~~2019, we had ~~3,526~~3,776 employees globally, an increase of 88250 employees from our headcount of ~~3,438~~3,526 at August 31, ~~2017.~~2018. Our headcount increased, primarily as a result of continued hiring in investment banking, asset management and equities, as well as additions in ~~asset management.~~corporate services.

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Revenues by Source

For presentation purposes, the remainder of “Results of Operations” is presented on a detailed product and expense basis, rather than on a business segment basis. Net revenues presented for our ~~equities and fixed income~~Capital Markets businesses include allocations of interest income and interest expense as we assess the profitability of these businesses inclusive of the net interest revenue or expense associated with the respective activities, which is a function of the mix of each business’s associated assets and liabilities and the related funding costs.

In connection with the adoption of the new revenue standard in the first quarter of 2018, we have made changes to the presentation of our “Revenues by Source” to better align the manner in which we describe and present the results of our performance with the manner in which we manage our business activities and serve our clients. We believe that the reorganization of our revenue reporting will enable us to describe our business mix more clearly and provide greater transparency in the communication of our results.

The “Results of our Operations” has historically been presented on a product basis. Prior to the first quarter of 2018, we presented “Revenues by Source” as follows: equities, fixed income, investment banking and asset management. As of the first quarter of 2018, we are reporting our “Revenues by Source” along the following business lines: equities, fixed income, investment banking, asset management and other. Additionally, the results of the investment banking business now includes a new subcategory “Other investment banking”, which contains our share of net earnings from our corporate lending joint venture, Jefferies Finance LLC (“Jefferies Finance”), as well as any gains and losses from any securities or loans received or acquired in connection with our investment banking efforts. Previously reported results are presented on a comparable basis in the tables below.

~~The following is a description of the changes that have been made:~~

Equities revenues now represent the activities of our core equities sales and trading, securities finance, prime brokerage and wealth management businesses. Revenues from other activities previously presented within the Equities business have been disaggregated as follows:


◦	Our share of net earnings from our Jefferies Finance joint venture, as well as any revenues from securities and loans received or acquired in connection with our investment banking efforts, are now presented as part of our investment banking business.


◦	~~Our share of net earnings from our historic Jefferies LoanCore LLC (“Jefferies LoanCore”) joint venture is presented as part of our fixed income business through its sale in October 2017.~~

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◦

Revenues related to our principal investments in certain private equity funds and hedge funds managed by third parties or related parties, investments in strategic ventures (including KCG through its sale in July 2017), certain other securities owned, and investments held as part of obligations under employee benefit plans, including deferred compensation arrangements, are now presented as part of our other business.


◦	~~Revenue related to our capital invested in asset management funds that are managed by us is now presented within our asset management business.~~

Revenues from our legacy futures business and revenues associated with structured notes issued by us are now presented as part of our other business. Additionally, revenues derived from securities or loans received or acquired in connection with our investment banking efforts are now presented as part of our investment banking revenues.

Revenues from principal investments in certain private equity and asset management funds managed by related parties, which were previously presented within our asset management revenue, are now presented as part of our other business.

The changes to the manner in which we describe and disclose the performance of our business activities has no effect on our historical consolidated results of operation. This reorganization does not impact our reportable segments and we will continue to report our activities in two business segments: Capital Markets and Asset Management.

The composition of our net revenues has varied over time as financial markets and the scope of our operations have changed. The composition of net revenues can also vary from period to period due to fluctuations in economic and market conditions, and our own performance. The following provides a summary of “Net Revenues by Source” (dollars in thousands):

Three Months Ended August 31, Nine Months Ended August 31,
2018 2017 2018 2017
Amount % of Net Revenues Amount % of Net Revenues % Change Amount % of Net Revenues Amount % of Net Revenues % Change
Equities $ 170,611
21.9 % $ 163,009
20.4 % 4.7 % $ 501,471
20.7 % $ 493,369
20.8 % 1.6 %
Fixed income 139,846
18.0
140,167
17.5
(0.2 )% 472,886
19.5
517,219
21.8
(8.6 )%
Total sales and trading 310,457
39.9
303,176
37.9
2.4 % 974,357
40.2
1,010,588
42.6
(3.6 )%

Equity (1) 139,220
17.9
86,081
10.8
61.7 % 326,613
13.5
222,549
9.4
46.8 %
Debt (1) 138,515
17.8
186,261
23.3
(25.6 )% 483,271
20.0
474,736
20.0
1.8 %
Capital markets 277,735
35.7
272,342
34.1
2.0 % 809,884
33.5
697,285
29.4
16.1 %
Advisory (1) 187,591
24.1
203,360
25.4
(7.8 )% 595,730
24.6
538,301
22.7
10.7 %
Other investment banking (13,732 ) (1.8 ) 2
—
N/M
(13,885 ) (0.6 ) 7,437
0.2
N/M
Total investment banking 451,594
58.0
475,704
59.5 % (5.1 )% 1,391,729
57.5
1,243,023
52.3
12.0 %

Other 9,086
1.2
9,426
1.1
(3.6 )% 22,714
0.9
95,945
4.0
(76.3 )%

Total Capital Markets 771,137
99.1
788,306
98.5 % (2.2 )% 2,388,800
98.6
2,349,556
98.9
1.7 %

Asset management fees 5,184
0.7
4,180
0.5
24.0 % 16,130
0.7
15,102
0.6
6.8 %
Investment return 1,294
0.2
8,206
1.0
(84.2 )% 16,488
0.7
10,841
0.5
52.1 %
Total Asset Management 6,478
0.9
12,386
1.5
(47.7 )% 32,618
1.4
25,943
1.1
25.7 %

Net revenues $ 777,615
100.0 % $ 800,692
100.0 % (2.9 )% $ 2,421,418
100.0 % $ 2,375,499
100.0 % 1.9 %

~~N/M — Not Meaningful~~



	Three Months Ended August 31,												Nine Months Ended August 31,
	2019					2018							2019					2018
	Amount			% of Net Revenues		Amount			% of Net Revenues		% Change		Amount			% of Net Revenues		Amount			% of Net Revenues		% Change
Equities	$	193,229		24.9	%	$	170,611		21.9	%	13.3	%	$	573,851		24.3	%	$	501,471		20.7	%	14.4	%
Fixed income	148,334			19.1		139,846			18.0		6.1	%	518,346			21.9		472,886			19.5		9.6	%
Total sales and trading	341,563			44.0		310,457			39.9		10.0	%	1,092,197			46.2		974,357			40.2		12.1	%

Equity	97,494			12.5		139,220			17.9		(30.0	)%	256,853			10.8		326,613			13.5		(21.4	)%
Debt	101,689			13.1		138,515			17.8		(26.6	)%	306,977			13.0		483,271			20.0		(36.5	)%
Capital markets	199,183			25.6		277,735			35.7		(28.3	)%	563,830			23.8		809,884			33.5		(30.4	)%
Advisory	213,350			27.5		187,591			24.1		13.7	%	572,386			24.2		595,730			24.6		(3.9	)%
Other investment banking	(9,108		)	(1.2	)	(13,732		)	(1.8	)	(33.7	)%	(7,116		)	(0.3	)	(13,885		)	(0.6	)	(48.8	)%
Total investment banking	403,425			51.9		451,594			58.0		(10.7	)%	1,129,100			47.7		1,391,729			57.5		(18.9	)%

Other	12,374			1.6		4,910			0.6		152.0	%	53,587			2.3		22,868			0.9		134.3	%

Total Capital Markets (1) (2)	757,362			97.5		766,961			98.5		(1.3	)%	2,274,884			96.2		2,388,954			98.6		(4.8	)%

Asset management fees	3,340			0.4		5,184			0.7		(35.6	)%	14,559			0.6		16,130			0.7		(9.7	)%
Investment return (3) (4)	25,746			3.3		14,483			1.9		77.8	%	106,233			4.5		40,754			1.7		160.7	%
Allocated net interest (3) (5)	(9,289		)	(1.2	)	(9,013		)	(1.1	)	3.1	%	(30,948		)	(1.3	)	(24,420		)	(1.0	)	26.7	%
Total Asset Management	19,797			2.5		10,654			1.5		85.8	%	89,844			3.8		32,464			1.4		176.7	%

Net revenues	$	777,159		100.0	%	$	777,615		100.0	%	(0.1	)%	$	2,364,728		100.0	%	$	2,421,418		100.0	%	(2.3	)%


(1)	~~As a result~~Includes net interest revenues (expenses) of $30.4 million and $51.4 million for the ~~new revenue standard, investment banking revenues~~three and nine months ended August 31, 2019, respectively, and $6.9 million and ($11.2) million for the three and nine months ended August 31, 2018, ~~reflect changes~~respectively.


(2)	Allocated net interest is not separately disaggregated in presenting our Capital Markets reportable segment within our Net Revenues by Source. This presentation is aligned to ~~the presentation of investment banking expenses and reimbursements thereof. Prior to~~our Capital Markets internal performance measurement.

(3)

Beginning with the first quarter of ~~2018, certain investment banking expenses~~2019, Net revenues attributed to the Investment return in our Asset Management reportable segment have been ~~presented~~disaggregated to separately present Investment return and Allocated net ~~against investment banking revenues.~~interest (see footnote 4 below). This ~~change~~disaggregation is intended to increase transparency and to make clearer actual Investment return. We offer third-party investors the opportunity to co-invest in ~~presentation resulted in~~our asset management funds and separately managed accounts alongside us. We believe that aggregating Investment return and Allocated net interest would obscure the Investment return by including an ~~increase~~amount that is unique to our credit spreads, debt maturity profile, capital structure, liquidity risks and allocation methods, none of ~~$36.3~~which are pertinent to the Investment returns generated by the performance of the portfolio.


(4)	Includes net interest expenses of $2.0 million and ~~$101.1~~$3.7 million ~~in investment banking net revenues during~~for the three and nine months ended August 31, 2019, respectively, and $3.3 million and $4.2 million for the three and nine months ended August 31, 2018, ~~respectively, as compared~~respectively.

(5)

Allocated net interest represents the allocation of our long-term debt interest expense to our Asset Management reportable segment, net of interest income on our Cash and cash equivalents and other sources of liquidity. For discussion of our sources of liquidity, refer to the ~~three~~“Liquidity, Financial Condition and nine months ended August 31, 2017. Refer to “Impact of Adopting Revenue Recognition Guidance” herein and Note 2, Summary of Significant Accounting Policies and Note 3, Accounting Developments in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on the new revenue standard.Capital Resources” section herein.

Equities Net Revenues

Equities is comprised of net revenues from:

services provided to our clients from which we earn commissions or spread revenue by executing, settling and clearing transactions for clients;

advisory services offered to clients;

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financing, securities lending and other prime brokerage services offered to clients; and

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wealth management services, which includes providing clients access to all of our institutional execution capabilities.

Three Months Ended August 31, ~~2018~~2019

Total equities net revenues were $193.2 million for the three months ended August 31, 2019, compared with $170.6 million for the three months ended August 31, 2018, ~~compared with $163.0 million~~an increase of 13.3%.

Equities net revenues for the three months ended August 31, ~~2017, as markets continued to show improvement.~~

~~The results in equities net revenues during~~2019 increased compared with the ~~three months ended August 31, 2018 increased~~prior year quarter across ~~certain~~most of our core ~~global~~ equities sales and trading ~~business, offset by losses in certain block positions.~~businesses. The increase in our core global equities sales and trading business was primarily driven by higher revenues across all of our global cash equities businesses in the Americas, Europe, and Asia, as well as in our global electronic trading, equity derivatives, international convertibles, securities finance and prime brokerage ~~U.S. cash equities~~businesses. The continued revenue growth was driven by increased market share and ~~equity derivatives~~client activity, as well as a continued focus on regional and product diversification. Our prime brokerage and Americas securities finance businesses ~~primarily due to overall improved market~~posted record quarterly revenues, driven by increased client activity and outsourced trading. Several of our international businesses, including European electronic trading, ~~volumes, higher equity volatility~~Asian electronic trading, and anAsian securities finance, also had record quarters reflecting our continued strength and growth across global markets.

The increase in our ~~commissions. The securities finance business saw an increase as~~core global equities net revenues compared towith the prior year quarter ~~driven by increased trading revenues. This increase~~ was partially offset by ~~a decrease~~higher losses in certain block positions in the three months ended August 31, 2019 as compared with the prior year quarter, and challenging market conditions in our Americas convertibles ~~and European cash equities businesses, primarily due to lower trading revenues and customer activity.~~

Equities posted record quarterly revenues across the overall sales and trading business, as well as across several core businesses, including our global electronic trading, prime brokerage and Asia Pacific securities finance businesses.

Nine Months Ended August 31, ~~2018~~

In April 2018, our core U.S. sales and trading business received top ranks from Greenwich Associates for our 2017 performance. This includes ranking #1 in electronic trading service and product quality, #1 in small and mid-cap equities trading, #3 in healthcare research and #4 in sales capability.2019

Total equities net revenues were $573.9 million for the nine months ended August 31, 2019, an increase of $72.4 million from net revenues of $501.5 million for the nine months ended August 31, ~~2018, compared with $493.4 million~~2018.

Equities net revenues for the nine months ended August 31, ~~2017.~~

~~The results in equities net revenues during~~2019 increased compared with the ~~nine months ended August 31, 2018 improved~~prior year period on strong performance across ~~various core global equities~~several of our sales and trading ~~business, offset by losses in certain block positions.~~businesses, which continue to be well-positioned with continued market share growth and competitive strength across global market rankings. The increase in our core global equities sales and trading business was primarily driven by higher revenues across global cash equities, primarily across the Americas and Europe, global electronic trading, international convertibles, securities finance and prime brokerage. Results in our ~~equity derivatives,~~Americas and European cash equities businesses were driven by improved trading results. Our global electronic trading business was driven by continued growth in market share and increased trading volumes. Our global convertibles business benefited from significant growth due to the expansion of the business with a market-leading team. Results in our prime services business, which reflects prime brokerage ~~businesses, primarily due to higher equity volatility, overall improved market~~and securities finance, was driven by increased customer trading ~~volumes~~activity and anoutsourced trading.

The increase in our ~~commissions. This~~core global equities sales and trading business was partially offset by a decrease in our ~~U.S.~~equity derivatives business, driven by a challenging trading environment and European cash equities businesses, primarily due to lower customer activity. European revenues were also lower as a result of the delay in advisory payments and the impact of unbundling due to the Market in Financial Instruments Directive (“MiFID II”) regulation. The securities finance business saw a decline ~~as compared with the prior year period, driven by decreased trading revenues.~~

~~Equities posted record nine months~~in client activity, and lower results in ~~the current year period across the overall sales and trading business, as well as across several core businesses, including~~ our ~~global electronic trading, European and Asia Pacific securities finance, and prime brokerage~~U.S. convertibles businesses.

Fixed Income Net Revenues

Fixed income is comprised of net revenues from:

executing transactions for clients and making markets in securitized products, investment grade, high-yield, emerging markets, municipal and sovereign securities and bank loans;

foreign exchange execution on behalf of clients; and

interest rate derivatives and credit derivatives (used primarily for hedging activities).

Three Months Ended August 31, ~~2018~~2019

Fixed income net revenues totaled $148.3 million for the three months ended August 31, 2019, an increase of $8.5 million from net revenues of $139.8 million for the three months ended August 31, 2018, primarily due to strong trading volumes during June and July, which were relatively unchanged compared with net revenues of $140.2 million in the three months ended August 31, 2017, as improved performance in our leveraged credit, U.S. and international rates and U.S. securitized markets businesses werepartially offset by ~~reduced market activity and~~muted trading volumes in ~~our global investment grade credit businesses~~August as investors were sidelined across most asset classes by increased volatility in risk assets and ~~municipal securities businesses.~~a further inversion of the U.S. Treasury yield curve. The following highlights the main components of the results:


◦	~~The performance~~Results in our global investment grade corporates businesses significantly improved with higher levels of trading activity helped by increased supply as compared with very difficult trading conditions in the prior year quarter.


◦	Revenues in our leveraged credit ~~business continued~~were higher due to ~~strengthen, primarily~~increased trading activity in the beginning of the current quarter, partially offset by risk asset and government bond volatility in the latter part of the quarter.

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◦	Revenues in our ~~distressed~~emerging markets business were strong as compared with the prior year quarter due to improved market reach globally.


◦	The current quarter also included higher revenues resulting from increased issuance and trading revenue volumes in our structured notes business.


◦	Global rates revenues in the current quarter underperformed due to perpetuating negative interest rates and continued muted volatility in international rates markets compared to constructive trading conditions in the prior year quarter.


◦	Revenues in our U.S. and international ~~rates businesses~~securitized markets groups were ~~higher~~lower due to ~~increased interest rate volatility in certain markets.~~


◦	~~Results in our~~declining yields and a flattening and inverted U.S. ~~securitized markets group were higher due to increased trading activity and continued strong~~Treasury yield curve compared with stronger performance in our origination ~~businesses.~~

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◦	~~Revenues in our global investment grade credit~~ businesses ~~declined on lower trading activity and reduced trading volatility.~~


◦	~~Revenues in our European credit business were lower due to reduced demand for higher yielding products.~~


◦	~~Revenues in our municipals businesses were down as client activity was muted by concerns of higher interest rates. This compares to a favorable market environment~~ in the prior year ~~quarter driven by activity leading up to changes in federal tax law.~~


◦	~~The prior year quarter also included revenues from our share of Jefferies LoanCore, which was sold in October 2017.~~quarter.

Nine Months Ended August 31, ~~2018~~2019

Fixed income net revenues totaled ~~$472.9~~$518.3 million for the nine months ended August 31, ~~2018, a decrease~~2019, an increase of ~~$44.3~~$45.4 million ~~compared with~~from net revenues of ~~$517.2~~$472.9 million in the nine months ended August 31, ~~2017,~~2018, primarily due to ~~soft market conditions~~more active markets throughout most of the current year period. The increase was partially offset by increased volatility in ~~the month of March 2018. This is compared to performance~~U.S. Rates markets and increased volatility in ~~the first quarter of 2017, which was bolstered by robust trading activity following the 2016 U.S. Presidential election.~~risk assets. The following highlights the main components of the results:

◦

Revenues improved in our ~~U.S. securitized markets group were significantly improved, primarily as more favorable~~global investment grade corporates business due to increased trading ~~conditions prevailed for our agency products. Additionally,~~activity and increased ~~securitization~~investor demand and compares to muted client activity ~~contributed to~~and demand in the ~~period’s results.~~prior year period.

◦

Revenues in our leveraged credit business were ~~strong,~~higher due to improved results from secondary trading of par loans and bonds, as ~~we increased~~well as benefiting from various trading hires. Similarly, our ~~market share in high yield, leveraged loan~~Asia credit business was also well positioned to benefit from new hires and ~~distressed products.~~extended client reach and activity throughout most of the current year period.


