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

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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, ~~2019~~2020



☐	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	10022
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (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 every Interactive Data File required to be submitted 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 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.

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, ~~2019~~2020

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, 2019			November 30, 2018			August 31, 2020			November 30, 2019
ASSETS
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 cash equivalents (includes $629 and $1,154 at August 31, 2020 and November 30, 2019, respectively, related to consolidated VIEs)							$	6,749,706		$	5,567,903
Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations	658,335			707,960			986,117			796,797
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
Financial instruments owned, at fair value (includes securities pledged of $12,793,080 and $12,058,522 at August 31, 2020 and November 30, 2019, respectively; and $3,573 and $339 at August 31, 2020 and November 30, 2019, respectively, related to consolidated VIEs)							17,555,720			16,363,374
Loans to and investments in related parties	943,174			997,524			892,987			944,509
Securities borrowed	7,895,149			6,538,212			7,268,413			7,624,642
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
Securities purchased under agreements to resell (includes $0 and $25,000 at fair value at August 31, 2020 and November 30, 2019, respectively)							5,327,391			4,299,598
Securities received as collateral, at fair value							4,413			9,500
Receivables:
Brokers, dealers and clearing organizations	2,927,789			3,218,984
Brokers, dealers and clearing organizations ($13,502 and $0 at August 31, 2020 and November 30, 2019, respectively, related to consolidated VIEs)							2,748,993			3,007,949
Customers	1,686,214			2,017,090			956,821			1,490,876
Fees, interest and other	350,663			327,083			350,261			323,067
Premises and equipment	323,510			304,026			863,522			350,433
Goodwill	1,638,574			1,642,170			1,644,044			1,643,599
Other assets ($2 at both August 31, 2019 and November 30, 2018, related to consolidated VIEs)	1,133,783			1,084,554
Other assets ($150 and $0 at August 31, 2020 and November 30, 2019, respectively, related to consolidated VIEs)							1,312,060			1,093,868
Total assets	$	43,093,588		$	41,168,773		$	46,660,448		$	43,516,115
LIABILITIES AND EQUITY
Short-term borrowings	$	518,914		$	387,492
Financial instruments sold, not yet purchased, at fair value	10,296,315			9,478,944
Short-term borrowings (includes $21,829 and $20,981 at fair value at August 31, 2020 and November 30, 2019, respectively)							$	805,381		$	548,490
Financial instruments sold, not yet purchased, at fair value ($2,094 and $0 at August 31, 2020 and November 30, 2019, respectively, related to consolidated VIEs)							10,994,445			10,532,460
Collateralized financings:
Securities loaned	2,182,865			1,838,688			1,929,737			1,525,140
Securities sold under agreements to repurchase	8,236,981			8,643,069			7,258,972			7,504,670
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
Other secured financings (includes $3,402 at fair value at August 31, 2020; and $2,788,316 and $2,465,800 at August 31, 2020 and November 30, 2019, respectively, related to consolidated VIEs)							2,791,718			2,467,819
Obligation to return securities received as collateral, at fair value							4,413			9,500
Payables:
Brokers, dealers and clearing organizations	2,253,033			2,448,059			2,546,494			2,555,178
Customers	3,599,564			3,176,727			3,936,811			3,808,609
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
Lease liabilities							573,563			—
Accrued expenses and other liabilities (includes $1,493 and $1,546 at August 31, 2020 and November 30, 2019, respectively, related to consolidated VIEs)							2,326,026			1,431,144
Long-term debt (includes $1,522,105 and $1,215,285 at fair value at August 31, 2020 and November 30, 2019, respectively)							6,988,434			7,003,358
Total liabilities	36,904,058			34,986,369			40,155,994			37,386,368
EQUITY
Member’s paid-in capital	6,387,097			6,376,662			6,615,771			6,329,677
Accumulated other comprehensive income (loss):
Currency translation adjustments	(220,080		)	(185,804		)	(142,080		)	(179,378		)
Changes in instrument specific credit risk	20,805			(5,728		)	19,586			(18,889		)
Cash flow hedges	—			470
Additional minimum pension liability	(4,693		)	(4,761		)	(5,939		)	(6,079		)
Available-for-sale securities	231			(346		)	552			141
Total accumulated other comprehensive loss	(203,737		)	(196,169		)	(127,881		)	(204,205		)
Total Jefferies Group LLC member’s equity	6,183,360			6,180,493			6,487,890			6,125,472
Noncontrolling interests	6,170			1,911			16,564			4,275
Total equity	6,189,530			6,182,404			6,504,454			6,129,747
Total liabilities and equity	$	43,093,588		$	41,168,773		$	46,660,448		$	43,516,115