◦	~~Revenues declined in~~The current year period also included higher revenues from our ~~global investment grade credit~~structured notes trading and issuance business ~~due to~~that benefited from a ~~decline in new issuance~~more established trading ~~activity and increased competition,~~desk, as ~~reduced volatility produced fewer trading opportunities.~~


◦	~~Revenue in our municipal trading business were lower on reduced market activity driven by changes in federal tax legislation, which shifted activity onto~~compared with the prior year ~~and the backdrop of increased interest rates dampened investor interest. The business outperformed in the prior year period, as macro events drove a more favorable trading environment.~~period.

◦

Global rates revenues in the nine months ended August 31, 2018 declined as the opportunities from volatility from the U.S. Presidential Election and European election cycles, primarily in the first quarter of 2017, were not replicated in the current year period. This was partially offset by improved performance in the current year period declined as ~~a result~~concerns over Brexit continued and economic challenges in other European countries limited trading opportunities, compared with higher levels of ~~increased~~trading around volatility in global interest ~~rates.~~rates, primarily in Europe, in the prior year period.


◦	~~The prior~~Revenues in our U.S. and international securitized markets groups were lower due to lower U.S. Treasury yields coupled with a flat yield curve, partially offset by improved performance in certain securitization businesses as they expanded client reach and market presence.


◦	Less constructive market conditions throughout the current year ~~nine month~~ period ~~also included~~contributed to declines in revenues ~~from~~for our ~~share of Jefferies LoanCore, which was sold in October 2017, as well as revenues from non-core fixed income products that have now been deemphasized.~~municipal securities businesses.

Investment Banking Revenues

Investment banking is comprised of revenues from:

capital markets services, which include underwriting and placement services related to corporate debt, municipal bonds, mortgage-and asset-backed securities and equity and equity-linked securities and loan syndication;

advisory services with respect to mergers and acquisitions and restructurings and recapitalizations;

our share of net earnings from our corporate lending joint venture Jefferies Finance; and

securities and loans received or acquired in connection with our investment banking activities.

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The following table sets forth our investment banking revenues (dollars in thousands):


	Three Months Ended August 31,					% Change			Nine Months Ended August 31,								% Change		Three Months Ended August 31,								% Change		Nine Months Ended August 31,						% Change
	2018			2017				2018				2017				2019				2018					2019				2018						% Change
Equity ~~(1)~~	$	139,220		$	86,081	% Change	61.7	%		$	326,613			$	222,549		% Change			46.8	%	$	97,494			$	% Change	139,220		(30.0	)%	$	256,853		$	326,613	(21.4	)%
Debt ~~(1)~~	138,515			186,261		(25.6	)%		483,271				474,736				1.8	%	101,689				138,515				(26.6	)%	306,977			483,271			(36.5	)%
Capital markets	277,735			272,342		2.0	%		809,884				697,285				16.1	%	199,183				277,735				(28.3	)%	563,830			809,884			(30.4	)%
Advisory ~~(1)~~	187,591			203,360		(7.8	)%		595,730				538,301				10.7	%	213,350				187,591				13.7	%	572,386			595,730			(3.9	)%
Other investment banking	(13,732		)	2		N/M			(13,885		)		7,437				N/M		(9,108		)		(13,732		)		(33.7	)%	(7,116		)	(13,885		)	(48.8	)%
Total investment banking	$	451,594		$	475,704	(5.1	)%		$	1,391,729			$	1,243,023			12.0	%	$	403,425			$	451,594			(10.7	)%	$	1,129,100		$	1,391,729		(18.9	)%

~~N/M — Not Meaningful~~

~~(1)~~

As a result of the new revenue standard, investment banking revenues for the three and nine months ended August 31, 2018 reflect changes to the presentation of investment banking expenses and reimbursements thereof. Prior to the first quarter of 2018, certain investment banking expenses have been presented net against investment banking revenues. This change in presentation resulted in an increase of $36.3 million and $101.1 million in investment banking net revenues during the three and nine months ended August 31, 2018, respectively, as compared to the three and nine months ended August 31, 2017. Refer to “Impact of Adopting Revenue Recognition Guidance” herein and Note 2, Summary of Significant Accounting Policies and Note 3, Accounting Developments in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on the new revenue standard.

The following table sets forth our investment banking activities (dollars in billions):


	Deals Completed				Aggregate Value								Deals Completed				Aggregate Value
	Three Months Ended August 31,		Nine Months Ended August 31,		Three Months Ended August 31,				Nine Months Ended August 31,				Three Months Ended August 31,		Nine Months Ended August 31,		Three Months Ended August 31,				Nine Months Ended August 31,
	2018	2017	2018	2017	2018		2017		2018		2017		2019	2018	2019	2018	2019		2018		2019		2018
Public and private debt financings	286	381	749	817	$	61.1	$	73.0	$	197.7	$	191.9	292	286	565	749	$	43.7	$	61.1	$	124.7	$	197.7
Public and private equity and convertible offerings (1)	57	34	142	125	11.5		15.7		31.8		50.1		45	57	115	142	14.2		11.5		34.6		31.8
Advisory transactions (2)	49	50	139	127	63.0		29.0		156.8		106.1		51	49	147	139	110.2		63.0		211.3		156.8


(1)	We acted as sole or joint bookrunner on 44 and 112 offerings during the three and nine months ended August 31, 2019, respectively, and 56 and 138 offerings during the three and nine months ended August 31, 2018, ~~respectively, and 33 and 118 offerings during the three and nine months ended August 31, 2017,~~ respectively.

(2)

The number of advisory deals completed includes three and twelve restructuring and recapitalization transactions during the three and nine months ended August 31, 2019, respectively, and two and eleven restructuring and recapitalization transactions during the three and nine months ended August 31, 2018, ~~respectively, and two and eight restructuring and recapitalization transactions during the three and nine months ended August 31, 2017,~~ respectively.

Three Months Ended August 31, ~~2018~~2019

Total investment banking revenues were ~~$451.6~~$403.4 million for the three months ended August 31, ~~2018, 5.1%~~2019, 10.7% lower than the three months ended August 31, 2017, primarily due to a decrease in debt capital markets and advisory revenues due to lower transaction levels in our leverage finance and our mergers and acquisitions businesses, partially offset by record equity capital markets revenues led by continued strong issuances in the life sciences sector.

~~Advisory revenues~~ for the three months ended August 31, 2018, ~~decreased 7.8% compared~~due to ~~the prior year quarter.~~lower leverage finance and equity capital markets revenues, partially offset by higher merger and acquisition revenues. Capital markets revenues were impacted by an industry-wide decline in equity and leverage finance fees across the ~~three months ended August 31, 2018 increased 2.0%~~U.S. and Europe of over 20% during the current quarter.

Our capital markets revenues for the quarter were $199.2 million, down $78.5 million, from the same quarter last year. Our advisory revenues were $213.4 million, up $25.8 million, from our results in the prior year quarter.

From equity and debt capital raising activities, we generated ~~$139.2~~$97.5 million and ~~$138.5~~$101.7 million in revenues, respectively, for the three months ended August 31, ~~2018,~~2019, compared with ~~$86.1~~$139.2 million and ~~$186.3~~$138.5 million in revenues, respectively, in the prior year quarter.

Other investment banking revenues were a loss of $9.1 million for the three months ended August 31, 2019, compared with a loss of $13.7 million for the three months ended August 31, 2018. Other investment banking revenues during the three months ended August 31, ~~2018 compared~~2019 include a net loss of $8.2 million from our share of the net results of the Jefferies Finance joint venture, reflecting $12.5 million in costs from refinancing its debt and volatility experienced in the leveraged finance markets during the current year quarter resulting in lower transaction volume. This compares with net revenues of ~~$2,000~~$19.0 million in the prior year quarter. The results ~~reflect net revenues of $19.0 million~~ in the current year quarter, compared with net revenues of $20.4 million in the prior year quarter, primarily due to our share of revenues from the Jefferies Finance joint venture, which were more than partially offset byboth quarters also included the amortization of costs and allocated interest expense ~~we incur associated with~~related to our investment in the Jefferies Finance business.

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~~JEFFERIES GROUP LLC AND SUBSIDIARIES~~

The results in the quarter also include an increase of $36.3 million in investment banking net revenues as a result of the new revenue standard. Refer to “Impact of Adopting Revenue Recognition Guidance” herein and Note 2, Summary of Significant Accounting Policies and Note 3, Accounting Developments in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on the new revenue standard.

Nine Months Ended August 31, ~~2018~~2019

Total investment banking revenues were ~~$1,391.7~~$1,129.1 million for the nine months ended August 31, ~~2018, 12.0% higher~~2019, 18.9% lower than for the nine months ended August 31, ~~2017,~~2018, due to ~~record~~a significant industry-wide decline in equity ~~capital markets~~ and ~~advisory revenues, resulting from continued strength in our mergers~~leverage finance activity across the U.S. and ~~acquisitions businesses and strong equity issuance in our life science business.~~

~~Capital markets revenues in~~Europe during the ~~nine months ended August 31, 2018 increased 16.1% from~~current period as compared to the prior year period. ~~Advisory~~

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JEFFERIES GROUP LLC AND SUBSIDIARIES

During the period, industry-wide U.S. equity and leverage finance capital market activity declined significantly. Our capital markets revenues for the ~~nine months ended August 31, 2018 increased 10.7% compared to~~period were $563.8 million, down $246.1 million, or 30.4%, from the same period last year. Our advisory revenues were $572.4 million, down $23.3 million, or 3.9% lower than our results in the prior year period.

From equity and debt capital raising activities, we generated ~~$326.6~~$256.9 million and ~~$483.3~~$307.0 million in revenues, respectively, for the nine months ended August 31, ~~2018,~~2019, compared with ~~$222.5~~$326.6 million and ~~$474.7~~$483.3 million in revenues, respectively, in the prior year period.

Other investment banking revenues were a loss of $7.1 million for the nine months ended August 31, 2019, compared with a loss of $13.9 million for the nine months ended August 31, 2018. Other investment banking revenues during the nine months ended August 31, ~~2018 compared with~~2019 include revenues of ~~$7.4~~$15.7 million from our share of the net results of the Jefferies Finance joint venture, reflecting $12.5 million in costs from refinancing its debt and volatility experienced in the leveraged finance markets during the first and third quarters of this year, which resulted in lower transaction volume. This compares with net revenues of $70.3 million in the prior year period. The results ~~reflect net revenues of $70.3 million~~ in ~~the current year quarter, compared with net revenues of $66.8 million in the prior year quarter, primarily due to our share of revenues from the Jefferies Finance joint venture, which~~both periods were ~~more than partially~~ offset by the amortization of costs and allocated interest expense ~~we incur associated with~~related to our investment in the Jefferies Finance business.

Results for the nine months ended August 31, 2018 also include an increase of $101.1 million in investment banking net revenues as a result of the new revenue standard. Refer to “Impact of Adopting Revenue Recognition Guidance” herein and Note 2, Summary of Significant Accounting Policies and Note 3, Accounting Developments in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on the new revenue standard.

Other

Other is comprised of revenues from:

Berkadia and other strategic investments (other than Jefferies Finance);

principal investments in private equity and hedge funds managed by third parties or related parties;

~~strategic investments other than Jefferies Finance (such as KCG through its sale in July 2017);~~ and

investments held as part of employee benefit plans, including deferred compensation ~~plans;~~

~~structured note activities on behalf of the firm;~~plans (for which we incur equal and

~~our legacy Futures business.~~ offsetting compensation expenses).

Three Months Ended August 31, ~~2018~~2019

Net revenues from our other business category totaled ~~$9.1~~$12.4 million for the three months ended August 31, ~~2018, a decrease~~2019, an increase of ~~$0.3~~$7.5 million compared with net ~~income~~revenues of ~~$9.4~~$4.9 million for the three months ended August 31, ~~2017.~~ 2018.

Results in the ~~prior~~current year quarter ~~included a~~include net ~~gain~~revenues of ~~$2.2~~$24.3 million due to our share of income from ~~our investment in KCG,~~Berkadia, which was ~~sold~~transferred to us on October 1, 2018 from Jefferies, partially offset by costs and mark-to-market decreases in ~~July 2017.~~other strategic investments.

Nine Months Ended August 31, ~~2018~~2019

Net revenues from our other business category totaled ~~$22.7~~$53.6 million for the nine months ended August 31, ~~2018, a decrease~~2019, an increase of ~~$73.2~~$30.7 million compared with net ~~income~~revenues of ~~$95.9~~$22.9 million for the nine months ended August 31, ~~2017, as results~~2018.

Results in the current year period include net revenues of $72.2 million due to our share of income from Berkadia, which was transferred to us on October 1, 2018 from Jefferies, partially offset by costs and mark-to-market decreases in other strategic investments, compared with foreign currency gains in the prior year ~~period included a net gain of $93.4 million from our investment in KCG, which was sold in July 2017, partially offset by foreign currency gains.~~period.

Asset Management

Asset management revenue includes the following:

management and performance fees from funds and accounts managed by us; and

investment income from ~~capital invested~~our investments in and managed by our asset management ~~business.~~business and other asset managers.

In the fourth quarter of 2018, Jefferies transferred to us investments in certain separately managed accounts and funds. Due to this transfer, we made changes to the presentation of our “Net Revenues by Source” in the fourth quarter of 2018 and are including investment income from our investments in these separately managed accounts and funds within asset management revenues. Previously reported results are presented on a comparable basis. See Note 1, Organization and Basis of Presentation, in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on this transfer.

The key components of asset management revenues are the level of assets under management and the performance return, whether on an absolute basis or relative to a benchmark or hurdle. These components can be affected by financial markets, profits and losses in the applicable investment portfolios and client capital activity. Further, asset management fees vary with the nature of investment management services. The terms under which clients may terminate our investment management authority, and the requisite notice period for such termination, varies depending on the nature of the investment vehicle and the liquidity of the portfolio assets.

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The following summarizes the results of our Asset Management businesses by asset class (dollars in thousands):



	Three Months Ended August 31,						% Change		Nine Months Ended August 31,						% Change
	2019			2018			% Change		2019			2018			% Change
Asset management fees:
Equities	$	633		$	310		104.2	%	$	3,344		$	1,633		104.8	%
Multi-asset	2,707			4,874			(44.5	)%	11,215			14,497			(22.6	)%
Total asset management fees	3,340			5,184			(35.6	)%	14,559			16,130			(9.7	)%
Investment return	25,746			14,483			77.8	%	106,233			40,754			160.7	%
Allocated net interest	(9,289		)	(9,013		)	3.1	%	(30,948		)	(24,420		)	26.7	%
Total Asset Management	$	19,797		$	10,654		85.8	%	$	89,844		$	32,464		176.7	%

Three Months Ended
August 31, % Change Nine Months Ended
August 31, % Change
2018 2017 2018 2017
Asset management fees:
Equities $ 310
$ 291
6.5 % $ 1,633
$ 2,753
(40.7 )%
Multi-asset 4,874
3,889
25.3 % 14,497
12,349
17.4 %
Total asset management fees 5,184
4,180
24.0 % 16,130
15,102
6.8 %
Investment return 1,294
8,206
(84.2 )% 16,488
10,841
52.1 %
Total Asset Management $ 6,478
$ 12,386
(47.7 )% $ 32,618
$ 25,943
25.7 %
Three Months Ended August 31, 2019

~~N/M — Not Meaningful~~Asset management net revenues in the three months ended August 31, 2019 were $19.8 million, compared with $10.7 million in the prior year quarter. The increase was primarily due to higher investment returns, as a result of an increase in our investments in certain separately managed accounts and funds and improved performance in certain of these investments, partially offset by lower asset management fees.

Nine Months Ended August 31, 2019

Net revenues in the nine months ended August 31, 2019 included asset management revenues of $89.8 million, compared with $32.5 million in the prior year period. The increase was primarily due to higher investment returns, as a result of an increase in our investment in certain separately managed accounts and funds and improved performance in certain of these investments, partially offset by an increase in allocated net interest expense.

Assets under Management

~~Period end assets~~Assets under management by predominant asset class were as follows (in millions):


	August 31, 2018		November 30, 2017		August 31, 2019		November 30, 2018
Assets under management (1):
Equities	$	133	$	218	$	111	$	130
Multi-asset	1,227		1,271		711		1,180
Total	$	1,360	$	1,489	$	822	$	1,310


(1)	Assets under management include assets actively managed by us, including hedge funds and certain managed accounts. Assets under management do not include the assets of funds that are consolidated due to the level or nature of our investment in such funds.

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~~Non-interest Expenses~~JEFFERIES GROUP LLC AND SUBSIDIARIES

~~Non-interest expenses increased due~~

Asset Management Investments

We invest in our asset management business through direct investments in hedge funds and through separately managed accounts where we or our Parent acts as the asset manager. Additionally, we make minority investments in and enter into revenue sharing arrangements with third-party asset managers. The following table represents our investments by asset manager (in thousands):



	August 31, 2019		November 30, 2018
Jefferies Group LLC; as manager:
Fund investments (1)	$	21,210	$	45,696
Separately managed accounts (2)	298,255		213,023
Total	$	319,465	$	258,719

Jefferies Financial Group Inc.; as manager:
Fund investments	$	216,702	$	213,456
Separately managed accounts (2)	66,730		277,538
Total	$	283,432	$	490,994

Third-party as asset manager:
Fund investments	$	290,174	$	10,093
Separately managed accounts (2)	292,428		261,790
Investments in asset managers	30,546		32,360
Total	$	613,148	$	304,243

Total asset management investments (3)	$	1,216,045	$	1,053,956

(1)

Due to the level or nature of an investment in a fund, we may consolidate that fund; and accordingly, the assets and liabilities of the fund are included in the representative line items in our consolidated financial statements. At August 31, 2019 and November 30, 2018, $21.1 million and $19.9 million, respectively, represents net investments in funds that have been consolidated in our financial statements.


(2)	Where we have investments in a separately managed account, the assets and liabilities of such account are presented on our balance sheet within each respective line item.

(3)

Of the $1,216.0 million total invested in the funds at August 31, 2019, $1,081.0 million was sourced from the proceeds of long-term and permanent capital, which attracted an internally calculated interest charge of $30.9 million. At August 31, 2019, we have borrowed $135.0 million under a credit facility agreement (“Credit Facility”) with JPMorgan Chase Bank, N.A., which is secured by our investment in a fund managed by Jefferies Financial Group Inc., with a carrying value of $216.7 million. Interest expense associated with the Credit Facility is included in Investment return (see “Net Revenues by Source” herein).

Our asset management investments generated an ~~increase in non-compensation expenses~~investment return of $25.7 million and $106.2 million for the three and nine months ended August 31, ~~2018. The increase in non-compensation expenses was primarily due to an increase in Business development expenses~~2019, respectively, and ~~Underwriting costs, as a result of applying the new revenue standard to our results of operations~~$14.5 million and $40.8 million for the three and nine months ended August 31, 2018. Refer to “Impact of Adopting Revenue Recognition Guidance” herein and Note 2, Summary of Significant Accounting Policies, and Note 3, Accounting Developments, in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on the new revenue standard.2018, respectively.

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Non-interest Expenses

Non-interest expenses were as follows (dollars in thousands):

Three Months Ended
August 31, % Change Nine Months Ended
August 31, % Change
2018 2017 2018 2017
Compensation and benefits $ 428,033
$ 462,933
(7.5 )% $ 1,327,760
$ 1,373,627
(3.3 )%
Non-compensation expenses:

Floor brokerage and clearing fees 45,745
44,869
2.0 % 135,808
138,221
(1.7 )%
Underwriting costs 20,528
—
N/M
47,832
—
N/M
Technology and communications 76,877
72,440
6.1 % 222,335
205,425
8.2 %
Occupancy and equipment rental 25,559
27,736
(7.8 )% 75,143
77,145
(2.6 )%
Business development 39,733
23,125
71.8 % 124,233
72,223
72.0 %
Professional services 35,316
25,007
41.2 % 101,715
83,544
21.8 %
Other 18,723
22,318
(16.1 )% 54,888
62,670
(12.4 )%
Total non-compensation expenses 262,481
215,495
21.8 % 761,954
639,228
19.2 %
Total non-interest expenses $ 690,514
$ 678,428
1.8 % $ 2,089,714
$ 2,012,855
3.8 %

~~N/M — Not Meaningful~~



	Three Months Ended August 31,				% Change		Nine Months Ended August 31,				% Change
	2019		2018		% Change		2019		2018		% Change
Compensation and benefits	$	411,936	$	428,033	(3.8	)%	$	1,261,506	$	1,327,760	(5.0	)%
Non-compensation expenses:
Floor brokerage and clearing fees	54,247		45,745		18.6	%	168,698		135,808		24.2	%
Technology and communications	86,649		76,877		12.7	%	247,464		222,335		11.3	%
Occupancy and equipment rental	29,300		25,559		14.6	%	87,587		75,143		16.6	%
Business development	36,526		39,733		(8.1	)%	103,430		124,233		(16.7	)%
Professional services	42,379		35,316		20.0	%	117,372		101,715		15.4	%
Underwriting costs	14,647		20,528		(28.6	)%	36,045		47,832		(24.6	)%
Other	18,400		18,723		(1.7	)%	41,828		54,888		(23.8	)%
Total non-compensation expenses	282,148		262,481		7.5	%	802,424		761,954		5.3	%
Total non-interest expenses	$	694,084	$	690,514	0.5	%	$	2,063,930	$	2,089,714	(1.2	)%

Compensation and Benefits

Compensation and benefits expense consists of salaries, benefits, ~~cash bonuses,~~ commissions, annual cash compensation awards and the amortization of share-based and cash compensation awards to employees.

Cash and ~~historical~~ share-based awards and a portion of cash awards granted to employees as part of year end compensation generally contain provisions such that employees who terminate their employment or are terminated without cause may continue to vest in their awards, so long as those awards are not forfeited as a result of other forfeiture provisions (primarily non-compete clauses) of those awards. Accordingly, the compensation expense for a portion of awards granted at year end as part of annual compensation is recorded in the year of the award.

~~Included in~~ Compensation and benefits expense ~~are share-based~~includes amortization expense for senior executive awards granted in February 2016, January 2017 and January 2018, cash-based amortization expense for senior executive awards granted in January 2018, non-annual share-based and cash-basedassociated with these awards to ~~other employees and certain year end awards that contain future service requirements for vesting, all of which~~the extent there are ~~being amortized over their~~ respective future service periods. In addition, the senior executive awards contain market and performance conditions.

Compensation and benefits expense was $411.9 million and $1,261.5 million for the three and nine months ended August 31, 2019, respectively, compared with $428.0 million and ~~$1,327.8~~$1,327.8 million ~~and~~ for the three and nine months ended August 31, 2018, ~~respectively, compared with $462.9 million and $1,373.6 million for the three and nine months ended August 31, 2017,~~ respectively.

Compensation and benefits expense as a percentage of Net revenues was 53.0% and 53.3% for the three and nine months ended August 31, 2019, respectively, compared with 55.0% and 54.8% for the three and nine months ended August 31, 2018, ~~respectively, compared with 57.8% for both the three and nine months ended August 31, 2017.~~respectively.

Compensation expense related to the amortization of share- and cash-based awards amounted to $78.9 million and $224.7 million for the three and nine months ended August 31, 2019, respectively, compared with $67.1 million and $204.7 million for the three and nine months ended August 31, 2018, ~~respectively, compared with $71.7 million and $206.5 million for three and nine months ended August 31, 2017,~~ respectively.

Employee headcount was 3,776 at August 31, 2019 and 3,526 at August 31, ~~2018 and 3,438 at August 31, 2017.~~2018. Since August 31, ~~2017,~~2018, our headcount increased, primarily as a result of continued hiring in investment banking, asset management and equities, as well as additions in ~~asset management.~~corporate services.

Refer to Note 14, Compensation Plans, in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on compensation and benefits.

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Non-Compensation Expenses

The increase in non-compensation expenses was essentially due to an increase in Business development expenses and Underwriting costs, as a result of applying the new revenue standard to our results of operations for the three and nine months ended August 31, 2018. Refer to “Impact of Adopting Revenue Recognition Guidance” herein and Note 2, Summary of Significant Accounting Policies and Note 3, Accounting Developments in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on the new revenue standard.

Three Months Ended August 31, ~~2018~~2019

Non-compensation expenses were ~~$262.5~~$282.1 million for the three months ended August 31, ~~2018,~~2019, an increase of ~~$47.0~~$19.6 million, or ~~21.8%~~7.5%, compared with ~~$215.5~~$262.5 million in the three months ended August 31, ~~2017.~~2018. The increase in non-compensation expenses was primarily due to ~~a $36.3 million increase in Business development expenses~~higher Floor brokerage and ~~Underwriting costs, as a result of applying the new revenue standard to our results of operations for the three months ended August 31, 2018. The increase was also~~clearings fees due to an increase in trading volumes across the equities and fixed income businesses, as well as growth in certain asset management funds and resultant trading activity. The increase also included higher Technology and communication expenses primarily related to the costs associated with the development of various trading systems and increased market data usage and an increase in Professional ~~service~~services expenses due to an increase in legal and consulting fees. The increases were partially offset by lower Business development expenses and Underwriting costs due to a decline in investment banking engagements and activity related to our Jefferies Finance joint venture during the current period.

Non-compensation expenses as a percentage of Net revenues was 36.3% and 33.8% ~~and 26.9%~~ for the three months ended August 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

Nine Months Ended August 31, ~~2018~~2019

Non-compensation expenses were ~~$762.0~~$802.4 million for the nine months ended August 31, ~~2018,~~2019, an increase of ~~$122.7~~$40.4 million, or ~~19.2%~~5.3%, compared with ~~$639.2~~$762.0 million in the nine months ended August 31, ~~2017.~~2018. The increase in non-compensation expenses was primarily due to ~~a $101.1 million~~higher Floor brokerage and clearings fees due to the growth in certain asset management funds and resultant trading activity, as well as an increase in ~~Business development~~trading volumes across the equities and fixed income businesses. The higher expenses ~~and Underwriting costs, as a result of applying the new revenue standard to our results of operations for the nine months ended August 31, 2018. The increase was~~ also ~~due to~~included an increase in Technology and communication expenses ~~due~~related to ~~higher~~ costs associated with the development of ~~the~~ various trading systems and ~~projects associated~~our efforts to provide our professionals with ~~corporate support infrastructure~~leading digital tools to manage workflow and ~~higher~~help us better serve our clients, as well as increased market data usage costs. Professional ~~service~~services expenses increased due to an increase in legal and consulting fees. The increases were partially offset by lower Business development expenses and Underwriting costs due to a decline in investment banking engagements and activity related to our Jefferies Finance joint venture during the current period.

Non-compensation expenses as a percentage of Net revenues was ~~31.5%~~33.9% and ~~26.9%~~31.5% for the nine months ended August 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

Income Taxes

On December 22, 2017, the Tax Act was enacted. The Tax Act is one of the most comprehensive changes in the U.S. corporate income tax since 1986 and certain provisions are complex in their application. In addition, on December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. Refer to Note 15, Income Taxes, in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on the Tax Act and SAB 118.

The following provides a discussion of our provision for income taxes:

For the three and nine months ended August 31, 2019, the provision for income taxes was $18.3 million and $79.8 million, respectively, equating to an effective tax rate of 22.0% and 26.5%, respectively. For the three and nine months ended August 31, 2018, the provision for income taxes was $26.9 million and $234.3 million, respectively, equating to an effective tax rate of 30.9% and 70.6%, respectively. For the three and nine months ended August 31, 2017, the provision for income taxes was $38.4 million and $95.0 million, respectively, equating to an effective tax rate of 31.4% and 26.2%, respectively.

The ~~slight~~ decrease in the effective tax rate for the three months ended August 31, ~~2018,~~2019, as compared ~~with~~to the prior year quarter, is primarily due to a ~~lower~~net tax ~~rate~~benefit recorded during the current quarter resulting from the ~~decrease in the Federal statutory tax rate from 35% to 21%, partially offset by the impact~~settlement of ~~certain discrete items related to tax planning for our non-U.S. subsidiaries in connection with the Tax Act.~~ various state and local exams and expiring statutes of limitation.

The ~~increase~~decrease in the effective tax rate during the nine months ended August 31, ~~2018,~~2019, as compared with the prior year period is primarily due to the $160.2 million provisional tax charge related to the enactment of the Tax Act recorded in the nine months ended August 31, 2018.

During the quarter ended February 28, 2019, we increased the provisional tax charge that had been recorded during the year ended November 30, 2018 by $0.2 million resulting in a total tax charge of $165.3 million, as ~~well as net~~a result of the Tax Act, which was enacted on December 22, 2017. Of this amount, $112.7 million related to the write down of our deferred tax ~~benefits arising from~~asset, reflecting the impact of a lower federal tax rate of 21% on our deferred tax items. The remaining part of the charge related to the transition tax on the deemed repatriation of unremitted foreign ~~earnings and their associated foreign tax credits from foreign subsidiaries,~~earnings.

The measurement period as permitted by Staff Accounting Bulletin No. 118, which ~~occurred during last year’s first quarter. Excluding this charge, plus an unrelated net tax benefit of $11.6 million~~was issued by SEC staff on December 22, 2017, was closed during the ~~current nine month period, which primarily resulted from~~quarter ended February 28, 2019 and we have completed our accounting as it relates to the ~~expiration of certain federal and state statutes of limitation, our adjusted annual effective tax rate would have been approximately 26%.~~Tax Act.

~~Refer to Note 15, Income Taxes, in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on income taxes.~~

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Accounting Developments

For a discussion of recently issued accounting developments and their impact on our consolidated financial statements, see Note 3, Accounting Developments, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

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Critical Accounting Policies

Our consolidated financial statements are prepared in conformity with U.S. ~~GAAP,~~generally accepted accounting principles (“U.S. GAAP”), which requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and related notes. Actual results can and may differ from estimates. These differences could be material to our consolidated financial statements.

We believe our application of U.S. GAAP and the associated estimates are reasonable. Our accounting estimates are reevaluated, and adjustments are made when facts and circumstances dictate a change. Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

We believe our critical accounting policies (policies that are both material to the financial condition and results of operations and require our most subjective or complex judgments) are our valuation of certain financial instruments and assessment of goodwill.

For further discussions of the following significant accounting policies and other significant accounting policies, see Note 2, Summary of Significant Accounting Policies, in our consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended November 30, ~~2017~~2018 and Note 2, Summary of Significant Accounting Policies, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Valuation of Financial Instruments

Financial instruments owned and Financial instruments sold, not yet purchased are recorded at fair value. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). Unrealized gains or losses are generally recognized in Principal ~~transaction~~transactions revenues in our Consolidated Statements of Earnings.

For information on the composition of our ~~financial~~Financial instruments owned and ~~financial~~Financial instruments sold, not yet purchased recorded at fair value, see Note 4, Fair Value Disclosures, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Fair Value Hierarchy – In determining fair value, we maximize the use of observable inputs and minimize the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs reflect our assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. We apply a hierarchy to categorize our fair value measurements broken down into three levels based on the transparency of inputs, where Level 1 uses observable prices in active markets and Level 3 uses valuation techniques that incorporate significant unobservable inputs. Greater use of management judgment is required in determining fair value when inputs are less observable or unobservable in the marketplace, such as when the volume or level of trading activity for a financial instrument has decreased and when certain factors suggest that observed transactions may not be reflective of orderly market transactions. Judgment must be applied in determining the appropriateness of available prices, particularly in assessing whether available data reflects current prices and/or reflects the results of recent market transactions. Prices or quotes are weighed when estimating fair value with greater reliability placed on information from transactions that are considered to be representative of orderly market transactions.

Fair value is a market based measure; therefore, when market observable inputs are not available, our judgment is applied to reflect those judgments that a market participant would use in valuing the same asset or liability. The availability of observable inputs can vary for different products. We use prices and inputs that are current as of the measurement date even in periods of market disruption or illiquidity. The valuation of financial instruments ~~classified in~~categorized within Level 3 of the fair value hierarchy involves the greatest extent of management judgment. (See Note 2, Summary of Significant Accounting Policies, in our consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended November 30, ~~2017~~2018 and Note 4, Fair Value Disclosures, in our consolidated financial statements included in this Quarterly Report on Form 10-Q for further information on the definitions of fair value, Level 1, Level 2 and Level 3 and related valuation techniques.)

Level 3 Assets and Liabilities – For information on the composition and activity of our Level 3 assets and Level 3 liabilities, see Note 4, Fair Value Disclosures, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

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Controls Over the Valuation Process for Financial Instruments – Our Independent Price Verification Group, independent of the trading function, plays an important role in determining that our financial instruments are appropriately valued and that fair value measurements are reliable. This is particularly important where prices or valuations that require inputs are less observable. In the event that observable inputs are not available, the control processes are designed to assure that the valuation approach utilized is appropriate and consistently applied and that the assumptions are reasonable. Where a pricing model is used to determine fair value, these control processes include reviews of the pricing model’s theoretical soundness and appropriateness by risk management personnel with relevant expertise who are independent from the trading desks. In addition, recently executed comparable transactions and other observable market data are considered for purposes of validating assumptions underlying the model.

Goodwill

At August 31, ~~2018, goodwill~~2019, Goodwill recorded in our Consolidated Statement of Financial Condition is ~~$1,643.1~~$1,638.6 million ~~(4.0%~~(3.8% of total assets). The nature and accounting for goodwill is discussed in Note 2, Summary of Significant Accounting Policies, in our consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended November 30, ~~2017~~2018 and Note 10, Goodwill and Intangible Assets, in our consolidated financial statements included in this Quarterly Report on Form 10-Q. Goodwill must be allocated to reporting units and tested for impairment at least annually, or when circumstances or events make it more likely than not that an impairment occurred. Goodwill is tested by comparing the estimated fair value of each reporting unit with its carrying value. Our annual goodwill impairment testing date is August 1, which did not indicate any goodwill impairment in any of our reporting units at August 1, ~~2018.~~2019.

We use allocated tangible equity plus allocated goodwill and intangible assets for the carrying amount of each reporting unit. The amount of tangible equity allocated to a reporting unit is based on our cash capital model deployed in managing our businesses, which seeks to approximate the capital a business would require if it were operating independently. For further information on our Cash Capital Policy, refer to the Liquidity, Financial Condition and Capital Resources section herein. Intangible assets are allocated to a reporting unit based on either specifically identifying a particular intangible asset as pertaining to a reporting unit or, if shared among reporting units, based on an assessment of the reporting unit’s benefit from the intangible asset in order to generate results.

Estimating the fair value of a reporting unit requires management judgment and often involves the use of estimates and assumptions that could have a significant effect on whether or not an impairment charge is recorded and the magnitude of such a charge. Estimated fair values for our reporting units utilize market valuation methods that incorporate price-to-earnings and price-to-book multiples of comparable public companies. Under the market approach, the key assumptions are the selected multiples and our internally developed forecasts of future profitability, growth and return on equity for each reporting unit. The weight assigned to the multiples requires judgment in qualitatively and quantitatively evaluating the size, profitability and the nature of the business activities of the reporting units as compared to the comparable publicly-traded companies. In addition, as the fair values determined under the market approach represent a noncontrolling interest, we apply a control premium to arrive at the estimate fair value of each reporting unit on a controlling basis.

The carrying values of goodwill by reporting unit at August 31, ~~2018~~2019 are as follows: ~~$564.0~~$562.3 million in Investment Banking, ~~$160.2~~$159.7 million in Equities and Wealth Management, ~~$915.9~~$913.2 million in Fixed Income and ~~$3.0~~$3.4 million in ~~Strategic Investments.~~Asset Management.

The results of our assessment on August 1, ~~2018~~2019 indicated that all our reporting units had a fair value in excess of their carrying amounts based on current ~~projections.~~projections and the fair values of our Investment Banking and Equities and Wealth Management reporting units exceeded their carrying values by 20% or higher. The valuation methodology for our reporting units are sensitive to management’s forecasts of future profitability, which ~~comes~~are a significant component of the valuation and come with a level of uncertainty regarding trading volumes, ~~and~~ capital market transaction ~~levels.~~levels and the expected growth prospects for certain business lines. At August 31, 2019, our Fixed Income reporting unit is the most sensitive to the forecast assumptions used in our market approach valuation. Reductions in trading volumes and/or declines from our expected level of performance in certain product areas assumed in our forecasts and which are affected by our economic outlook could cause a decline in the estimated fair value of our ~~Equities and~~ Fixed Income reporting units and a resulting impairment of a portion of our goodwill.

Refer to Note 10, Goodwill and Intangible Assets, in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on goodwill.

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Liquidity, Financial Condition and Capital Resources

Our Chief Financial Officer (“CFO”) and Global Treasurer are responsible for developing and implementing our liquidity, funding and capital management strategies. These policies are determined by the nature and needs of our day to day business operations, business opportunities, regulatory obligations, and liquidity requirements.

Our actual levels of capital, total assets and financial leverage are a function of a number of factors, including asset composition, business initiatives and opportunities, regulatory requirements and cost and availability of both long term and short term funding. We have historically maintained a balance sheet consisting of a large portion of our total assets in cash and liquid marketable securities, arising principally from traditional securities brokerage and trading activity. The liquid nature of these assets provides us with flexibility in financing and managing our business.