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,
	2019			2018			2019		2018			2020			2019			2020			2019
Revenues:
Commissions and other fees	$	171,003		$	162,700		$	493,843	$	482,194		$	204,313		$	171,003		$	627,115		$	493,843
Principal transactions	148,873			143,308			632,002		498,583			560,665			148,873			1,399,850			632,002
Investment banking	412,533			465,326			1,128,216		1,405,614			615,837			412,533			1,595,330			1,128,216
Asset management fees	3,340			5,184			14,559		16,130
Asset management fees and revenues												6,772			4,220			23,068			16,350
Interest	383,596			305,347			1,163,022		870,490			195,960			383,596			702,569			1,163,022
Other	22,286			6,420			79,354		58,678			11,526			21,406			(6,020		)	77,563
Total revenues	1,141,631			1,088,285			3,510,996		3,331,689			1,595,073			1,141,631			4,341,912			3,510,996
Interest expense	364,472			310,670			1,146,268		910,271			211,629			364,472			753,405			1,146,268
Net revenues	777,159			777,615			2,364,728		2,421,418			1,383,444			777,159			3,588,507			2,364,728
Non-interest expenses:
Compensation and benefits	411,936			428,033			1,261,506		1,327,760			725,555			411,936			1,932,332			1,261,506
Non-compensation expenses:
Floor brokerage and clearing fees	54,247			45,745			168,698		135,808			66,744			54,247			204,943			168,698
Technology and communications	86,649			76,877			247,464		222,335			102,635			86,649			287,413			247,464
Occupancy and equipment rental	29,300			25,559			87,587		75,143			27,053			29,300			78,951			87,587
Business development	36,526			39,733			103,430		124,233			7,637			36,526			45,953			103,430
Professional services	42,379			35,316			117,372		101,715			41,173			42,379			127,832			117,372
Underwriting costs	14,647			20,528			36,045		47,832			29,071			14,647			59,085			36,045
Other	18,400			18,723			41,828		54,888			20,175			18,400			80,351			41,828
Total non-compensation expenses	282,148			262,481			802,424		761,954			294,488			282,148			884,528			802,424
Total non-interest expenses	694,084			690,514			2,063,930		2,089,714			1,020,043			694,084			2,816,860			2,063,930
Earnings before income taxes	83,075			87,101			300,798		331,704			363,401			83,075			771,647			300,798
Income tax expense	18,250			26,923			79,789		234,337			95,870			18,250			203,855			79,789
Net earnings	64,825			60,178			221,009		97,367			267,531			64,825			567,792			221,009
Net earnings (loss) attributable to noncontrolling interests	(143		)	(4		)	140		(1		)	(531		)	(143		)	(4,397		)	140
Net earnings attributable to Jefferies Group LLC	$	64,968		$	60,182		$	220,869	$	97,368		$	268,062		$	64,968		$	572,189		$	220,869

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,
	2019			2018			2019			2018			2020			2019			2020			2019
Net earnings	$	64,825		$	60,178		$	221,009		$	97,367		$	267,531		$	64,825		$	567,792		$	221,009
Other comprehensive income (loss), net of tax:
Currency translation adjustments and other (1)	(28,023		)	(26,050		)	(34,208		)	(71,219		)	74,960			(28,023		)	37,438			(34,208		)
Changes in instrument specific credit risk (2)	5,889			1,067			26,533			8,971			(133,259		)	5,889			38,475			26,533
Cash flow hedges (3)	—			85			(470		)	1,382			0			0			0			(470		)
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		)
Unrealized gain (loss) on available-for-sale securities (4)													(22		)	198			411			577
Total other comprehensive income (loss), net of tax (5)													(58,321		)	(21,936		)	76,324			(7,568		)
Comprehensive income	42,889			35,280			213,441			36,501			209,210			42,889			644,116			213,441
Net earnings (loss) attributable to noncontrolling interests	(143		)	(4		)	140			(1		)	(531		)	(143		)	(4,397		)	140
Comprehensive income attributable to Jefferies Group LLC	$	43,032		$	35,284		$	213,301		$	36,502		$	209,741		$	43,032		$	648,513		$	213,301

(1)

The amounts include income tax expenses of approximately $(25.6) million and $(13.7) million during the three and nine months ended August 31, 2020, respectively, and income tax benefits of $8.9 million and $10.6 million 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, 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 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.respectively.

(2)

The amounts include income tax benefits (expenses) of approximately $45.5 million and $(13.1) million during the three and nine months ended August 31, 2020, respectively, and 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~~respectively. The amounts during the three and nine months ended August 31, ~~2018, respectively.~~2020 also include net gains (losses) of $0.6 million and $(0.9) million, respectively, net of income tax (expenses) benefits of $(0.2) million and $0.3 million, respectively, related to changes in instrument specific risk, which were reclassified to Principal transactions revenues in our Consolidated Statements of Earnings. The amount during the nine months ended August 31, 2019 also includes ~~gains~~a net gain 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~~in our Consolidated Statements of Earnings. The amounts during the three and nine months ended August 31, 2018 also include gains of $0.1 million and $0.4 million, net of taxes of $0.1 million, respectively, related to changes in instrument specific risk, which was reclassified to Principal 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~~Cash flow hedge ~~loss~~losses of $0.5 million ~~during the nine months ended August 31, 2019 was~~were 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.Earnings.


(4)	The ~~amount~~amounts include income tax expenses of $0.2 million during the nine months ended August 31, ~~2019 includes~~2020, and income tax expense of ~~approximately~~ $0.2 ~~million.~~million during the nine months ended August 31, 2019.