We maintain modest leverage to support our investment grade ratings. The growth of our balance sheet is supported by our equity and we have quantitative metrics in place to monitor leverage and double leverage. Our capital plan is robust, in order to sustain our operating model through stressed conditions. We maintain adequate financial resources to support business activities in both normal and stressed market conditions, including a buffer in excess of our regulatory, or other internal or external, requirements. Our access to funding and liquidity is stable and efficient to ensure that there is sufficient liquidity to meet our financial obligations in normal and stressed market conditions.

Our Balance Sheet

A business unit level balance sheet and cash capital analysis is prepared and reviewed with senior management on a weekly basis. As a part of this balance sheet review process, capital is allocated to all assets and gross balance sheet limits are adjusted, as necessary. This process ensures that the allocation of capital and costs of capital are incorporated into business decisions. The goals of this process are to protect the firm’s platform, enable our businesses to remain competitive, maintain the ability to manage capital proactively and hold businesses accountable for both balance sheet and capital usage.

We actively monitor and evaluate our financial condition and the composition of our assets and liabilities. We continually monitor our overall securities inventory, including the inventory turnover rate, which confirms the liquidity of our overall assets. Substantially all of our financial instruments are valued on a daily basis and we monitor and employ balance sheet limits for our various businesses.

The following table provides detail on key balance sheet asset and liability ~~line~~ items (dollars in millions):


	August 31, 2018		November 30, 2017		% Change		August 31, 2019		November 30, 2018		% Change
Total assets	$	40,572.5	$	39,705.7	2.2	%	$	43,093.6	$	41,168.8	4.7	%
Cash and cash equivalents	4,812.6		5,164.5		(6.8	)%	4,665.5		5,145.9		(9.3	)%
Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations	913.5		578.0		58.0	%	658.3		708.0		(7.0	)%
Financial instruments owned	15,195.6		14,193.4		7.1	%	16,370.9		16,399.5		(0.2	)%
Financial instruments sold, not yet purchased	8,128.2		8,171.9		(0.5	)%	10,296.3		9,478.9		8.6	%
Total Level 3 assets	311.1		327.7		(5.1	)%	388.1		336.7		15.3	%

Securities borrowed	$	7,369.9	$	7,721.8	(4.6	)%	$	7,895.1	$	6,538.2	20.8	%
Securities purchased under agreements to resell	3,659.1		3,689.6		(0.8	)%	4,500.0		2,785.8		61.5	%
Total securities borrowed and securities purchased under agreements to resell	$	11,029.0	$	11,411.4	(3.4	)%	$	12,395.1	$	9,324.0	32.9	%

Securities loaned	$	2,531.5	$	2,843.9	(11.0	)%	$	2,182.9	$	1,838.7	18.7	%
Securities sold under agreements to repurchase	9,864.5		8,660.5		13.9	%	8,237.0		8,643.1		(4.7	)%
Total securities loaned and securities sold under agreements to repurchase	$	12,396.0	$	11,504.4	7.8	%	$	10,419.9	$	10,481.8	(0.6	)%

Total assets at August 31, ~~2018~~2019 and November 30, ~~2017~~2018 were ~~$40.6~~$43.1 billion and ~~$39.7~~$41.2 billion, respectively, an increase of ~~2.2%~~4.7%. During the three and nine months ended August 31, ~~2018,~~2019, average total assets were approximately ~~18.4%~~23.2% and ~~20.5%~~23.5% higher, respectively, than total assets at August 31, ~~2018.~~2019.

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Our total Financial instruments owned inventory was $16.4 billion at both August 31, ~~2018 was $15.2 billion, an increase of 7.1% from inventory of $14.2 billion at~~2019 and November 30, ~~2017, primarily~~2018. During the nine months ended August 31, 2019 our total Financial instruments owned inventory was flat due to a decline primarily in mortgage- and asset-backed securities and loans, offset by increases primarily in corporate equity securities, government and federal agency obligations, derivative contracts inventory, and ~~mortgage- and asset-backed securities, partially offset by decreases in corporate debt securities and sovereign obligations.~~investments at fair value. Financial instruments sold, not yet purchased inventory was ~~$8.1 billion and $8.2~~$10.3 billion at August 31, ~~2018 and~~2019, an increase of 8.6% from $9.5 billion at November 30, ~~2017, respectively,~~2018, with the ~~decrease~~increase primarily driven by increases in corporate equity securities and government and federal agency obligations, ~~and corporate debt securities,~~ partially offset by ~~an increase~~a decrease in derivative contracts ~~inventory and sovereign obligations.~~inventory. Our overall net inventory position was ~~$7.1~~$6.1 billion and ~~$6.0~~$6.9 billion at August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, respectively. Our Level 3 ~~financial~~Financial instruments owned as a percentage of total ~~financial~~Financial instruments owned ~~declined~~increased to ~~2.0%~~2.2% at August 31, ~~2018~~2019 from ~~2.3%~~2.1% at November 30, ~~2017.~~

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2018.

Securities financing assets and liabilities include financing for our financial instruments trading activity, matched book transactions and mortgage finance transactions. Matched book transactions accommodate customers, as well as obtain securities for the settlement and financing of inventory positions. The aggregate outstanding balance of our securities borrowed and securities purchased under agreements to resell ~~decreased~~increased by ~~3.4%~~32.9% from November 30, ~~2017~~2018 to August 31, ~~2018, primarily~~2019, due to ~~a decrease~~increases in our matched book activity and firm financing of our inventory, partially offset by ~~a decrease~~an increase in the netting benefit for our collateralized financing transactions. The outstanding balance of our securities loaned and securities sold under agreement to repurchase ~~increased~~decreased by ~~7.8%~~0.6% from November 30, ~~2017~~2018 to August 31, ~~2018,~~2019, primarily due to ~~a decrease~~an increase in the netting benefit for our collateralized financing transactions and ~~an increase~~a decrease in firm financing of our inventory, partially offset by ~~a decrease~~an increase in our matched book activity. Our average month end balances of total reverse repos and stock borrows during the three and nine months ended August 31, ~~2018~~2019 were ~~35.0%~~36.9% and ~~35.6%~~34.6% higher, respectively, than the August 31, ~~2018 balances.~~2019 balance. Our average month end balances of total repos and stock loans during the three and nine months ended August 31, ~~2018~~2019 were ~~27.5%~~62.0% and ~~26.3%~~65.5% higher, respectively, than the August 31, ~~2018 balances.~~2019 balance.

The following table presents our period end balance, average balance and maximum balance at any month end within the periods presented for Securities purchased under agreements to resell and Securities sold under agreements to repurchase (dollars in millions):


	Nine Months Ended August 31, 2018		Year Ended November 30, 2017		Nine Months Ended August 31, 2019		Year Ended November 30, 2018
Securities Purchased Under Agreements to Resell:
Period end	$	3,659	$	3,690	$	4,500	$	2,786
Month end average	5,426		6,195		7,432		5,232
Maximum month end	7,593		7,814		11,589		7,593
Securities Sold Under Agreements to Repurchase:
Period end	$	9,864	$	8,661	$	8,237	$	8,643
Month end average	12,866		11,273		14,855		12,704
Maximum month end	15,579		13,679		19,654		15,579

Fluctuations in the balance of our repurchase agreements from period to period and intraperiod are dependent on business activity in those periods. Additionally, the fluctuations in the balances of our securities purchased under agreements to resell ~~over the periods presented~~ are influenced in any given period by our clients’ balances and our clients’ desires to execute collateralized financing arrangements via the repurchase market or via other financing products. Average balances and period end balances will fluctuate based on market and liquidity conditions and we consider the fluctuations intraperiod to be typical for the repurchase market.

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Leverage Ratios

The following table presents total assets, total equity, total Jefferies Group LLC member’s equity and tangible Jefferies Group LLC member’s equity with the resulting leverage ratios (dollars in thousands):


		August 31, 2018			November 30, 2017				August 31, 2019			November 30, 2018
Total assets	Total assets	$	40,572,473		$	39,705,691		Total assets	$	43,093,588		$	41,168,773

Total equity	Total equity	$	5,557,136		$	5,759,559		Total equity	$	6,189,530		$	6,182,404

Total Jefferies Group LLC member’s equity	Total Jefferies Group LLC member’s equity	$	5,548,074		$	5,758,822		Total Jefferies Group LLC member’s equity	$	6,183,360		$	6,180,493
Deduct:	Goodwill and intangible assets	(1,828,779		)	(1,842,882		)	Goodwill and intangible assets	(1,810,976		)	(1,824,638		)
Tangible Jefferies Group LLC member’s equity	Tangible Jefferies Group LLC member’s equity	$	3,719,295		$	3,915,940		Tangible Jefferies Group LLC member’s equity	$	4,372,384		$	4,355,855

Leverage ratio (1)	Leverage ratio (1)	7.3			6.9			Leverage ratio (1)	7.0			6.7
Tangible gross leverage ratio (2)	Tangible gross leverage ratio (2)	10.4			9.7			Tangible gross leverage ratio (2)	9.4			9.0


(1)	Leverage ratio equals total assets divided by total equity.


(2)	Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets divided by tangible Jefferies Group LLC member’s equity. The tangible gross leverage ratio is used by rating agencies in assessing our leverage ratio.

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Liquidity Management

The key objectives of the liquidity management framework are to support the successful execution of our business strategies while ensuring sufficient liquidity through the business cycle and during periods of financial distress. Our liquidity management policies are designed to mitigate the potential risk that we may be unable to access adequate financing to service our financial obligations without material franchise or business impact.

The principal elements of our liquidity management framework are our Contingency Funding Plan, our Cash Capital Policy and our assessment of Maximum Liquidity Outflow.

Contingency Funding Plan. Our Contingency Funding Plan is based on a model of a potential liquidity contraction over a one year time period. This incorporates potential cash outflows during a liquidity stress event, including, but not limited to, the following:

Repayment of all unsecured debt maturing within one year and no incremental unsecured debt issuance;

Maturity rolloff of outstanding letters of credit with no further issuance and replacement with cash collateral;

Higher margin requirements than currently exist on assets on securities financing activity, including repurchase agreements;

Liquidity outflows related to possible credit downgrade;

Lower availability of secured funding;

Client cash withdrawals;

The anticipated funding of outstanding investment and loan commitments; and

Certain accrued expenses and other liabilities and fixed costs.

Cash Capital Policy. We maintain a cash capital model that measures long-term funding sources against requirements. Sources of cash capital include our equity and the noncurrent portion of long-term borrowings. Uses of cash capital include the following:

Illiquid assets such as equipment, goodwill, net intangible assets, exchange memberships, deferred tax assets and certain investments;

~~A portion of securities inventory that is not expected to be financed on a secured basis in a credit stressed environment (i.e., margin requirements); and~~


•	A portion of securities inventory that is not expected to be financed on a secured basis in a credit stressed environment (i.e., margin requirements); and

Drawdowns of unfunded commitments.

To ensure that we do not need to liquidate inventory in the event of a funding crisis, we seek to maintain surplus cash capital, which is reflected in the leverage ratios we maintain. Our total long-term capital of ~~$11.3~~$12.2 billion at August 31, ~~2018~~2019 exceeded our cash capital requirements.

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Maximum Liquidity Outflow. Our businesses are diverse, and our liquidity needs are determined by many factors, including market movements, collateral requirements and client commitments, all of which can change dramatically in a difficult funding environment. During a liquidity crisis, credit-sensitive funding, including unsecured debt and some types of secured financing agreements, may be unavailable, and the terms (e.g., interest rates, collateral provisions and tenor) or availability of other types of secured financing may change. As a result of our policy to ensure we have sufficient funds to cover what we estimate may be needed in a liquidity crisis, we hold more cash and unencumbered securities and have greater long-term debt balances than our businesses would otherwise require. As part of this estimation process, we calculate a Maximum Liquidity Outflow that could be experienced in a liquidity crisis. Maximum Liquidity Outflow is based on a scenario that includes both a market-wide stress and firm-specific stress, characterized by some or all of the following elements:

Global recession, default by a medium-sized sovereign, low consumer and corporate confidence, and general financial instability.

Severely challenged market environment with material declines in equity markets and widening of credit spreads.

Damaging follow-on impacts to financial institutions leading to the failure of a large bank.

A firm-specific crisis potentially triggered by material losses, reputational damage, litigation, executive departure, and/or a ratings downgrade.

The following are the critical modeling parameters of the Maximum Liquidity Outflow:

Liquidity needs over a 30-day scenario.

A two-notch downgrade of our long-term senior unsecured credit ratings.

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No support from government funding facilities.

~~A combination of contractual outflows, such as upcoming maturities of unsecured debt, and contingent outflows (e.g., actions though not contractually required, we may deem necessary in a crisis). We assume that most contingent outflows will occur within the initial days and weeks of a crisis.~~


•	A combination of contractual outflows, such as upcoming maturities of unsecured debt, and contingent outflows (e.g., actions though not contractually required, we may deem necessary in a crisis). We assume that most contingent outflows will occur within the initial days and weeks of a crisis.

No diversification benefit across liquidity risks. We assume that liquidity risks are additive.

The calculation of our Maximum Liquidity Outflow under the above stresses and modeling parameters considers the following potential contractual and contingent cash and collateral outflows:

All upcoming maturities of unsecured long-term debt, commercial paper, promissory notes and other unsecured funding products assuming we will be unable to issue new unsecured debt or rollover any maturing debt.

Repurchases of our outstanding long-term debt in the ordinary course of business as a market maker.

~~A portion of upcoming contractual maturities of secured funding trades due to either the inability to refinance or the ability to refinance only at wider haircuts (i.e., on terms which require us to post additional collateral). Our assumptions reflect, among other factors, the quality of the underlying collateral and counterparty concentration.~~


•	A portion of upcoming contractual maturities of secured funding trades due to either the inability to refinance or the ability to refinance only at wider haircuts (i.e., on terms which require us to post additional collateral). Our assumptions reflect, among other factors, the quality of the underlying collateral and counterparty concentration.

Collateral postings to counterparties due to adverse changes in the value of our over-the-counter (“OTC”) derivatives and other outflows due to trade terminations, collateral substitutions, collateral disputes, collateral calls or termination payments required by a two-notch downgrade in our credit ratings.

Variation margin postings required due to adverse changes in the value of our outstanding exchange-traded derivatives and any increase in initial margin and guarantee fund requirements by derivative clearing houses.

Liquidity outflows associated with our prime services business, including withdrawals of customer credit balances, and a reduction in customer short positions.

Liquidity outflows to clearing banks to ensure timely settlements of cash and securities transactions.

Draws on our unfunded commitments considering, among other things, the type of commitment and counterparty.

Other upcoming large cash outflows, such as tax payments.

Based on the sources and uses of liquidity calculated under the Maximum Liquidity Outflow scenarios, we determine, based on a calculated surplus or deficit, additional long-term funding that may be needed versus funding through the repurchase financing market and consider any adjustments that may be necessary to our inventory balances and cash holdings. At August 31, ~~2018,~~2019, we had sufficient excess liquidity to meet all contingent cash outflows detailed in the Maximum Liquidity Outflow. We regularly refine our model to reflect changes in market or economic conditions and our business mix.

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Sources of Liquidity

The following are financial instruments that are cash and cash equivalents or are deemed by management to be generally readily convertible into cash, marginable or accessible for liquidity purposes within a relatively short period of time (dollars in thousands):


	August 31, 2018			Average Balance Quarter ended August 31, 2018 (1)		November 30, 2017			August 31, 2019			Average Balance Quarter ended August 31, 2019 (1)		November 30, 2018
Cash and cash equivalents:
Cash in banks	$	2,313,560		$	2,241,512	$	2,244,207		$	1,356,120		$	2,170,372	$	2,333,476
Money market investments(2)	2,499,004			1,725,826		2,920,285			3,309,370			1,401,166		2,812,410
Total cash and cash equivalents	4,812,564			3,967,338		5,164,492			4,665,490			3,571,538		5,145,886
Other sources of liquidity:
Debt securities owned and securities purchased under agreements to resell ~~(2)~~(3)	948,364			905,451		1,031,252			1,063,118			1,018,739		958,539
Other ~~(3)~~(4)	337,075			407,669		513,293			345,039			562,316		499,576
Total other sources	1,285,439			1,313,120		1,544,545			1,408,157			1,581,055		1,458,115
Total cash and cash equivalents and other liquidity sources	$	6,098,003		$	5,280,458	$	6,709,037		$	6,073,647		$	5,152,593	$	6,604,001
Total cash and cash equivalents and other liquidity sources as % of Total assets	15.0		%			16.9		%	14.1		%			16.0		%
Total cash and cash equivalents and other liquidity sources as % of Total assets less goodwill and intangible assets	15.7		%			17.7		%	14.7		%			16.8		%


(1)	Average balances are calculated based on weekly balances.

(2)

At August 31, 2019 and November 30, 2018, $3,247.0 million and $2,250.0 million, respectively, was invested in U.S. government money funds that invest at least 99.5% of its total assets in cash, securities issued by the U.S. government and U.S. government-sponsored entities, and repurchase agreements that are fully collateralized by cash or government securities. The remaining $62.4 million and $562.4 million at August 31, 2019 and November 30, 2018, respectively, are invested in Triple A rated prime money funds. The average balance of U.S. government money funds for the quarter ended August 31, 2019 was $1,023.3 million.

(3)

Consists of high quality sovereign government securities and reverse repurchase agreements collateralized by U.S. government securities and other high quality sovereign government securities; deposits with a central bank within the European Economic Area, Canada, Australia, Japan, Switzerland or the ~~USA;~~U.S.; and securities issued by a designated multilateral development bank and reverse repurchase agreements with underlying collateral comprised of these securities.


~~(3)~~(4)	Other includes unencumbered inventory representing an estimate of the amount of additional secured financing that could be reasonably expected to be obtained from our ~~financial~~Financial instruments owned that are currently not pledged after considering reasonable financing haircuts.

In addition to the cash balances and liquidity pool presented above, the majority of financial instruments (both long and short) in our trading accounts are actively traded and readily marketable. At August 31, ~~2018,~~2019, we had the ability to readily obtain repurchase financing for ~~79.4%~~73.7% of our inventory at haircuts of 10% or less, which reflects the liquidity of our inventory. In addition, as a matter of our policy, all of these assets have internal capital assessed, which is in addition to the funding haircuts provided in the securities finance markets. Additionally, certain of our Financial instruments owned, primarily consisting of bank loans, consumer loans and investments are predominantly funded by long term capital. Under our cash capital policy, we model capital allocation levels that are more stringent than the haircuts used in the market for secured funding; and we maintain surplus capital at these more stringent levels. We continually assess the liquidity of our inventory based on the level at which we could obtain financing in the market place for a given asset. Assets are considered to be liquid if financing can be obtained in the repurchase market or the securities lending market at collateral haircut levels of 10% or less. The following summarizes our financial instruments by asset class that we consider to be of a liquid nature and the amount of such assets that have not been pledged as collateral at August 31, ~~2018~~2019 and November 30, ~~2017~~2018 (in thousands):

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	August 31, 2018				November 30, 2017				August 31, 2019				November 30, 2018
	Liquid Financial Instruments		Unencumbered Liquid Financial Instruments (2)		Liquid Financial Instruments		Unencumbered Liquid Financial Instruments (2)		Liquid Financial Instruments		Unencumbered Liquid Financial Instruments (2)		Liquid Financial Instruments		Unencumbered Liquid Financial Instruments (2)
Corporate equity securities	$	1,421,055	$	355,575	$	1,718,617	$	272,380	$	2,334,267	$	212,378	$	1,907,064	$	317,189
Corporate debt securities	2,249,374		117,808		2,475,291		57,290		2,299,621		14,365		1,775,721		104,685
U.S. government, agency and municipal securities	3,596,343		150,236		1,954,697		185,481		2,946,757		150,406		2,648,843		294,030
Other sovereign obligations	1,860,711		790,011		2,050,942		996,421		2,550,571		981,913		2,626,212		840,578
Agency mortgage-backed securities (1)	2,661,695		—		1,742,977		—		1,715,564		—		2,972,638		—
Loans and other receivables	271,938		—		243,664		—		215,269		—		272,201		—
Total	$	12,061,116	$	1,413,630	$	10,186,188	$	1,511,572	$	12,062,049	$	1,359,062	$	12,202,679	$	1,556,482


(1)	Consists solely of agency mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae. These securities include pass-through securities, securities backed by adjustable rate mortgages, ~~(“ARMs”),~~ collateralized mortgage obligations, commercial mortgage-backed securities and interest- and principal-only securities.


(2)	Unencumbered liquid balances represent assets that can be sold or used as collateral for a loan, but have not been.

Average liquid financial instruments were ~~$13.8~~$16.1 billion and ~~$14.1~~$16.7 billion for the three and nine months ended August 31, ~~2018,~~2019, respectively, and ~~$11.8~~$18.5 billion and ~~$11.9~~$13.0 billion for the three and twelve months ended November 30, ~~2017,~~2018, respectively. Average unencumbered liquid financial instruments were ~~$1.4~~$1.6 billion and ~~$1.6~~$1.7 billion for the three and nine months ended August 31, ~~2018,~~2019, respectively, and $1.5 billion and $1.6 billion for the three and twelve months ended November 30, ~~2017,~~2018, respectively.

In addition to being able to be readily financed at modest haircut levels, we estimate that each of the individual securities within each asset class above could be sold into the market and converted into cash within three business days under normal market conditions, assuming that the entire portfolio of a given asset class was not simultaneously liquidated. There are no restrictions on the unencumbered liquid securities, nor have they been pledged as collateral.

Sources of Funding and Capital Resources

Our assets are funded by equity capital, senior ~~debt, convertible~~ debt, securities loaned, securities sold under agreements to repurchase, customer free credit balances, bank loans and other payables.

Secured Financing

We rely principally on readily available secured funding to finance our inventory of financial instruments. Our ability to support increases in total assets is largely a function of our ability to obtain short and intermediate-term secured funding, primarily through securities financing transactions. We finance a portion of our long inventory and cover some of our short inventory by pledging and borrowing securities in the form of repurchase or reverse repurchase agreements (collectively “repos”), respectively. Approximately ~~71.1%~~71.2% of our cash and ~~non-cash~~noncash repurchase financing activities use collateral that is considered eligible collateral by central clearing corporations. Central clearing corporations are situated between participating members who borrow cash and lend securities (or vice versa); accordingly, repo participants contract with the central clearing corporation and not one another individually. Therefore, counterparty credit risk is borne by the central clearing corporation which mitigates the risk through initial margin demands and variation margin calls from repo participants. The comparatively large proportion of our total repo activity that is eligible for central clearing reflects the high quality and liquid composition of the inventory we carry in our trading books. For those asset classes not eligible for central clearing house financing, we seek to execute our bi-lateral financings on an extended term basis and the tenor of our repurchase and reverse repurchase agreements generally exceeds the expected holding period of the assets we are financing. The weighted average maturity of cash and ~~non-cash~~noncash repurchase agreements for non-clearing corporation eligible funded inventory is approximately ~~four~~five months at August 31, ~~2018.~~2019.

Our ability to finance our inventory via central clearinghouses and bi-lateral arrangements is augmented by our ability to draw bank loans on an uncommitted basis under our various banking arrangements. At August 31, ~~2018,~~2019, short-term borrowings, which must be repaid within one year or less and include bank loans and overdrafts, borrowings under revolving credit facilities and structured notes totaled ~~$382.0~~$518.9 million. Interest under the bank lines is generally at a spread over the federal funds rate. Letters of credit are used in the normal course of business mostly to satisfy various collateral requirements in favor of exchanges in lieu of depositing cash or securities. Average daily short-term borrowings outstanding were ~~$422.9~~$496.5 million and ~~$498.6~~$580.8 million for the three and nine months ended August 31, ~~2018.~~2019, respectively.

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Our short-term borrowings include the following ~~facility:~~facilities:

~~Intraday Credit Facility.~~

•

Credit Facility. On December 27, 2018, one of our subsidiaries entered into a Credit Facility with JPMorgan Chase Bank, N.A. for a committed amount of $135.0 million. Interest is based on an annual alternative base rate or an adjusted London Interbank Offered Rate (“LIBOR”), as defined in the Credit Facility. The Credit Facility contains certain covenants that, among other things, require Jefferies Group LLC to maintain a specified level of tangible net worth. The covenants also require the borrower to maintain specified leverage amounts and impose certain restrictions on the borrower’s future indebtedness. During the nine months ended August 31, 2019, we were in compliance with all debt covenants under the Credit Facility.

•

Intraday Credit Facility. The Bank of New York Mellon has agreed to make revolving intraday credit advances (“Intraday Credit Facility”) for an aggregate committed amount of $150.0 million. The Intraday Credit Facility contains financial covenants, which include a minimum regulatory net capital requirement for our U.S. broker-dealer, Jefferies LLC. Interest is based on the higher of the Federal funds effective rate plus 0.5% or the prime rate. During the nine months ended August 31, 2019, we were in compliance with all debt covenants under the Intraday Credit Facility.

On March 28, 2019, we entered into a promissory note with Jefferies Finance, which was repaid on May 15, 2019. For further information on this promissory note, refer to ~~make revolving intraday credit advances (“Intraday Credit Facility”) for an aggregate committed amount of $150.0 million. The Intraday Credit Facility contains~~Note 9, Investments, in our consolidated financial ~~covenants, which includes a minimum regulatory net capital requirement for our U.S. broker-dealer, Jefferies LLC. Interest is based~~statements included in this Quarterly Report on the higher of the Federal funds effective rate plus 0.5% or the prime rate. During the nine months ended August 31, 2018, we were in compliance with all debt covenants under the Intraday Credit Facility.

Form 10-Q.

For additional details on our short-term borrowings, refer to Note 11, Short-Term Borrowings, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

In addition to the above financing arrangements, we issue notes backed by eligible collateral under a master repurchase agreement, which provides an additional financing source for our inventory (our “repurchase agreement financing program”). The notes issued under the program are presented within Other secured financings in our Consolidated Statements of Financial Condition. At August 31, ~~2018,~~2019, the outstanding notes were ~~$1.0~~$1.8 billion, bear interest at a spread over LIBOR and ~~are as follows:~~mature from September 2019 to July 2021.



~~Series~~	~~Issued~~	~~Principal~~	~~Maturity~~
~~2015-2 (1) (2)~~	~~May 12, 2015~~	~~$151.8 million~~	~~July 15, 2019~~
~~2017-6 (1) (3)~~	~~October 13, 2017~~	~~$60.0 million~~	~~November 26, 2018~~
~~2017-7 (1) (3)~~	~~October 20, 2017~~	~~$100.0 million~~	~~November 26, 2018~~
~~2018-1 (1) (3)~~	~~February 12, 2018~~	~~$80.0 million~~	~~April 24, 2019~~
~~2018-2 (1)~~	~~March 29, 2018~~	~~$150.0 million~~	~~March 24, 2019~~
~~2018-3 (1)~~	~~May 11, 2018~~	~~$75.0 million~~	~~July 24, 2019~~
~~2018-4 (1)~~	~~June 6, 2018~~	~~$100.0 million~~	~~June 24, 2019~~
~~2018-5 (1)~~	~~July 25, 2018~~	~~$75.0 million~~	~~September 24, 2019~~
~~2018-6 (1)~~	~~August 21, 2018~~	~~$50.0 million~~	~~September 24, 2019~~
~~2018-7 (1)~~	~~August 21, 2018~~	~~$100.0 million~~	~~September 24, 2019~~
~~2018-CL1 (1)~~	~~May 29, 2018~~	~~$63.0 million~~	~~July 15, 2019~~


~~(1)~~	~~These notes bear interest at a spread over the one month London Interbank Offered Rate (“LIBOR”).~~


~~(2)~~	~~This note is redeemable at the option of the noteholders.~~


~~(3)~~	~~These notes are redeemable at our option.~~

For additional details on our repurchase agreement financing program, refer to Note 8, Variable Interest Entities, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Total Long-Term Capital

At August 31, ~~2018~~2019 and November 30, ~~2017,~~2018, we had total long-term capital of ~~$11.3~~$12.2 billion and ~~$11.2~~$11.8 billion, respectively, resulting in a long-term debt to equity capital ratio of ~~1.03:~~0.97:1 and ~~0.94:~~0.92:1, respectively. See “Equity Capital” herein for further information on our change in total equity. Our total long-term capital base at August 31, ~~2018~~2019 and November 30, ~~2017~~2018 was as follows (in thousands):


	August 31, 2018		November 30, 2017		August 31, 2019		November 30, 2018
Long-Term Debt (1)	$	5,703,495	$	5,402,590	$	6,029,670	$	5,657,420
Total Equity	5,557,136		5,759,559		6,189,530		6,182,404
Total Long-Term Capital	$	11,260,631	$	11,162,149	$	12,219,200	$	11,839,824

(1)

Long-term debt at August 31, 2019 excludes $548.6 million of our 2.375% Euro Medium Term Notes, as these notes mature on May 20, 2020 and $188.9 million of our outstanding borrowings under our senior secured revolving credit facility (“Revolving Credit Facility”). Long-term debt at November 30, 2018 excludes ~~$5.8~~$5.7 million of our structured notes, as these notes ~~mature~~matured on February 26, 2019, ~~$707.1~~$699.7 million of our 8.500% senior notes, as these notes mature on July 15, 2019 and ~~$158.5~~$183.5 million of our outstanding borrowings under our senior secured revolving credit facility. Long-term debt at November 30, 2017 excludes $7.1 million of our structured notes, as these notes matured on May 4, 2018, $324.8 million of our 3.875% convertible debentures due 2029 (principal amount of $345.0 million) (the “debentures”), as these debentures were redeemable beginning on November 1, 2017, and $682.3 million of our 5.125% senior notes, as these notes matured on April 13, 2018. The $324.8 million of our convertible debentures were redeemed on January 5, 2018. Refer to Note 12, Long-Term Debt, in our consolidated financial statements included in this Quarterly Report on Form 10-Q for further details on these notes.Revolving Credit Facility.

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On January 11, 2018, our Board of Directors approved a distribution to our sole limited liability company member, Jefferies Financial Group Inc. (“Jefferies”), in the amount of $200.0 million, which was paid on January 31, 2018, and reduced our total equity. In addition, our Board of Directors approved a quarterly distribution policy authorizing us to pay a quarterly distribution to our limited liability company members following the end of each of our fiscal quarters. Beginning at the end of our fiscal quarter ending February 28, 2018 and on a quarterly basis thereafter, we will pay our limited liability company members a quarterly dividend equal to 50% of our positive Net earnings attributable to Jefferies Group LLC (as adjusted for preceding loss quarters, if any). During the three months ended August 31, 2018, we paid a dividend in the amount of $18.6 million to Jefferies, based on our results for the six months ended May 31, 2018. Our results at August 31, 2018, include a dividend payable in the amount of $30.1 million.

Long-Term Debt

During the nine months ended August 31, ~~2018,~~2019, long-term debt increased ~~$158.0~~$220.9 million. This ~~amount includes the issuance of 4.150% senior~~increase is primarily due to structured notes ~~on January 23, 2018 with a total principal amount of $1.0 billion, due 2030. Additionally, structured notes~~issuances with a total principal amount of approximately ~~$162.6~~$283.2 million, net of ~~retirements, were~~retirements. In addition, on July 19, 2019, under our $2.5 billion Euro Medium Term Note Program, we issued ~~during the period.~~1.000% senior unsecured notes with a principal amount of $553.6 million, due 2024. Proceeds amounted to $551.4 million. The increase in long-term debt was partially offset by repayments of $680.8 million of our 8.500% senior notes. At August 31, ~~2018,~~2019, all of our structured notes contain various interest rate payment terms and are accounted for at fair value, with changes in fair value resulting from a change in the instrument-specific credit risk presented in other comprehensive income and changes in fair value resulting from non-credit components recognized in Principal ~~transaction~~transactions revenues. The fair value of all of our structured notes at ~~fair value at~~ August 31, ~~2018~~2019 was ~~$709.6~~$1,014.5 million. For further information, see Note 12, Long-Term Debt, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

~~On November 22, 2017, all~~

Table of ~~our remaining convertible debentures ($324.8 million at November 30, 2017) were called for optional redemption at~~Contents

JEFFERIES GROUP LLC AND SUBSIDIARIES

We have a price equal to 100% of the principal amount of the convertible debentures redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. All of these remaining convertible debentures were redeemed on January 5, 2018. In addition, our 5.125% senior notes with a principal of $668.3 million were redeemed in April 2018. For further information, see Note 12, Long-Term Debt, and Note 19, Related Party Transactions, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

~~On May 16, 2018, we entered into a senior secured revolving credit facility (“~~Revolving Credit ~~Facility”)~~Facility with a group of commercial banks for an aggregate principal amount of ~~at $160.0~~$190.0 million. At August 31, ~~2018,~~2019, borrowings under the Revolving Credit Facility amounted to ~~$158.5~~$188.9 million. Interest is based on an annual alternative base rate or an adjusted LIBOR, as defined in the Revolving Credit Facility agreement. The Revolving Credit Facility contains certain covenants that, among other things, requires Jefferies Group LLC to maintain specified level of tangible net worth and liquidity amounts, and imposes certain restrictions on future indebtedness of and requires specified levels of regulated capital for certain of our subsidiaries. Throughout the period and at August 31, ~~2018,~~2019, no instances of noncompliance with the Revolving Credit Facility covenants occurred and we expect to remain in compliance given our current liquidity, and anticipated funding requirements given our business plan and profitability expectations. For further information, see Note 12, Long-Term Debt, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

At August 31, ~~2018,~~2019, our long-term debt, excluding the Revolving Credit Facility, has a weighted average maturity of approximately ~~8.8~~9.0 years.

Our long-term debt ratings at August 31, ~~2018~~2019 are as follows:



	Rating	Outlook
Moody’s Investors Service ~~(1)~~	Baa3	Stable
Standard and Poor’s ~~(2)~~(1)	BBB-	~~Stable~~Positive
Fitch Ratings ~~(3)~~	BBB	Stable


(1)	On ~~March 20, 2018, Moody’s Investors Services (“Moody’s”) reaffirmed our long-term debt rating of Baa3 and our rating outlook of stable.~~


~~(2)~~	~~On April 10, 2018,~~July 11, 2019, Standard and Poor’s (“S&P”) reaffirmed our long-term debt rating of BBB- and revised our rating outlook ~~of stable.~~from stable to positive.


~~(3)~~	~~On February 13, 2018, Fitch Ratings upgraded our long-term debt rating from BBB- to BBB and reaffirmed our rating outlook of stable.~~

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At August 31, ~~2018,~~2019, the long-term ratings on our principal operating broker-dealers, Jefferies LLC and Jefferies International Limited (a U.K. broker-dealer) are as follows:



	Jefferies LLC		Jefferies International Limited
	Rating	Outlook	Rating	Outlook
Moody’s ~~(1)~~Investors Service	Baa2	Stable	Baa2	Stable
S&P ~~(2)~~(1)	BBB	~~Stable~~Positive	BBB	~~Stable~~Positive


(1)	On ~~January 10, 2018, Moody’s reaffirmed our long-term debt rating of Baa2 and our rating outlook of stable.~~


~~(2)~~	~~On April 10, 2018,~~July 11, 2019, S&P reaffirmed our long-term debt rating of BBB and revised our rating outlook ~~of stable.~~from stable to positive.

Access to external financing to finance our day to day operations, as well as the cost of that financing, is dependent upon various factors, including our debt ratings. Our current debt ratings are dependent upon many factors, including industry dynamics, operating and economic environment, operating results, operating margins, earnings trend and volatility, balance sheet composition, liquidity and liquidity management, our capital structure, our overall risk management, business diversification and our market share and competitive position in the markets in which we operate. Deteriorations in any of these factors could impact our credit ratings. While certain aspects of a credit rating downgrade are quantifiable pursuant to contractual provisions, the impact on our business and trading results in future periods is inherently uncertain and depends on a number of factors, including the magnitude of the downgrade, the behavior of individual clients and future mitigating action taken by us.

In connection with certain over-the-counter derivative contract arrangements and certain other trading arrangements, we may be required to provide additional collateral to counterparties, exchanges and clearing organizations in the event of a credit rating downgrade. At August 31, ~~2018,~~2019, the amount of additional collateral that could be called by counterparties, exchanges and clearing organizations under the terms of such agreements in the event of a downgrade of our long-term credit rating below investment grade was ~~$83.2~~$96.5 million. For certain foreign clearing organizations, credit rating is only one of several factors employed in determining collateral that could be called. The above represents management’s best estimate for additional collateral to be called in the event of credit rating downgrade. The impact of additional collateral requirements is considered in our Contingency Funding Plan and calculation of Maximum Liquidity Outflow, as described above.

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Equity Capital

As compared to November 30, ~~2017,~~2018, the ~~decrease~~increase to total Jefferies Group LLC member’s equity at August 31, ~~2018~~2019 is primarily attributed to ~~dividend~~net earnings and changes in instruments specific credit risk, partially offset by distributions to Jefferies and foreign currency translation adjustments ~~partially offset by net earnings~~ during the nine months ended August 31, 2019. During the three and nine months ended August 31, 2019, we recognized losses due to foreign currency translation adjustments of $28.0 million and $34.3 million, respectively, the majority of which is due to our £716.4 million investment in our London subsidiaries at August 31, 2019. The gains or losses resulting from translating foreign currency financial statements into U.S. dollars, net of hedging gains or losses and taxes, if any, are included in Other comprehensive income. For further information on foreign currency translations, see Note 2, Summary of Significant Accounting Policies our in our consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended November 30, 2018.