(5)	None of the components of other comprehensive ~~loss~~income (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,						Three Months Ended August 31,						Nine Months Ended August 31,
	2019			2018			2019			2018			2020			2019			2020			2019
Member’s paid-in capital:
Balance, beginning of period	$	6,354,613		$	5,715,628		$	6,376,662		$	5,895,601		$	6,481,740		$	6,354,613		$	6,329,677		$	6,376,662
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			268,062			64,968			572,189			220,869
Distributions to Jefferies Financial Group Inc.	(32,484		)	(30,091		)	(210,434		)	(248,684		)	(134,031		)	(32,484		)	(286,095		)	(210,434		)
Tax Cuts and Jobs Act adjustment	—			—			—			7,555
Balance, end of period	$	6,387,097		$	5,745,719		$	6,387,097		$	5,745,719		$	6,615,771		$	6,387,097		$	6,615,771		$	6,387,097
Accumulated other comprehensive income (loss), net of tax:
Balance, beginning of period	$	(181,801	)	$	(172,747	)	$	(196,169	)	$	(136,779	)	$	(69,560	)	$	(181,801	)	$	(204,205	)	$	(196,169	)
Currency translation adjustments and other	(28,023		)	(26,050		)	(34,208		)	(71,219		)	74,960			(28,023		)	37,438			(34,208		)
Changes in instrument specific credit risk	5,889			1,067			26,533			8,971			(133,259		)	5,889			38,475			26,533
Cash flow hedges	—			85			(470		)	1,382			0			0			0			(470		)
Unrealized gain on available-for-sale securities	198			—			577			—
Unrealized gain (loss) on available-for-sale securities													(22		)	198			411			577
Balance, end of period	$	(203,737	)	$	(197,645	)	$	(203,737	)	$	(197,645	)	$	(127,881	)	$	(203,737	)	$	(127,881	)	$	(203,737	)
Total Jefferies Group LLC member’s equity	$	6,183,360		$	5,548,074		$	6,183,360		$	5,548,074		$	6,487,890		$	6,183,360		$	6,487,890		$	6,183,360
Noncontrolling interests:
Balance, beginning of period	$	6,313		$	750		$	1,911		$	737		$	17,598		$	6,313		$	4,275		$	1,911
Net earnings (loss) attributable to noncontrolling interests	(143		)	(4		)	140			(1		)	(531		)	(143		)	(4,397		)	140
Contributions	—			—			6,600			10			1,000			0			18,405			6,600
Distributions	—			—			(2,481		)	—			(1,503		)	0			(1,719		)	(2,481		)
Consolidation of asset management entity	—			8,316			—			8,316
Balance, end of period	$	6,170		$	9,062		$	6,170		$	9,062		$	16,564		$	6,170		$	16,564		$	6,170
Total equity	$	6,189,530		$	5,557,136		$	6,189,530		$	5,557,136		$	6,504,454		$	6,189,530		$	6,504,454		$	6,189,530

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,
	2019			2018			2020			2019
Cash flows from operating activities:
Net earnings	$	221,009		$	97,367		$	567,792		$	221,009
Adjustments to reconcile net earnings to net cash used in operating activities:
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization	24,626			10,208			49,450			24,626
Income on loans to and investments in related parties	(71,615		)	(30,687		)
Goodwill impairment							3,000			0
(Income) loss on loans to and investments in related parties							25,524			(71,615		)
Distributions received on investments in related parties	126,504			2,330			35,949			126,504
Other adjustments	81,362			(96,359		)	218,431			81,362
Net change in assets and liabilities:
Securities deposited with clearing and depository organizations	(153		)	64,890			(20,955		)	(153		)
Receivables:
Brokers, dealers and clearing organizations	268,337			(27,967		)	265,354			268,337
Customers	330,869			(388,076		)	534,057			330,869
Fees, interest and other	(27,007		)	64,563			(25,628		)	(27,007		)
Securities borrowed	(1,410,295		)	309,722			382,907			(1,410,295		)
Financial instruments owned	(102,577		)	(1,115,411		)	(1,115,993		)	(102,577		)
Securities purchased under agreements to resell	(1,772,192		)	(53,020		)	(979,989		)	(1,772,192		)
Other assets	(74,840		)	117,440			(235,829		)	(74,840		)
Payables:
Brokers, dealers and clearing organizations	(169,021		)	(260,193		)	(16,565		)	(169,021		)
Customers	422,840			523,611			128,167			422,840
Securities loaned	387,016			(275,629		)	387,692			387,016
Financial instruments sold, not yet purchased	921,282			52,196			366,626			921,282
Securities sold under agreements to repurchase	(346,031		)	1,250,575			(260,144		)	(346,031		)
Accrued expenses and other liabilities	(323,548		)	(392,471		)	835,964			(323,548		)
Net cash used in operating activities	(1,513,434		)	(146,911		)
Net cash provided by (used in) operating activities							1,145,810			(1,513,434		)
Cash flows from investing activities:
Contributions to loans to and investments in related parties	(26,849		)	(1,918,500		)	(1,338,499		)	(26,849		)
Distributions from loans to and investments in related parties	24,629			1,873,000
Capital distributions from investments and repayments of loans from related parties							1,328,392			24,629
Net payments on premises and equipment	(71,392		)	(52,699		)	(82,651		)	(71,392		)
Consolidation of asset management entity	—			130
Net cash used in investing activities	(73,612		)	(98,069		)	(92,758		)	(73,612		)