During the nine months ended August 31, 2019, we paid distributions of $108.7 million to Jefferies, based on our results for the nine months ended May 31, 2019. In addition, on January 29, 2019, our Board of Directors approved a distribution of $100.0 million to Jefferies, which was paid on January 30, 2019. At August 31, 2019, we have accrued a distribution payable of $32.5 million based on our results for the three months ended August 31, 2019.

Net Capital

As a broker-dealer registered with the SEC and member firms of the Financial Industry Regulatory Authority (“FINRA”), Jefferies LLC is subject to the Securities and Exchange Commission Uniform Net Capital Rule (“Rule 15c3-1”), which requires the maintenance of minimum net capital, and has elected to calculate minimum capital requirements using the alternative method permitted by Rule 15c3-1 in calculating net capital. Jefferies LLC, as a dually-registered U.S. broker-dealer and futures commission merchant (“FCM”), is also subject to Rule 1.17 of the Commodity Futures Trading Commission (“CFTC”), which sets forth minimum financial requirements. The minimum net capital requirement in determining excess net capital for a dually-registered U.S. broker-dealer and FCM is equal to the greater of the requirement under Rule 15c3-1 or CFTC Rule 1.17.

At August 31, ~~2018,~~2019, Jefferies LLC’s net capital and excess net capital were as follows (in thousands):

Net Capital Excess Net Capital
Jefferies LLC $ 1,917,634
$ 1,806,197



	Net Capital		Excess Net Capital
Jefferies LLC	$	1,474,186	$	1,356,458

FINRA is the designated examining authority for our U.S. broker-dealer and the National Futures Association is the designated self-regulatory organization for Jefferies LLC as an FCM.

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Certain other U.S. and non-U.S. subsidiaries are subject to capital adequacy requirements as prescribed by the regulatory authorities in their respective jurisdictions, including Jefferies International Limited which is subject to the regulatory supervision and requirements of the Financial Conduct Authority in the United Kingdom. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law on July 21, 2010. The Dodd-Frank Act contains provisions that require the registration of all swap dealers, major swap participants, security-based swap dealers, and/or major security-based swap participants. While entities that register under these provisions will be subject to regulatory capital requirements, these regulatory capital requirements have not yet been finalized. We expect that these provisions will result in modifications to the regulatory capital requirements of some of our entities, and will result in some of our other entities becoming subject to regulatory capital requirements for the first time, including Jefferies Financial Services, Inc., which registered as a swap dealer with the CFTC during January 2013 and Jefferies Financial Products LLC, which registered during August 2014.

The regulatory capital requirements referred to above may restrict our ability to withdraw capital from our regulated subsidiaries.

On March 29, 2017, the United Kingdom notified the European Council and triggered a period to negotiate its withdrawal from the European Union (“Brexit”). While, there is ongoing uncertainty as to the terms and any potential transition periods related to Brexit, we have taken steps to ensure our ability to provide services to our European clients without interruption. As such, we have established a wholly-owned subsidiary of our UK broker-dealer in Germany, which has been approved as an authorized MiFID investment firm by the German regulator and which will enable us to conduct business across all of our European investment banking, fixed income and equity platforms. Our plans contemplate providing sufficient capital pursuant to the regulatory requirements for the planned operations as well pursuant to requirements of relevant clearing organizations.

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Off-Balance Sheet Arrangements and Contractual Obligations

Off-Balance Sheet Arrangements

We have contractual commitments arising in the ordinary course of business for securities loaned or purchased under agreements to resell, repurchase agreements, future purchases and sales of foreign currencies, securities transactions on a when-issued basis and underwriting. Each of these financial instruments and activities contains varying degrees of off-balance sheet risk whereby the fair values of the securities underlying the financial instruments may be in excess of, or less than, the contract amount. The settlement of these transactions is not expected to have a material effect upon our consolidated financial statements.

In the normal course of business, we engage in other off-balance sheet arrangements, including derivative contracts. Neither derivatives’ notional amounts nor underlying instrument values are reflected as assets or liabilities in our Consolidated Statements of Financial Condition. Rather, the fair values of derivative contracts are reported in our Consolidated Statements of Financial Condition as Financial instruments owned or Financial instruments sold, not yet purchased as applicable. Derivative contracts are reflected net of cash paid or received pursuant to credit support agreements and are reported on a net by counterparty basis when a legal right of offset exists under an enforceable master netting agreement. For additional information about our accounting policies and our derivative activities, see Note 2, Summary of Significant Accounting ~~Policies;~~Policies our in our consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended November 30, 2018 and Note 4, Fair Value ~~Disclosures;~~Disclosures and Note 5, Derivative Financial Instruments, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

We are routinely involved with variable interest entities (“VIEs”) in the normal course of business. At August 31, ~~2018,~~2019, we did not have any commitments to purchase assets from these VIEs. For additional information regarding our involvement with VIEs, see Note 7, Securitization Activities, and Note 8, Variable Interest Entities, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Due to the uncertainty regarding the timing and amounts that will ultimately be paid, our liability for unrecognized tax benefits has been excluded from the below contractual obligations table. See Note 15, Income Taxes, in our consolidated financial statements included in this Quarterly Report on Form 10-Q for further information for further information.

For information on our commitments and guarantees, see Note 16, Commitments, Contingencies and Guarantees, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Contractual Obligations

The table below provides information about our contractual obligations at August 31, ~~2018.~~2019. The table presents principal cash flows with expected maturity dates (in millions):


	Expected Maturity Date												Expected Maturity Date
	2018		2019		2020 and 2021		2022 and 2023		2024 and Later		Total		2019		2020		2021 and 2022		2023 and 2024		2025 and Later		Total
Debt obligations:
Unsecured long-term debt (contractual principal payments net of unamortized discounts and premiums) (1)	$	—	$	713.0	$	1,374.9	$	642.9	$	3,685.6	$	6,416.4	$	—	$	548.6	$	811.3	$	1,160.6	$	4,057.8	$	6,578.3
Revolving credit facility (1)													—		—		188.9		—		—		188.9
Interest payment obligations on long-term debt (2)	86.8		323.7		525.1		400.8		1,539.3		2,875.7		83.4		313.4		517.8		409.5		1,623.4		2,947.5
Total	$	86.8	$	1,036.7	$	1,900.0	$	1,043.7	$	5,224.9	$	9,292.1	$	83.4	$	862.0	$	1,518.0	$	1,570.1	$	5,681.2	$	9,714.7


(1)	For additional information on long-term debt, see Note 12, Long-Term Debt, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.


(2)	Amounts based on applicable interest rates at August 31, ~~2018.~~2019.

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Risk Management

Overview

Risk is an inherent part of our business and activities. The extent to which we properly and effectively identify, assess, monitor and manage each of the various types of risk involved in our activities is critical to our financial soundness, viability and profitability. Accordingly, we have a comprehensive risk management approach, with a formal governance structure and processes to identify, assess, monitor and manage risk. Principal risks involved in our business activities include market, credit, liquidity and capital, operational, legal and compliance, new business and reputational risk.

Risk management is a multifaceted process that requires communication, judgment and knowledge of financial products and markets. ~~Accordingly, our~~Our risk management process encompasses the active involvement of executive and senior management, and also many departments independent of the revenue-producing business units, including the Risk Management, Operations, Compliance, Legal and Finance Departments. Our risk management policies, procedures and methodologies are ~~fluid~~flexible in nature and are subject to ongoing review and modification.

In achieving our strategic business objectives, our risk appetite incorporates keeping our clients’ interests at the top of our priority list and ensuring we are in compliance with applicable laws, rules and regulations, as well as adhering to the highest ethical standards. We undertake prudent and conservative risk-taking that protects the capital base and franchise, utilizing risk limits and tolerances that avoid outsized risk-taking. We maintain a diversified business mix and avoid significant concentrations to any sector, product, geography, or activity and set quantitative concentration limits to manage this risk. We consider contagion, second order effects and correlation in our risk assessment process and actively seek out value opportunities of all sizes. We manage the risk of opportunities larger than our approved risk levels through risk sharing and risk distribution, sell-down and hedging as appropriate. We have a limited appetite for illiquid assets and complex derivative financial instruments. We maintain the asset quality of our balance sheet through conducting trading activity in liquid markets and generally ensure high turnover of our inventory. We subject less liquid positions and derivative financial instruments to oversight and use a wide variety of specific metrics, limits, and constraints to manage these risks. We protect our reputation and franchise, as well as our standing within the market. We operate a federated approach to risk management with risk oversight responsibilities assigned to those areas of the business that have the appropriate knowledge.

For discussion of liquidity and capital risk management, refer to the “Liquidity, Financial Condition and Capital Resources” section herein.

Governance and Risk Management Structure and Risk Policy Framework

For a discussion of our governance and risk management structure and our risk management framework, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended November 30, ~~2017.~~2018.

Risk ~~Management Key Metrics~~Considerations

We apply a comprehensive framework of limits on a variety of key metrics to constrain the risk profile of our business activities. The size of the ~~limit~~limits reflects our risk tolerance for a certain activity under normal business conditions. Key metrics included in our risk management framework include inventory position and exposure limits on a gross and net basis, scenario analysis and stress tests, Value-at-Risk (“VaR”), sensitivities, ~~(greeks),~~ exposure concentrations, aged inventory, amount of Level 3 assets, counterparty exposure, leverage and cash ~~capital and performance analysis metrics.~~capital.

Market Risk

~~The potential for changes in the value of financial instruments~~Market risk is ~~referred to~~defined as ~~market risk. Our market risk generally represents~~ the risk of loss ~~that may result from a change~~due to fluctuations in the market value of a financial ~~instrument as a result of fluctuations~~assets and liabilities attributable to changes in market variables.

Our market risk principally arises from interest ~~rates, credit spreads, equity prices, commodity prices and foreign exchange rates, along with the level of volatility. Interest~~ rate ~~risks result primarily~~risk, from exposure to changes in the yield curve, the volatility of interest rates, and credit ~~spreads. Equity~~spreads, and from equity price risks ~~result~~ from exposure to changes in prices and volatilities of individual equities, equity baskets and equity indices. ~~Commodity~~In addition, commodity price ~~risks result~~risk results from exposure to the changes in prices and volatilities of individual commodities, commodity baskets and commodity ~~indices.~~ indices, and foreign exchange risk results from changes in foreign currency rates.

Market risk ~~arises from market-making,~~is present in our market making, proprietary trading, underwriting, specialist and investing ~~activities. We seek to manage our exposure to market risk~~activities and is principally managed by diversifying exposures, controlling position sizes, and establishing economic hedges in related securities or derivatives. Due to imperfections in correlations, gains and losses can occur even for positions that are economically hedged. Position limits in trading and inventory accounts are established and monitored on an ongoing basis. Each day, consolidated position and exposure reports are prepared and distributed to various levels of management, which enable management to monitor inventory levels and the results of our trading businesses.

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VaR

VaR is a statistical estimate of the ~~trading groups.~~

~~Value-at-Risk~~

potential loss from adverse market movements over a specified time horizon within a specified probability (confidence level). It provides a common risk measure across financial instruments, markets and asset classes. We estimate ~~Value-at-Risk (“VaR”)~~VaR using a model that simulates revenue and loss distributions on our trading portfolios by applying historical market changes to the current portfolio. ~~Using the results of this simulation, VaR measures the potential loss in value of our financial instruments due to adverse market movements over a specified time horizon at a given confidence level.~~ We calculate a one-day VaR using a one year look-back period measured at a 95% confidence level.

As with all measures of VaR, our estimate has inherent limitations due to the assumption that historical changes in market conditions are representative of the future. Furthermore, the VaR model measures the risk of a current static position over a one-day horizon and might not capture the market risk over a longer time horizon where moves may be more extreme. Previous changes in market risk factors may not generate accurate predictions of ~~positions that cannot be liquidated or offset with hedges in a one-day period. Published VaR results reflect past trading positions while~~ future ~~risk depends on future positions.~~

market movements. While we believe the assumptions and inputs in our risk model are reasonable, we could incur losses greater than the reported ~~VaR because the historical market prices and rates changes may not be an accurate measure of future market events and conditions.~~VaR. Consequently, this VaR estimate is only one of a number of tools we use in our daily risk management activities.

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~~When comparing our VaR numbers to those of other firms, it is important to remember that different methodologies and assumptions could produce significantly different results.~~

Our average daily VaR increased to ~~$7.53~~$9.71 million for the three months ended August 31, ~~2018~~2019 from ~~$6.78~~$8.70 million for the three months ended May 31, ~~2018.~~2019. The increase was primarily due to higher interest rate risk volatility and a lower diversification benefit, partially offset by lower equity price risk ~~driven by equity block trading activity during~~mainly due to the ~~latter half~~liquidation of ~~the quarter.~~certain separately managed accounts within our Asset Management businesses.

The following table illustrates each separate component of VaR for each component of market risk by interest rate, equity, currency and commodity products, as well as for our overall trading positions using the past 365 days of historical data (in millions):


				Daily VaR (1) Value-at-Risk in Trading Portfolios																								Daily VaR (1) Value-at-Risk in Trading Portfolios
	VaR at August 31, 2018										VaR at May 31, 2018												VaR at August 31, 2019					Daily VaR (1) Value-at-Risk in Trading Portfolios											VaR at May 31, 2019
				Daily VaR (1) Value-at-Risk in Trading Portfolios	Daily VaR for the Three Months Ended August 31, 2018										Daily VaR for the Three Months Ended May 31, 2018												Daily VaR for the Three Months Ended August 31, 2019															Daily VaR for the Three Months Ended May 31, 2019
Risk Categories				Average			High		Low						Average			High			Low						Average				High				Low							Average				High				Low
Interest Rates	$	4.27		$	4.75		$	5.71	$	3.83			$	4.24		$	4.64		$	5.76		$		3.56		$	5.49			$	4.64			$	5.87			$		3.40			$	4.41			$	3.41			$	4.41			$	2.58
Equity Prices	12.22			5.21			13.56		3.11			3.31			4.82			8.05			3.25				5.94				7.70				13.17				4.96					12.66				9.99				12.66				7.51
Currency Rates	0.11			0.13			0.20		0.10			0.13			0.11			0.17			0.04			0.38				0.27				0.52				0.07				0.09				0.25				1.41				0.06
Commodity Prices	0.91			0.64			1.12		0.24			0.86			0.50			0.73			0.29			0.87				0.94				1.18				0.75				1.08				1.00				1.26				0.70
Diversification Effect (2)	(3.09		)	(3.20		)	N/A		N/A			(3.33		)	(3.29		)	N/A			N/A			(4.04		)		(3.84		)		N/A				N/A				(7.41		)		(5.95		)		N/A				N/A
Firmwide	$	14.42		$	7.53		$	14.73	$	5.33		$	5.21		$	6.78		$	10.32		$	5.21		$	8.64			$	9.71			$	14.83			$	6.59			$	10.83			$	8.70			$	10.83			$	6.48


(1)	For the VaR numbers reported above, a one-day time horizon, with a one year look-back period, and a 95% confidence level were used.


(2)	The diversification effect is not applicable for the maximum and minimum VaR values as the firmwide VaR and the VaR values for the four risk categories might have occurred on different days during the period.

The aggregated VaR presented here is less than the sum of the individual components (i.e., interest rate risk, foreign exchange rate risk, equity risk and commodity price risk) due to the benefit of diversification among the four risk categories. Diversification benefit equals the difference between aggregated VaR and the sum of VaRs for the four risk categories and arises because the market risk categories are not perfectly correlated.

The chart below reflects our daily VaR over the last four quarters with the significant increase in the daily VaR in late August 2018 due to the acquisition and short-term holding of an equity block position that was substantially liquidated within a few days subsequent to quarter end:

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The primary method used to test the efficacy of the VaR model is to compare our actual daily net revenue for those positions included in our VaR calculation with the daily VaR estimate. This evaluation is performed at various levels of the trading portfolio, from the ~~holding company~~overall level down to specific business lines. For the VaR model, trading related revenue is defined as principal ~~transaction revenue,~~transactions revenues, trading related commissions, revenue from securitization activities and net interest income.

For a 95% confidence one day VaR model (i.e.,no intra-day trading), assuming current changes in market value are consistent with the historical changes used in the calculation, net trading losses would not be expected to exceed the VaR estimates more than twelve times on an annual basis (i.e.,once in every 20 days). During the three months ended August 31, ~~2018,~~2019, results of the evaluation at the aggregate level demonstrated ~~no days~~one day when the net trading loss exceeded the 95% one day ~~VaR.~~VaR, due to an equity block position.

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The chart below reflects our daily VaR over the last four quarters with the significant increase in the daily VaR in the middle of the three months ended February 28, 2019 due to an equity block position, which then decreased in the latter part of the quarter due to lower market price volatility and the increase in the beginning of the three months ended August 31, 2019 was also due to an equity block position. In addition, our daily VaR increased in the latter part of 2018 due to the transfer to us by Jefferies, in the fourth quarter of 2018, of investments in certain separately managed accounts and funds. See Note 1, Organization and Basis of Presentation for further details on this transfer.

Daily Net Trading Revenue

There were 10 days with trading losses out of a total of 64 trading days in the three months ended August 31, 2019. The histogram below presents the distribution of our actual daily net trading revenue for substantially all of our trading activities for the three months ended August 31, 2019 (in millions).

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Other Risk Measures

Certain positions within financial instruments are not included in the VaR model because VaR is not the most appropriate measure of risk. Accordingly, Risk Management has additional procedures in place to assure that the level of potential loss that would arise from market movements are within acceptable levels. Such procedures include performing stress tests, monitoring concentration risk and tracking price target/stop loss levels. The table below presents the potential reduction in net income associated with a 10% stress of the fair value of the positions that are not included in the VaR model at August 31, ~~2018~~2019 (in thousands):


	10% Sensitivity		10% Sensitivity
Investments in funds (1)			$	57,346
Private investments	$	20,567	27,451
Corporate debt securities in default	8,636		6,275
Trade claims	5,135		4,269


(1)	Includes investments in hedge funds, fund of funds and private equity funds. For additional details on these investments refer to “Investments at Fair Value” within Note 4, Fair Value Disclosures, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

~~VaR also excludes the~~The impact of changes in our own credit spreads on our structured notes for which the fair value option was ~~elected.~~elected is not included in VaR. The estimated credit spread risk sensitivity for each one basis point widening in our own credit spreads on financial liabilities for which the fair value option was elected was an increase in value of approximately ~~$1.0~~$1.12 million at August 31, ~~2018,~~2019, which is included in other comprehensive income.

~~Daily Net Trading Revenue~~

There were 11 days with trading losses out of a total of 65 trading days in the three months ended August 31, 2018. Our trading loss days were primarily attributed to block trading activities, for which certain positions have subsequently been liquidated since quarter end. The histogram below presents the distribution of our actual daily net trading revenue for substantially all of our trading activities for the three months ended August 31, 2018 (in millions).

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Stress Tests and Scenario Analysis ~~and~~

Stress ~~Tests~~

~~While VaR measures potential losses due to adverse changes in historical market prices and rates, we use stress testing~~tests are used to analyze the potential impact of specific events or ~~moderate or~~ extreme market moves on ~~our~~the current portfolio both ~~firm wide~~firm-wide and within business segments. Stress testing is an important part of our risk management approach because it allows us to quantify our exposure to tail risks, highlight potential loss concentrations, undertake risk/reward analysis, set risk controls and overall assess and mitigate our risk.

We employ a range of stress scenarios, which comprise both historical market price and rate changes and hypothetical market environments, and generally involve simultaneous changes of many risk factors. Indicative market changes in ~~our~~the scenarios include, but are not limited to, a large widening of credit spreads, a substantial decline in equities markets, significant moves in selected emerging markets, large moves in interest rates and changes in the shape of the yield curve and large moves in European markets. In addition, we also perform ad hoc stress tests and add new scenarios as market conditions dictate. Because our stress scenarios are meant to reflect market moves that occur over a period of time, our estimates of potential loss assume some level of position reduction for liquid positions. curve.

Unlike our VaR, which measures potential losses within a given confidence interval, stress scenarios do not have an associated implied ~~probability; rather,~~probability. Rather, stress testing is used to estimate the potential loss from market moves that tend to be larger than those embedded in the VaR calculation. Stress testing complements VaR to cover for potential limitations of VaR such as the breakdown in correlations, non-linear risks, tail risk and extreme events and capturing market moves beyond the confidence levels assumed in the VaR calculations.

Stress testing is performed and reported ~~regularly~~at least weekly as part of ~~the~~our risk management ~~process. Stress testing is used~~process and on an ad hoc basis in response to market events or concerns. Current stress tests provide estimated revenue and loss of the current portfolio through a range of both historical and hypothetical events. The stress scenarios are reviewed and assessed at least annually so that they remain relevant and up to date with market developments. Additional hypothetical scenarios are also conducted on a sub-portfolio basis to assess ~~our aggregate risk position~~the impact of any relevant idiosyncratic stress events as ~~well as for limit setting and risk/reward analysis.~~

~~Counterparty Credit Risk and Issuer Country Exposure~~needed.

Counterparty Credit Risk

Credit risk is the risk of loss due to adverse changes in a counterparty’s credit worthiness or its ability or willingness to meet its financial obligations in accordance with the terms and conditions of a financial contract.

We are exposed to credit risk as a trading counterparty to other broker-dealers and customers, as a direct lender and through extending loan commitments, as a holder of securities and as a member of exchanges and clearing organizations. Credit exposure exists across a wide-range of products, including cash and cash equivalents, loans, securities finance transactions and over-the-counter derivative contracts. The main sources of credit risk are:

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Loans and lending arising in connection with our capital markets activities, which reflects our exposure at risk on a default event with no recovery of loans. Current exposure represents loans that have been drawn by the borrower and lending commitments that are outstanding. In addition, credit exposures on forward settling traded loans are included within our loans and lending exposures for consistency with the balance sheet categorization of these items. Loans and lending also arise in connection with our portion of a Secured Revolving Credit Facility that is ~~critical~~with us and Massachusetts Mutual Life Insurance Company, to ~~our financial soundness and profitability that we properly and effectively identify, assess, monitor, and manage the various credit and counterparty risks inherent~~be funded equally, to support loan underwritings by Jefferies Finance. For further information on this facility, refer to Note 9, Investments, in our ~~businesses.~~ consolidated financial statements included in this Quarterly Report on Form 10-Q. In addition, we have loans outstanding to certain of our officers and employees (none of whom are executive officers or directors). For further information on these employee loans, refer to Note 19, Related Party Transactions, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Securities and margin financing transactions, which reflect our credit exposure arising from reverse repurchase agreements, repurchase agreements and securities lending agreements to the extent the fair value of the underlying collateral differs from the contractual agreement amount and from margin provided to customers.

OTC derivatives, which are reported net by counterparty when a legal right of setoff exists under an enforceable master netting agreement. OTC derivative exposure is based on a contract at fair value, net of cash collateral received or posted under credit support agreements. In addition, credit exposures on forward settling trades are included within our derivative credit exposures.

Cash and cash equivalents, which includes both interest-bearing and non-interest-bearing deposits at banks.

Credit is extended to counterparties in a controlled manner and in order to generate acceptable returns, whether such credit is granted directly or is incidental to a transaction. All extensions of credit are monitored and managed ~~on an enterprise level in order~~as a whole to limit exposure to loss related to credit risk.

~~Our~~ Credit risk is managed according to the Credit Risk ~~Framework is responsible~~Policy, which sets out the process for identifying counterparty credit ~~risks throughout the operating businesses,~~risk, establishing counterparty limits, and managing and monitoring ~~those~~ credit limits. ~~Our framework includes:~~The policy includes our approach for:

~~Defining~~Client on-boarding and approving counterparty credit ~~limit guidelines and credit limit approval processes;~~

~~Providing a consistent and integrated credit risk framework across the enterprise;~~

~~Approving counterparties and counterparty limits with parameters set by the Risk Management Committee;~~limits;

Negotiating, approving and monitoring credit terms in legal and master documentation;

~~Delivering credit limits to all relevant sales and trading desks;~~

~~Maintaining credit reviews for all active and new counterparties;~~

~~Operating a control function for exposure analytics and exception management and reporting;~~

Determining the analytical standards and risk parameters for ~~on-going~~ongoing management and monitoring ~~of global~~ credit risk books;

Actively managing daily exposure, exceptions and breaches; and

Monitoring daily margin call activity and counterparty ~~performance (in concert with~~performance.

Counterparty credit exposure limits are granted within our credit ratings framework, as detailed in the ~~Margin Department);~~Credit Risk Policy. The Credit Risk Department assesses counterparty credit risk and sets credit limits at the counterparty master agreement level. Limits must be approved by appropriate credit officers and initiated in our credit and trading systems before trading commences. All credit exposures are reviewed against approved limits on a daily basis.

~~Setting~~Our Secured Revolving Credit Facility, which supports loan underwritings by Jefferies Finance, is governed under separate policies other than the ~~minimum global requirements for systems, reports,~~Credit Risk Policy and ~~technology.~~

~~Credit Exposures~~

~~Credit exposure exists across~~is approved by our Board of Directors. The loans outstanding to certain of our officers and employees are extended pursuant to a ~~wide-range of products including cash and cash equivalents, loans, securities finance transactions and over-the-counter derivative contracts.~~

~~Loans and lending, arising in connection with~~review by our ~~capital markets activities and forward settling traded loans;~~

~~Securities and margin finance, which represents securities financing transactions (reverse repurchase agreements, repurchase agreements and securities lending agreements);~~

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~~OTC derivatives, which are reported net by counterparty when a legal right of setoff exists under an enforceable master netting agreement, and includes forward settling trades; and~~

~~Cash and cash equivalents, which includes both interest-bearing and non-interest bearing deposits at banks.~~

most senior management.

Current counterparty credit exposures at August 31, ~~2018~~2019 and November 30, ~~2017~~2018 are summarized in the tables below and provided by credit quality, region and industry (in millions). Credit exposures presented take netting and collateral into consideration by counterparty and master agreement. Collateral taken into consideration includes both collateral received as cash as well as collateral received in the form of securities or other arrangements. Current exposure is the loss that would be incurred on a particular set of positions in the event of default by the counterparty, assuming no recovery. Current exposure equals the fair value of the positions less collateral. Issuer risk is the credit risk arising from inventory positions (for example, corporate debt securities and secondary bank loans). Issuer risk is included in our country risk exposure tables below. Of our counterparty credit exposure at August 31, 2018, excluding cash and cash equivalents, the percentage of investment grade counterparties remained flat at 92% when compared to November 30, 2017, with a majority concentrated in North America.

When comparing our credit exposure at August 31, 2018 with credit exposure at November 30, 2017, excluding cash and cash equivalents, current exposure decreased to approximately $1,114 million from $1,353 million. Counterparty credit exposure from OTC derivatives decreased by 35%, primarily driven by investment grade North American banks and broker-dealers, and exposure from both loans and lending and from securities and margin finance decreased by 13% during the period.

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																																																	Counterparty Credit Exposure by Credit Rating
	Loans and Lending				Securities and Margin Finance				OTC Derivatives				Total				Cash and Cash Equivalents				Total with Cash and Cash Equivalents				Loans and Lending				Securities and Margin Finance				OTC Derivatives				Total				Cash and Cash Equivalents				Total with Cash and Cash Equivalents
	At				At				At				At				At				At				At				At				At				At				At				At
	August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018
AAA Range	$	—	$	—	$	1.5	$	6.4	$	—	$	—	$	1.5	$	6.4	$	2,506.1	$	2,924.2	$	2,507.6	$	2,930.6	$	—	$	—	$	12.8	$	3.2	$	—	$	—	$	12.8	$	3.2	$	3,309.4	$	2,981.2	$	3,322.2	$	2,984.4
AA Range	45.0		47.7		47.1		61.3		0.4		3.8		92.5		112.8		123.7		158.6		216.2		271.4		45.0		45.1		34.6		45.3		3.2		4.2		82.8		94.6		3.9		111.6		86.7		206.2
A Range	0.3		1.2		571.2		603.0		175.6		260.6		747.1		864.8		1,989.5		1,751.9		2,736.6		2,616.7		0.4		0.3		612.0		573.3		123.9		97.9		736.3		671.5		1,348.0		1,865.9		2,084.3		2,537.4
BBB Range	0.3		0.5		171.5		232.5		10.1		28.5		181.9		261.5		13.5		152.3		195.4		413.8		250.1		250.1		153.3		206.6		31.6		15.5		435.0		472.2		3.6		2.3		438.6		474.5
BB or Lower	9.1		12.5		5.6		8.1		16.0		16.7		30.7		37.3		106.9		100.6		137.6		137.9		13.5		—		22.9		5.5		189.6		15.7		226.0		21.2		—		107.5		226.0		128.7
Unrated	60.7		70.1		—		—		—		—		60.7		70.1		72.9		76.9		133.6		147.0		75.5		119.3		—		—		8.5		—		84.0		119.3		0.6		77.4		84.6		196.7
Total	$	115.4	$	132.0	$	796.9	$	911.3	$	202.1	$	309.6	$	1,114.4	$	1,352.9	$	4,812.6	$	5,164.5	$	5,927.0	$	6,517.4	$	384.5	$	414.8	$	835.6	$	833.9	$	356.8	$	133.3	$	1,576.9	$	1,382.0	$	4,665.5	$	5,145.9	$	6,242.4	$	6,527.9
																																	Counterparty Credit Exposure by Region
	Loans and Lending				Securities and Margin Finance				OTC Derivatives				Total				Cash and Cash Equivalents				Total with Cash and Cash Equivalents				Loans and Lending				Securities and Margin Finance				OTC Derivatives				Total				Cash and Cash Equivalents				Total with Cash and Cash Equivalents
	At				At				At				At				At				At				At				At				At				At				At				At
	August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018
Asia/Latin America/Other	$	—	$	3.0	$	37.8	$	45.8	$	0.2	$	0.3	$	38.0	$	49.1	$	292.5	$	280.7	$	330.5	$	329.8	$	13.5	$	—	$	55.3	$	30.2	$	1.7	$	0.1	$	70.5	$	30.3	$	90.8	$	304.0	$	161.3	$	334.3
Europe	0.1		1.0		361.7		403.5		20.6		54.0		382.4		458.5		321.2		540.0		703.6		998.5		0.1		0.3		363.8		427.0		81.8		27.3		445.7		454.6		263.5		170.8		709.2		625.4
North America	115.3		128.0		397.4		462.0		181.3		255.3		694.0		845.3		4,198.9		4,343.8		4,892.9		5,189.1		370.9		414.5		416.5		376.7		273.3		105.9		1,060.7		897.1		4,311.2		4,671.1		5,371.9		5,568.2
Total	$	115.4	$	132.0	$	796.9	$	911.3	$	202.1	$	309.6	$	1,114.4	$	1,352.9	$	4,812.6	$	5,164.5	$	5,927.0	$	6,517.4	$	384.5	$	414.8	$	835.6	$	833.9	$	356.8	$	133.3	$	1,576.9	$	1,382.0	$	4,665.5	$	5,145.9	$	6,242.4	$	6,527.9
																																	Counterparty Credit Exposure by Industry
	Loans and Lending				Securities and Margin Finance				OTC Derivatives				Total				Cash and Cash Equivalents				Total with Cash and Cash Equivalents				Loans and Lending				Securities and Margin Finance				OTC Derivatives				Total				Cash and Cash Equivalents				Total with Cash and Cash Equivalents
	At				At				At				At				At				At				At				At				At				At				At				At
	August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2018		November 30, 2017		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018		August 31, 2019		November 30, 2018
Asset Managers	$	—	$	—	$	4.9	$	15.9	$	—	$	7.1	$	4.9	$	23.0	$	2,499.0	$	2,920.3	$	2,503.9	$	2,943.3	$	—	$	—	$	2.1	$	0.6	$	—	$	—	$	2.1	$	0.6	$	3,309.4	$	2,812.4	$	3,311.5	$	2,813.0
Banks, Broker-dealers	0.4		1.7		562.8		620.8		187.5		282.6		750.7		905.1		2,313.6		2,244.2		3,064.3		3,149.3		250.1		250.4		628.2		619.6		162.4		118.9		1,040.7		988.9		1,356.1		2,333.5		2,396.8		3,322.4
Corporates	96.6		87.5		—		—		11.1		14.7		107.7		102.2		—		—		107.7		102.2		78.7		92.9		—		—		183.0		7.2		261.7		100.1		—		—		261.7		100.1
Other	18.4		42.8		229.2		274.6		3.5		5.2		251.1		322.6		—		—		251.1		322.6		55.7		71.5		205.3		213.7		11.4		7.2		272.4		292.4		—		—		272.4		292.4
Total	$	115.4	$	132.0	$	796.9	$	911.3	$	202.1	$	309.6	$	1,114.4	$	1,352.9	$	4,812.6	$	5,164.5	$	5,927.0	$	6,517.4	$	384.5	$	414.8	$	835.6	$	833.9	$	356.8	$	133.3	$	1,576.9	$	1,382.0	$	4,665.5	$	5,145.9	$	6,242.4	$	6,527.9

For additional information regarding credit exposure to OTC derivative contracts, refer to Note 5, Derivative Financial Instruments, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

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Country Risk Exposure

Country risk is the risk that events or developments that occur in the general environment of a country or countries due to economic, political, social, regulatory, legal or other factors, will affect the ability of obligors of the country to honor their obligations. We define the country of risk as the country of jurisdiction or domicile of the ~~obligor.~~obligor, and monitor country risk resulting from both trading positions and counterparty exposure. The following tables reflect our top exposure at August 31, ~~2018~~2019 and November 30, ~~2017~~2018 to the sovereign governments, corporations and financial institutions in those non- U.S. countries in which we have a net long issuer and counterparty exposure (in millions):


	August 31, 2018																					August 31, 2019
	Issuer Risk								Counterparty Risk								Issuer and Counterparty Risk					Issuer Risk								Counterparty Risk									Issuer and Counterparty Risk
	Fair Value of Long Debt Securities		Fair Value of Short Debt Securities			Net Derivative Notional Exposure			Loans and Lending		Securities and Margin Finance		OTC Derivatives		Cash and Cash Equivalents		Excluding Cash and Cash Equivalents			Including Cash and Cash Equivalents		Fair Value of Long Debt Securities		Fair Value of Short Debt Securities			Net Derivative Notional Exposure			Loans and Lending		Securities and Margin Finance		OTC Derivatives		Cash and Cash Equivalents			Excluding Cash and Cash Equivalents			Including Cash and Cash Equivalents
United Kingdom	$	372.5	$	(168.3	)	$	(52.4	)	$	0.1	$	36.8	$	13.1	$	92.8	$	201.8		$	294.6	$	336.7	$	(192.8	)	$	(9.7	)	$	0.1	$	59.4	$	27.7	$	178.9		$	221.4		$	400.3
Germany	103.2		(257.1		)	177.0			—		74.2		1.5		82.8		98.8			181.6
Spain																						398.9		(267.8		)	—			—		0.1		—		—			131.2			131.2
France																						347.4		(260.0		)	(124.9		)	—		139.4		26.6		—			128.5			128.5
Finland																						129.1		(15.6		)	—			—		—		—		—			113.5			113.5
Canada																						192.8		(166.6		)	9.6			—		0.7		74.5		1.3			111.0			112.3
Italy																						1,293.3		(972.5		)	(227.0		)	—		—		0.2		—			94.0			94.0
Hong Kong																						35.7		(16.5		)	0.1			—		0.2		—		46.3			19.5			65.8
Japan	91.7		(80.4		)	(7.9		)	—		20.8		—		126.3		24.2			150.5		299.1		(279.0		)	10.3			—		23.5		—		11.3			53.9			65.2
Belgium	77.4		(45.4		)	(1.6		)	—		—		—		107.0		30.4			137.4
Canada	117.2		(119.8		)	(48.1		)	—		0.7		152.3		16.2		102.3			118.5
Switzerland	89.3		(31.4		)	6.4			—		26.5		2.4		3.8		93.2			97.0		90.5		(74.2		)	2.1			—		30.6		1.9		4.9			50.9			55.8
Hong Kong	15.5		(14.8		)	3.0			—		0.5		—		79.1		4.2			83.3
Brazil	135.2		(61.3		)	(0.1		)	—		—		—		0.2		73.8			74.0		119.6		(62.8		)	(2.1		)	—		—		—		—			54.7			54.7
Finland	104.1		(36.1		)	—			—		—		—		5.6		68.0			73.6
Singapore	19.8		(4.8		)	3.9			—		0.1		—		24.5		19.0			43.5
Total	$	1,125.9	$	(819.4	)	$	80.2		$	0.1	$	159.6	$	169.3	$	538.3	$	715.7		$	1,254.0	$	3,243.1	$	(2,307.8	)	$	(341.6	)	$	0.1	$	253.9	$	130.9	$	242.7		$	978.6		$	1,221.3