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,
	2019			2018			2020			2019
Cash flows from financing activities:
Proceeds from short-term borrowings	1,418,000			616,283			1,563,800			1,418,000
Payments on short-term borrowings	(1,221,000		)	(669,466		)	(1,269,851		)	(1,221,000		)
Proceeds from issuance of long-term debt, net of issuance costs	908,332			1,321,714			521,170			908,332
Repayment of long-term debt	(756,614		)	(1,025,563		)	(675,909		)	(756,614		)
Distributions to Jefferies Financial Group Inc.	(208,647		)	(218,593		)	(164,644		)	(208,647		)
Net proceeds from other secured financings	939,953			282,714			323,899			939,953
Net change in bank overdrafts	(9,028		)	2,369			(37,758		)	(9,028		)
Proceeds from contributions of noncontrolling interests	6,600			10			18,405			6,600
Payments on distributions to noncontrolling interests	(2,481		)	—			(1,719		)	(2,481		)
Net cash provided by financing activities	1,075,115			309,468			277,393			1,075,115
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(18,243		)	(16,084		)	19,723			(18,243		)
Net increase (decrease) in cash, cash equivalents and restricted cash	(530,174		)	48,404			1,350,168			(530,174		)
Cash, cash equivalents and restricted cash at beginning of period	5,819,027			5,642,776			6,329,712			5,819,027
Cash, cash equivalents and restricted cash at end of period	$	5,288,853		$	5,691,180		$	7,679,880		$	5,288,853

Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest	$	1,205,380		$	1,001,307		$	834,180		$	1,205,380
Income taxes, net	72,925			152,600			56,906			72,925

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


	August 31, 2019		November 30, 2018		August 31, 2020		November 30, 2019
Cash and cash equivalents	$	4,665,490	$	5,145,886	$	6,749,706	$	5,567,903
Cash and securities segregated and on deposit for regulatory purposes with clearing and depository organizations	623,363		673,141		930,174		761,809
Total cash, cash equivalents and restricted cash	$	5,288,853	$	5,819,027	$	7,679,880	$	6,329,712

See accompanying notes to consolidated financial statements.

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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	10
Note 4. Fair Value Disclosures	12
Note 5. Derivative Financial Instruments	29
Note 6. Collateralized Transactions	3435
Note 7. Securitization Activities	3738
Note 8. Variable Interest Entities	3840
Note 9. Investments	4143
Note 10. Goodwill and Intangible Assets	4446
Note 11. Short-Term Borrowings	4648
Note 12. Long-Term Debt	4749
Note 13. ~~Revenues from Contracts with Customers~~Leases	4850
Note 14. ~~Compensation Plans~~	51
~~Note 15. Income Taxes~~Revenues from Contracts with Customers	52
Note ~~16. Commitments, Contingencies and Guarantees~~	53
~~Note 17. Net Capital Requirements~~	54
~~Note 18. Segment Reporting~~15. Compensation Plans	55
Note 16. Income Taxes	56
Note 17. Commitments, Contingencies and Guarantees	57
Note 18. Net Capital Requirements	59
Note 19. Segment Reporting	59
Note 20. Related Party Transactions	5661

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(Unaudited)

Note 1. Organization and Basis of Presentation

Organization

Jefferies Group LLC is the largest independent U.S.-headquartered global full service, integrated ~~securities~~investment banking and ~~investment banking~~securities 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”). Jefferies does not guarantee any of our outstanding debt securities. 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 these transfers, related deferred tax liabilities of approximately $50.9 million were transferred to us, for which Jefferies has indemnified us.

We operate in 2 reportable business ~~segments,~~segments: (1) Investment Banking and Capital Markets and (2) Asset Management. For further information on our reportable business segments, refer to Note ~~18,~~19, 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, ~~2018.~~2019. Certain footnote disclosures included in our Annual Report on Form 10-K for the year ended November 30, ~~2018~~2019 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~~our 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 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 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.

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(Unaudited)

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, ~~2018.~~2019.

During the nine months ended August 31, 2020, 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. 2016-02, Leases (the “new lease standard”) on December 1, 2019. These lease policy updates are applied using a modified retrospective approach. 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.

For leases with an original term longer than one year, lease liabilities are initially recognized on the lease commencement date based on the present value of the future minimum lease payments over the lease term, including non-lease components such as fixed common area maintenance costs and other fixed costs for generally all leases. A corresponding right-of-use (“ROU”) asset is initially recognized equal to the lease liability adjusted for any lease prepayments, initial direct costs and lease incentives. The ROU assets are included in Premises and equipment and the lease liabilities are included in Lease liabilities in our Consolidated Statement of Financial Condition.

The discount rates used in determining the present value of leases represent our collateralized borrowing rate considering each lease’s term and currency of payment. The lease term includes options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Certain leases have renewal options that can be exercised at the discretion of the Company. Lease expense is generally recognized on a straight-line basis over the lease term and included in Occupancy and equipment rental expense in our Consolidated Statement of Earnings.

Refer to Note 3, Accounting Developments, and Note 13, Leases, for further information.

Note 3. Accounting Developments

Accounting Standards to be Adopted in Future Periods

Reference Rate Reform. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance provides optional exceptions for applying U.S. GAAP to contracts, hedge accounting relationships or other transactions affected by reference rate reform. The optional exceptions can be elected through December 31, 2022. We are currently evaluating the impact of applying the optional exceptions on our consolidated financial statements.

Income Taxes. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The objective of the guidance is to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and to provide more consistent application to improve the comparability of financial statements. The guidance is effective in the first quarter of fiscal 2022. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

Consolidation. In October 2018, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued ~~Accounting Standards Update (“ASU”)~~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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

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.

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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~~(Unaudited)~~

Adopted Accounting Standards

~~Leases.~~ Leases. We adopted the new lease standard on December 1, 2019 using a modified retrospective transition approach. Accordingly, 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. We elected not to reassess whether existing contracts are or contain leases, or the lease classification and initial direct costs of existing leases upon transition. At transition on December 1, 2019, the adoption of this standard resulted in the recognition of operating ROU assets of $519.9 million and operating lease liabilities of $586.3 million reflected in Premises and equipment and Lease liabilities in our Consolidated Statement of Financial Condition, respectively. Finance lease ROU assets and finance lease liabilities were not material and are reflected in Premises and equipment and Lease liabilities in our Consolidated Statement of Financial Condition, respectively.

Derivatives and Hedging.In ~~February 2016,~~August 2017, the FASB issued ASU No. ~~2016-02, Leases (“ASU 2016-02”).~~2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. 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 valueobjective of the ~~remaining rental payments. The population~~guidance is to improve the financial reporting of ~~contracts that will be subject~~hedging relationships to ~~recognition on our Consolidated Statements~~better portray the economic results of ~~Financial Condition has been identified; however,~~an entity’s risk management activities in its financial statements. We adopted 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~~and the adoption did not have a ~~cumulative-effect adjustment to opening member’s equity in the period of adoption. We are currently evaluating the~~material impact ~~of the new guidance~~ on our consolidated financial statements.

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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 ~~$573.5~~$920.3 million and ~~$322.9~~$570.3 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, respectively, by level within the fair value hierarchy (in thousands):


	August 31, 2019											August 31, 2020
	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	$	2,388,213	$	162,382	$	50,600	$	—		$	2,601,195	$	2,446,810	$	63,256	$	77,830	$	—		$	2,587,896
Corporate debt securities	—		2,892,471		9,288		—			2,901,759		0		2,720,581		23,269		—			2,743,850
Collateralized debt obligations and collateralized loan obligations	—		114,045		21,135		—			135,180		0		68,287		27,936		—			96,223
U.S. government and federal agency securities	2,115,452		204,076		—		—			2,319,528		3,164,472		92,036		0		—			3,256,508
Municipal securities	—		706,375		—		—			706,375		0		358,292		0		—			358,292
Sovereign obligations	1,521,540		1,088,927		—		—			2,610,467		1,686,522		877,334		0		—			2,563,856
Residential mortgage-backed securities	—		1,405,246		17,929		—			1,423,175		0		975,166		28,317		—			1,003,483
Commercial mortgage-backed securities	—		373,319		5,462		—			378,781		0		1,091,406		4,663		—			1,096,069
Other asset-backed securities	—		490,055		34,598		—			524,653		0		48,734		63,337		—			112,071
Loans and other receivables	—		1,460,982		75,563		—			1,536,545		0		2,112,437		105,434		—			2,217,871
Derivatives	9,258		2,954,937		16,024		(2,494,475		)	485,744		2,897		2,060,960		52,195		(1,611,815		)	504,237
Investments at fair value	—		41,548		132,505		—			174,053		0		45,156		49,881		—			95,037
Total financial instruments owned, excluding Investments at fair value based on NAV	$	6,034,463	$	11,894,363	$	363,104	$	(2,494,475	)	$	15,797,455	$	7,300,701	$	10,513,645	$	432,862	$	(1,611,815	)	$	16,635,393
Securities purchased under agreements to resell	$	—	$	—	$	25,000	$	—		$	25,000
Securities received as collateral												$	4,413	$	0	$	0	$	—		$	4,413

Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	2,750,131	$	7,097	$	211	$	—		$	2,757,439	$	2,295,391	$	12,533	$	4,367	$	—		$	2,312,291
Corporate debt securities	—		1,803,666		1,202		—			1,804,868		0		1,448,558		148		—			1,448,706
U.S. government and federal agency securities	1,922,145		—		—		—			1,922,145		2,722,907		0		0		—			2,722,907
Sovereign obligations	1,281,332		853,882		—		—			2,135,214		1,452,399		1,096,176		0		—			2,548,575
Commercial mortgage-backed securities	—		—		35		—			35		0		0		35		—			35
Loans	—		1,097,178		16,630		—			1,113,808		0		1,432,113		46,594		—			1,478,707
Derivatives	7,327		3,087,898		66,787		(2,599,206		)	562,806		1,031		2,207,254		74,620		(1,799,681		)	483,224
Total financial instruments sold, not yet purchased	$	5,960,935	$	6,849,721	$	84,865	$	(2,599,206	)	$	10,296,315	$	6,471,728	$	6,196,634	$	125,764	$	(1,799,681	)	$	10,994,445
Short-term borrowings												$	0	$	21,829	$	0	$	—		$	21,829
Other secured financings												$	0	$	0	$	3,402	$	—		$	3,402
Obligation to return securities received as collateral												$	4,413	$	0	$	0	$	—		$	4,413
Long-term debt	$	—	$	666,446	$	348,063	$	—		$	1,014,509	$	0	$	891,845	$	630,260	$	—		$	1,522,105


(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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(Unaudited)


	November 30, 2018											November 30, 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	$	1,907,945	$	118,681	$	51,040	$	—		$	2,077,666	$	2,325,116	$	218,403	$	58,301	$	—		$	2,601,820
Corporate debt securities	—		2,683,180		9,484		—			2,692,664		0		2,472,213		7,490		—			2,479,703
Collateralized debt obligations and collateralized loan obligations	—		72,949		25,815		—			98,764		0		124,225		20,081		—			144,306
U.S. government and federal agency securities	1,789,614		56,592		—		—			1,846,206		2,101,624		158,618		0		—			2,260,242
Municipal securities	—		894,253		—		—			894,253		0		742,326		0		—			742,326
Sovereign obligations	1,769,556		1,043,409		—		—			2,812,965		1,330,026		1,405,827		0		—			2,735,853
Residential mortgage-backed securities	—		2,163,629		19,603		—			2,183,232		0		1,069,066		17,740		—			1,086,806
Commercial mortgage-backed securities	—		819,406		10,886		—			830,292		0		424,060		6,110		—			430,170
Other asset-backed securities	—		239,381		53,175		—			292,556		0		303,847		42,563		—			346,410
Loans and other receivables	—		2,056,593		46,985		—			2,103,578		0		2,395,211		64,240		—			2,459,451
Derivatives	12,186		2,524,988		5,922		(2,412,486		)	130,610		2,809		1,812,659		14,889		(1,432,806		)	397,551
Investments at fair value	—		—		113,831		—			113,831		0		32,688		75,738		—			108,426
Total financial instruments owned, excluding Investments at fair value based on NAV	$	5,479,301	$	12,673,061	$	336,741	$	(2,412,486	)	$	16,076,617	$	5,759,575	$	11,159,143	$	307,152	$	(1,432,806	)	$	15,793,064
Securities purchased under agreements to resell												$	0	$	0	$	25,000	$	—		$	25,000
Securities received as collateral												$	9,500	$	0	$	0	$	—		$	9,500

Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	1,685,071	$	1,444	$	—	$	—		$	1,686,515	$	2,755,601	$	7,438	$	4,487	$	—		$	2,767,526
Corporate debt securities	—		1,505,618		522		—			1,506,140		0		1,471,142		340		—			1,471,482
U.S. government and federal agency securities	1,384,295		—		—		—			1,384,295		1,851,981		0		0		—			1,851,981
Sovereign obligations	1,735,242		661,095		—		—			2,396,337		1,363,475		941,065		0		—			2,304,540
Commercial mortgage-backed securities												0		0		35		—			35
Loans	—		1,371,630		6,376		—			1,378,006		0		1,600,228		9,463		—			1,609,691
Derivatives	26,471		3,585,249		27,536		(2,511,605		)	1,127,651		871		2,066,064		92,057		(1,631,787		)	527,205
Total financial instruments sold, not yet purchased	$	4,831,079	$	7,125,036	$	34,434	$	(2,511,605	)	$	9,478,944	$	5,971,928	$	6,085,937	$	106,382	$	(1,631,787	)	$	10,532,460
Short-term borrowings												$	0	$	20,981	$	0	$	—		$	20,981
Obligation to return securities received as collateral												$	9,500	$	0	$	0	$	—		$	9,500
Long-term debt	$	—	$	485,425	$	200,745	$	—		$	686,170	$	0	$	735,216	$	480,069	$	—		$	1,215,285


(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.

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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~~can be 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

•

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 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.

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 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.~~structures. 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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•

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. 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. Where available, 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 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.