	November 30, 2017																					November 30, 2018
	Issuer Risk								Counterparty Risk								Issuer and Counterparty Risk					Issuer Risk								Counterparty Risk									Issuer and Counterparty Risk
	Fair Value of Long Debt Securities		Fair Value of Short Debt Securities			Net Derivative Notional Exposure			Loans and Lending		Securities and Margin Finance		OTC Derivatives		Cash and Cash Equivalents		Excluding Cash and Cash Equivalents			Including Cash and Cash Equivalents		Fair Value of Long Debt Securities		Fair Value of Short Debt Securities			Net Derivative Notional Exposure			Loans and Lending		Securities and Margin Finance		OTC Derivatives		Cash and Cash Equivalents			Excluding Cash and Cash Equivalents			Including Cash and Cash Equivalents
Finland																						$	279.8	$	(6.7	)	$	—		$	—	$	—	$	—	$	1.0		$	273.1		$	274.1
Japan																						97.7		(92.8		)	8.0			—		11.3		—		136.9			24.2			161.1
Italy																						1,778.1		(1,267.5		)	(354.5		)	—		0.2		0.1		—			156.4			156.4
United Kingdom																						311.6		(168.2		)	(30.3		)	0.3		63.1		18.5		(56.4		)	195.0			138.6
Belgium																						65.4		(39.8		)	2.8			—		—		—		107.3			28.4			135.7
Netherlands																						317.4		(316.1		)	70.4			—		39.5		—		—			111.2			111.2
Germany	$	493.3	$	(396.2	)	$	98.2		$	—	$	78.9	$	2.1	$	181.9	$	276.3		$	458.2	175.4		(384.8		)	129.4			—		89.7		1.3		93.3			11.0			104.3
United Kingdom	634.6		(394.4		)	(72.1		)	0.7		97.8		26.9		45.0		293.5			338.5
Spain	217.9		(181.3		)	7.5			—		—		—		151.6		44.1			195.7
Japan	100.1		(81.3		)	4.1			—		25.8		—		136.3		48.7			185.0
Canada	205.3		(164.7		)	(128.5		)	—		17.3		222.8		7.4		152.2			159.6
Netherlands	315.9		(210.9		)	0.9			—		44.1		2.2		—		152.2			152.2
Switzerland	31.0		(16.9		)	(1.1		)	—		54.3		3.3		4.5		70.6			75.1		100.5		(50.1		)	5.7			—		37.7		2.7		3.8			96.5			100.3
Hong Kong	23.0		(25.1		)	—			—		1.0		—		58.7		(1.1		)	57.6		13.8		(39.7		)	3.5			—		0.5		—		84.9			(21.9		)	63.0
Australia	50.5		(14.0		)	0.3			—		15.0		0.3		4.7		52.1			56.8
Singapore	36.0		(4.2		)	—			—		—		—		24.7		31.8			56.5		21.1		(1.4		)	1.0			—		0.1		—		31.2			20.8			52.0
Total	$	2,107.6	$	(1,489.0	)	$	(90.7	)	$	0.7	$	334.2	$	257.6	$	614.8	$	1,120.4		$	1,735.2	$	3,160.8	$	(2,367.1	)	$	(164.0	)	$	0.3	$	242.1	$	22.6	$	402.0		$	894.7		$	1,296.7

We have net issuer and counterparty risk exposure to Puerto Rico of $35.5 million at August 31, 2019 in connection with our municipal securities market-making activities. The government of Puerto Rico, amid a severe political crisis, is continuing its efforts to restructure its $74.0 billion in debt, with these efforts reaching a critical point, as discussions with creditors progress and federal support is expected. At August 31, 2019, we had no other material exposure to countries where either sovereign or non-sovereign sectors potentially pose potential default risk as the result of liquidity concerns.

Operational Risk

Operational risk refers to the risk of loss resulting from our operations, including, but not limited to, improper or unauthorized execution and processing of transactions, deficiencies in our operating systems, business disruptions and inadequacies or breaches in our internal control processes. Our businesses are highly dependent on our ability to process, on a daily basis, a large number of transactions across numerous and diverse markets in many currencies. In addition, the transactions we process have become increasingly complex. If our financial, accounting or other data processing systems do not operate properly or are disabled or if there are other shortcomings or failures in our internal processes, people or systems, we could suffer an impairment to our liquidity, financial loss, a disruption of our businesses, liability to clients, regulatory intervention or reputational damage.

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These systems may fail to operate properly or become disabled as a result of events that are wholly or partially beyond our control, including a disruption of electrical or communications services or our inability to occupy one or more of our buildings. The inability of our systems to accommodate an increasing volume of transactions could also constrain our ability to expand our businesses.

We also face the risk of operational failure or termination of any of the clearing agents, exchanges, clearing houses or other financial intermediaries we use to facilitate our securities transactions. Any such failure or termination could adversely affect our ability to effect transactions and manage our exposure to risk. In addition, despite the contingency plans we have in place, our ability to conduct business may be adversely impacted by a disruption in the infrastructure that supports our businesses and the communities in which they are located. This may include a disruption involving electrical, communications, transportation or other services used by us or third parties with which we conduct business.

Our operations rely on the secure processing, storage and transmission of confidential and other information in our computer systems and networks. Although we take protective measures and endeavor to modify them as circumstances warrant, our computer systems, software and networks may be vulnerable to unauthorized access, computer viruses or other malicious code, and other events that could have a security impact. If one or more of such events occur, this potentially could jeopardize our or our clients’ or counterparties’ confidential and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our, our clients’, our counterparties’ or third parties’ operations. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us.

Our Operational Risk framework includes governance, collection of operational risk incidents, proactive operational risk management, and periodic review and analysis of business metrics to identify and recommend controls and process-related enhancements.

Each revenue producing and support department is responsible for the management and reporting of operational risks and the implementation of the Operational Risk policy and processes within the department. Operational Risk policy, framework, infrastructure, methodology, processes, guidance and oversight of the operational risk processes are centralized and consistent firm wide and also subject to regional operational risk governance.

Model Risk

Model risk refers to the risk of losses resulting from decisions that are based on the output of models, due to errors or weaknesses in the design and development, implementation, or improper use of models. We use quantitative models primarily to value certain financial assets and liabilities and to monitor and manage our risk. Model risk is a function of the model materiality, frequency of use, complexity and uncertainty around inputs and assumptions used in a given model. Robust model risk management is a core part of our risk management approach and is overseen through our risk governance structure and risk management controls.

Legal and Compliance Risk

Legal and compliance risk includes the risk of noncompliance with applicable legal and regulatory requirements. We are subject to extensive regulation in the different jurisdictions in which we conduct our business. We have various procedures addressing issues such as regulatory capital requirements, sales and trading practices, use of and safekeeping of customer funds, credit granting, collection activities, anti-money laundering and record keeping. These risks also reflect the potential impact that changes in local and international laws and tax statutes have on the economics and viability of current or future transactions. In an effort to mitigate these risks, we continuously review new and pending regulations and legislation and participate in various industry interest groups. We also maintain an anonymous hotline for employees or others to report suspected inappropriate actions by us or by our employees or agents.

New Business Risk

New business risk refers to the risks of entering into a new line of business or offering a new product. By entering a new line of business or offering a new product, we may face risks that we are unaccustomed to dealing with and may increase the magnitude of the risks we currently face. The New Business Committee reviews proposals for new businesses and new products to determine if we are prepared to handle the additional or increased risks associated with entering into such activities.

Reputational Risk

We recognize that maintaining our reputation among clients, investors, regulators and the general public is an important aspect of minimizing legal and operational risks. Maintaining our reputation depends on a large number of factors, including the selection of our clients and the conduct of our business activities. We seek to maintain our reputation by screening potential clients and by conducting our business activities in accordance with high ethical standards. Our reputation and business activity can be affected by statements and actions of third parties, even false or misleading statements by them. We actively monitor public comment concerning us and are vigilant in seeking to assure accurate information and perception prevails.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Quantitative and qualitative disclosures about market risk are set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Risk Management” in Part I, Item 2 of this Form 10-Q.

Item 4. Controls and Procedures.

Our Management, under the direction of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

No change in our internal control over financial reporting occurred during the quarter ended August 31, ~~2018~~2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Many aspects of our business involve substantial risks of legal and regulatory liability. In the normal course of business, we have been named as defendants or co-defendants in lawsuits involving primarily claims for damages. We are also involved in a number of judicial and regulatory matters, including exams, investigations and similar reviews, arising out of the conduct of our business. Based on currently available information, we do not believe that any matter will have a material adverse effect on our consolidated financial statements.

Item 1A. Risk Factors

Information regarding our risk factors appears in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended November 30, ~~2017~~2018 filed with the SEC on January ~~26, 2018.~~29, 2019. These risk factors describe some of the assumptions, risks, uncertainties and other factors that could adversely affect our business or that could otherwise result in changes that differ materially from our expectations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 6. Exhibits



Exhibit No.	Description
3.1	Certificate of Formation of Jefferies Group LLC effective as of March 1, 2013 is incorporated herein by reference to Exhibit 3.2 of Registrant’s Form 8-K filed on March 1, 2013.
3.2	Certificate of Conversion of Jefferies Group LLC effective as of March 1, 2013 is incorporated herein by reference to Exhibit 3.1 of Registrant’s Form 8-K filed on March 1, 2013.
3.3	Limited Liability Company Agreement of Jefferies Group LLC dated as of March 1, 2013 (with Schedule A supplemented effective May 23, 2018) is incorporated herein by reference to Exhibit 3.3 of Registrant’s Form 10-K filed on January 29, 2019.
4	Instruments defining the rights of holders of long-term debt securities of the Registrant and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. Registrant hereby agrees to furnish copies of these instruments to the Commission upon request.
12*	~~Computation of Ratio of Earnings to Fixed Charges and to Combined Fixed Charges and Preferred Stock Dividends.~~
31.1*	Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer.
31.2*	Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer.
32*	Rule 13a-14(b)/15d-14(b) and Section 1350 of Title 18 U.S.C. Certification by the Chief Executive Officer and Chief Financial Officer.
101*	Interactive data files pursuant to Rule 405 of Regulation ~~S-T:~~S-T, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Statements of Financial Condition as of August 31, ~~2018~~2019 and November 30, ~~2017;~~2018; (ii) the Consolidated Statements of Earnings for the three and nine months ended August 31, ~~2018~~2019 and ~~2017;~~2018; (iii) the Consolidated Statements of Comprehensive Income for the three and nine months ended August 31, ~~2018~~2019 and ~~2017;~~2018; (iv) the Consolidated Statements of Changes in Equity for the three and nine months ended August 31, ~~2018~~2019 and ~~the year ended November 30, 2017;~~2018; (v) the Consolidated Statements of Cash Flows for the nine months ended August 31, ~~2018~~2019 and ~~2017;~~2018 and (vi) the Notes to Consolidated Financial Statements.
104	Cover page interactive data file pursuant to Rule 406 of Regulation S-T, formatted in iXBRL (included in Exhibit 101)


*	Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			JEFFERIES GROUP LLC (Registrant)

Date:	October ~~9, 2018~~8, 2019	By:	/s/ Peregrine C. Broadbent
			Peregrine C. Broadbent Chief Financial Officer (duly authorized officer)

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PART I. FINANCIAL INFORMATION
	Page
Item 1. Financial Statements	2
Consolidated Statements of Financial Condition (Unaudited)	2
Consolidated Statements of Earnings (Unaudited)	3
Consolidated Statements of Comprehensive Income (Unaudited)	4
Consolidated Statements of Changes in Equity (Unaudited)	5
Consolidated Statements of Cash Flows (Unaudited)	6
Notes to Consolidated Financial Statements (Unaudited)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	6259
Item 3. Quantitative and Qualitative Disclosures About Market Risk	9491
Item 4. Controls and Procedures	9491

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	9592
Item 1A. Risk Factors	9592
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	9592
Item 6. Exhibits	9592



	Nine Months Ended August 31, 2018			Year Ended November 30, 2017
Member’s paid-in capital:
Balance, beginning of period	$	5,895,601		$	5,538,103
Cumulative effect of the adoption of the new revenue standard, net of tax	(6,121		)	—
Net earnings attributable to Jefferies Group LLC	97,368			357,498
Distribution to Jefferies Financial Group Inc.	(248,684		)	—
Tax Cuts and Jobs Act adjustment	7,555			—
Balance, end of period	$	5,745,719		$	5,895,601
Accumulated other comprehensive income (loss), net of tax (1) (2):
Balance, beginning of period	$	(136,779	)	$	(168,157	)
Currency adjustments (3)	(75,717		)	53,396
Changes in instrument specific credit risk (4)	8,971			(21,394		)
Cash flow hedges (5)	1,382			(936		)
Pension adjustments (6)	4,498			312
Balance, end of period	$	(197,645	)	$	(136,779	)
Total Jefferies Group LLC member’s equity	$	5,548,074		$	5,758,822
Noncontrolling interests:
Balance, beginning of period	$	737		$	651
Net earnings (loss) attributable to noncontrolling interests	(1		)	86
Contributions	10			—
Consolidation of asset management entity	8,316			—
Balance, end of period	$	9,062		$	737
Total equity	$	5,557,136		$	5,759,559



	Three Months Ended August 31, 2018						Nine Months Ended August 31, 2018
	As Reported		ASC 606 Impact		Adjusted (1)		As Reported		ASC 606 Impact		Adjusted (1)
Revenues:
Investment banking	$	465,326	$	36,319	$	429,007	$	1,405,614	$	101,146	$	1,304,468
Total revenues	1,088,285		36,319		1,051,966		3,331,689		101,146		3,230,543
Net revenues	777,615		36,319		741,296		2,421,418		101,146		2,320,272
Non-interest expenses:
Underwriting costs	20,528		20,528		—		47,832		47,832		—
Technology and communications	76,877		97		76,780		222,335		311		222,024
Business development	39,733		14,946		24,787		124,233		50,187		74,046
Professional services	35,316		401		34,915		101,715		1,968		99,747
Other expenses	18,723		347		18,376		54,888		848		54,040
Total non-compensation expenses	262,481		36,319		226,162		761,954		101,146		660,808
Total non-interest expenses	690,514		36,319		654,195		2,089,714		101,146		1,988,568



	Three Months Ended August 31, 2017
	Balance at May 31, 2017		Total gains/losses (realized and unrealized) (1)			Purchases			Sales			Settlements			Issuances		Net transfers into/ (out of) Level 3			Balance at August 31, 2017		Change in unrealized gains/ (losses) relating to instruments still held at August 31, 2017 (1)
Assets:
Financial instruments owned:
Corporate equity securities	$	20,548	$	4,344		$	4		$	(645	)	$	(55	)	$	—	$	(2,022	)	$	22,174	$	4,319
Corporate debt securities	24,727		(2,350		)	5,901			(5,551		)	(31		)	—		2,319			25,015		(2,224		)
CDOs and CLOs	27,255		(6,119		)	52,918			(36,564		)	245			—		468			38,203		(3,552		)
RMBS	33,032		(263		)	494			(732		)	(291		)	—		(11,591		)	20,649		188
CMBS	16,263		(125		)	—			(676		)	(637		)	—		2,811			17,636		(161		)
Other ABS	43,349		(6,454		)	5,798			(3,789		)	(2,924		)	—		32,966			68,946		(3,570		)
Loans and other receivables	49,365		15,261			9,265			(5,854		)	(8,249		)	—		2,868			62,656		14,005
Investments at fair value	89,006		1,703			—			—			(292		)	—		—			90,417		1,703
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	354	$	107		$	(369	)	$	27		$	—		$	—	$	—		$	119	$	(92	)
Corporate debt securities	522		—			—			—			—			—		—			522		—
CMBS	70		(35		)	—			—			—			—		—			35		(35		)
Loans	4,967		(3,071		)	—			333			—			—		1,056			3,285		3,018
Net derivatives (2)	3,022		(2,980		)	—			—			5,040			—		—			5,082		(2,474		)



	Nine Months Ended August 31, 2017
	Balance at November 30, 2016		Total gains/losses (realized and unrealized) (1)			Purchases			Sales			Settlements			Issuances		Net transfers into/ (out of) Level 3			Balance at August 31, 2017		Change in unrealized gains/ (losses) relating to instruments still held at August 31, 2017 (1)
Assets:
Financial instruments owned:
Corporate equity securities	$	21,739	$	3,416		$	945		$	(1,502	)	$	(356	)	$	—	$	(2,068	)	$	22,174	$	2,689
Corporate debt securities	25,005		(3,280		)	19,610			(18,364		)	(1,724		)	—		3,768			25,015		(3,424		)
CDOs and CLOs	54,354		(13,902		)	65,523			(72,122		)	239			—		4,111			38,203		(3,685		)
Municipal securities	27,257		(1,547		)	—			(25,710		)	—			—		—			—		—
RMBS	38,772		(1,446		)	113,391			(125,731		)	(572		)	—		(3,765		)	20,649		(2,005		)
CMBS	20,580		(1,180		)	2,033			(5,199		)	(985		)	—		2,387			17,636		(952		)
Other ABS	40,911		(15,338		)	67,611			(4,121		)	(16,891		)	—		(3,226		)	68,946		(8,872		)
Loans and other receivables	81,872		27,709			84,342			(83,791		)	(23,241		)	—		(24,235		)	62,656		16,294
Investments at fair value	96,369		4,698			300			(10,119		)	(831		)	—		—			90,417		6,721
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	313	$	134		$	(355	)	$	27		$	—		$	—	$	—		$	119	$	(92	)
Corporate debt securities	523		(1		)	—			—			—			—		—			522		1
CMBS	—		35			—			—			—			—		—			35		(35		)
Loans	378		1,604			(364		)	333			—			—		1,334			3,285		(1,583		)
Net derivatives (2)	3,441		(2,854		)	—			—			5,162			404		(1,071		)	5,082		(2,333		)
Other secured financings	418		(418		)	—			—			—			—		—			—		—



	August 31, 2018		November 30, 2017
Our investment in Epic Gas (1)	$	21.2	$	22.2



	Three Months Ended
	June 30, 2018 (2)			March 31, 2018 (2)			December 31, 2017 (2)			June 30, 2017 (2)			March 31, 2017 (2)			December 31, 2016 (2)
Net losses	$	(2.3	)	$	(2.7	)	$	(16.4	)	$	(5.4	)	$	(3.4	)	$	(15.9	)



Remainder of fiscal 2018	$	3,049
Year ending November 30, 2019	12,198
Year ending November 30, 2020	12,198
Year ending November 30, 2021	12,198
Year ending November 30, 2022	12,198



	August 31, 2018		November 30, 2017
Bank loans (1)	$	324,021	$	304,651
Floating rate puttable notes	57,985		108,240
Equity-linked notes	—		23,324
Total short-term borrowings	$	382,006	$	436,215



	August 31, 2018		November 30, 2017
Total Assets by Reportable Business Segment:
Capital Markets	$	39,532.2	$	38,620.4
Asset Management	1,040.3		1,085.3
Total assets	$	40,572.5	$	39,705.7



	August 31, 2018		November 30, 2017
Payables-brokers, dealers and clearing organizations	$	12.3	$	17.0



Date	Amount (in millions) (1)
February 2017	$	25.6
April 2017	21.9
August 2017	7.1