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


	August 31, 2019				August 31, 2020
	Fair Value (1)		Unfunded Commitments		Fair Value (1)		Unfunded Commitments
Equity Long/Short Hedge Funds (2)	$	292,205	$	—	$	322,020	$	0
Equity Funds (3)	33,891		19,154		23,586		11,442
Commodity Funds (4)	15,212		—		16,204		0
Multi-asset Funds (5)	231,991		—		558,452		0
Other Funds (6)	158		—		65		0
Total	$	573,457	$	19,154	$	920,327	$	11,442


	November 30, 2018				November 30, 2019
	Fair Value (1)		Unfunded Commitments		Fair Value (1)		Unfunded Commitments
Equity Long/Short Hedge Funds (2)	$	15,338	$	—	$	291,593	$	0
Equity Funds (3)	40,070		20,996		27,952		12,108
Commodity Funds (4)	10,129		—		16,025		0
Multi-asset Funds (5)	256,972		—		234,583		0
Other Funds (6)	400		—		157		0
Total	$	322,909	$	20,996	$	570,310	$	12,108


(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 both public and private equity securities in domestic and international ~~markets in~~markets. At both ~~the public and private sectors. At~~ August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, approximately 94% and 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 redeemable quarterly with 60 days prior written notice.

(3)

At August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, 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 ~~nine~~eight years.


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

(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, ~~2019~~2020 and November 30, ~~2018,~~2019, investments representing approximately 4%58% and ~~15%~~5%, respectively, of the fair value of investments in this category are redeemable monthly with 30 or 60 days prior written notice.

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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.

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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 of the underlying collateral. Securities purchased under agreements to resell are categorized within Level 3 of the fair value hierarchy due to limited observability of the embedded derivative and unobservable credit spreads.

Other Secured Financings

Other secured financings that are accounted for at fair value are classified within Level 3 of the fair value hierarchy. Fair value is based on estimates of future cash flows incorporating assumptions regarding recovery rates.

Securities Received as Collateral / Obligations to Return Securities Received 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. Valuation is based on the price of the underlying security and is categorized within Level 1 of the fair value hierarchy.

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, constant maturity 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.

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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, ~~2019~~2020 (in thousands):



	Three Months Ended August 31, 2020
	Balance at May 31, 2020		Total gains/losses (realized and unrealized) (1)			Purchases			Sales			Settlements			Issuances		Net transfers into/ (out of) Level 3			Balance at August 31, 2020		For instruments still held at August 31, 2020 changes in unrealized gains/(losses) included in:
																						Earnings (1)			Other comprehensive income (1)
Assets:
Financial instruments owned:
Corporate equity securities	$	76,100	$	(588	)	$	699		$	0		$	0		$	0	$	1,619		$	77,830	$	(588	)	$	0
Corporate debt securities	25,178		(889		)	4			(394		)	0			0		(630		)	23,269		(881		)	0
CDOs and CLOs	23,139		3,796			39			(7,539		)	(2,075		)	0		10,576			27,936		385			0
RMBS	22,339		1,240			0			0			(774		)	0		5,512			28,317		1,262			0
CMBS	4,461		202			0			0			0			0		0			4,663		198			0
Other ABS	86,062		(1,585		)	3,313			0			(7,442		)	0		(17,011		)	63,337		(5,101		)	0
Loans and other receivables	68,429		8,302			18,492			(13,897		)	(355		)	0		24,463			105,434		8,633			0
Investments at fair value	63,959		(3,257		)	2,182			0			(13,003		)	0		0			49,881		(4,406		)	0
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	4,190	$	(12	)	$	0		$	0		$	0		$	0	$	189		$	4,367	$	12		$	0
Corporate debt securities	163		(15		)	0			0			0			0		0			148		15			0
CMBS	140		0			(140		)	35			0			0		0			35		0			0
Loans	10,674		6,636			(23,001		)	3,558			0			0		48,727			46,594		(6,591		)	0
Net derivatives (2)	45,131		(12,175		)	(1,404		)	13,089			(648		)	0		(21,568		)	22,425		12,007			0
Other secured financings	0		(617		)	0			0			0			4,019		0			3,402		617			0
Long-term debt	497,040		130,463			0			0			0			5,749		(2,992		)	630,260		(42,163		)	(88,300		)


(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 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, 2020

During the three months ended August 31, 2020, transfers of assets of $64.5 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

Loans and other receivables of $31.8 million, CDOs and CLOs of $19.5 million, Other ABS of $5.8 million and RMBS of $5.5 million due to reduced pricing transparency.

During the three months ended August 31, 2020, transfers of assets of $39.9 million from Level 3 to Level 2 are primarily attributed to:

Other ABS of $22.9 million, CDOs and CLOs of $8.9 million and Loans and other receivables of $7.4 million due to greater pricing transparency supporting classification into Level 2.

During the three months ended August 31, 2020, transfers of liabilities of $54.4 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

Loans of $50.1 million and Net derivatives of $4.1 million due to reduced pricing and market transparency.

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During the three months ended August 31, 2020, transfers of liabilities of $30.0 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

Net derivatives of $25.6 million and structured notes of $3.0 million due to greater pricing and market transparency.

Net gains on Level 3 assets were $7.2 million and net losses on Level 3 liabilities were $124.3 million for the three months ended August 31, 2020. Net gains on Level 3 assets were primarily due to increased market values across Loans and other receivables and CDOs and CLOs, partially offset by decreased market values across Investments at fair value and Other ABS. Net losses on Level 3 liabilities were primarily due to increased valuations of certain structured notes, partially offset by decreased market values across 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, 2020 (in thousands):


	Three Months Ended August 31, 2019																																		Nine Months Ended August 31, 2020
			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:									Total gains/losses (realized and unrealized) (1)																		Net transfers into/ (out of) Level 3							For instruments still held at August 31, 2020, changes in unrealized gains/(losses) included in:
	Balance at May 31, 2019					Purchases				Sales				Settlements				Issuances						Balance at August 31, 2019			Earnings (1)				Other comprehensive income (1)			Balance at November 30, 2019						Purchases				Sales				Settlements				Issuances						Balance at August 31, 2020			Earnings (1)				Other comprehensive income (1)
Assets:
Financial instruments owned:
Corporate equity securities	$	59,307	$	12,542			$	16,508			$	(17,502	)		$	—			$	—	$	(20,255	)		$	50,600		$	12,062			$	—		$	58,301	$	(3,793	)		$	3,299			$	(13,555	)		$	0			$	0	$	33,578			$	77,830		$	(654	)		$	0
Corporate debt securities	7,429		(3,072		)		1,175				(1,942		)		(85		)		—		5,783				9,288			(3,047		)		—			7,490		(162		)		285				(489		)		(602		)		0		16,747				23,269			(591		)		0
CDOs and CLOs	16,195		(1,514		)		—				—				—				—		6,454				21,135			(1,503		)		—			20,081		(8,651		)		10,883				(20,935		)		(5,675		)		0		32,233				27,936			(20,218		)		0
RMBS	17,266		(1,917		)		—				(65		)		(22		)		—		2,667				17,929			(1,435		)		—			17,740		(1,347		)		7,625				0				(496		)		0		4,795				28,317			(1,811		)		0
CMBS	12,530		(2,003		)		—				(1,703		)		(3,362		)		—		—				5,462			(3,143		)		—			6,110		232				0				0				(1,785		)		0		106				4,663			807				0
Other ABS	43,185		(1,689		)		13,497				(6,975		)		(5,500		)		—		(7,920		)		34,598			(1,068		)		—			42,563		(3,495		)		29,096				(664		)		(22,125		)		0		17,962				63,337			(13,012		)		0
Loans and other receivables	98,484		(2,847		)		26,921				(33,409		)		(1,287		)		—		(12,299		)		75,563			(2,392		)		—			64,240		(7,093		)		259,982				(208,958		)		(6,979		)		0		4,242				105,434			(6,216		)		0
Investments at fair value	103,833		(6,407		)		240				(296		)		—				—		35,135				132,505			(6,407		)		—			75,738		(33,753		)		21,067				(168		)		(13,003		)		0		0				49,881			(35,601		)		0
Securities purchased under agreements to resell	25,000		—				—				—				—				—		—				25,000			—				—			25,000		0				0				0				(25,000		)		0		0				0			0				0
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	221	$	401			$	(221	)		$	—			$	(190	)		$	—	$	—			$	211		$	(35	)		$	—		$	4,487	$	258			$	(567	)		$	0			$	0			$	0	$	189			$	4,367		$	98			$	0
Corporate debt securities	669		(650		)		(34		)		—				(369		)		—		1,586				1,202			649				—			340		(261		)		(325		)		394				0				0		0				148			20				0
CMBS	—		—				—				35				—				—		—				35			—				—			35		0				(35		)		35				0				0		0				35			0				0
Loans	9,428		(520		)		(10,281		)		5,384				—				—		12,619				16,630			531				—			9,463		2,986				(5,760		)		38,531				0				0		1,374				46,594			(3,366		)		0
Net derivatives (2)	47,449		(19,519		)		—				6,766				(14		)		—		16,081				50,763			18,507				—			77,168		(63,367		)		(6,732		)		26,656				(1,567		)		0		(9,733		)		22,425			60,257				0
Other secured financings																																			0		(617		)		0				0				0				4,019		0				3,402			617				0
Long-term debt	236,562		7,455				—				—				—				114,641		(10,595		)		348,063			(8,162		)		706			480,069		10,851				0				0				(2,000		)		202,046		(60,706		)		630,260			(28,153		)		17,302


(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 ~~Three~~Nine Months Ended August 31, 2020

During the nine months ended August 31, 2020, transfers of assets of $132.0 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

Corporate equity securities of $36.6 million, CDOs and CLOs of $34.1 million, Other ABS of $23.5 million, Corporate debt securities of $18.6 million and Loans and other receivables of $13.4 million due to reduced pricing transparency.

Table of Contents

JEFFERIES GROUP LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

During the nine months ended August 31, 2020, transfers of assets of $22.3 million from Level 3 to Level 2 are primarily attributed to:

Loans and other receivables of $9.2 million, Other ABS of $5.6 million and Corporate equity securities of $3.1 million due to greater pricing transparency supporting classification into Level 2.

During the nine months ended August 31, 2020, transfers of liabilities of $37.3 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

Net derivatives of $35.2 million due to reduced pricing transparency.

During the nine months ended August 31, 2020, transfers of liabilities of $106.2 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

Structured notes of $60.7 million and net derivatives of $45.0 million due to greater market and pricing transparency.

Net losses on Level 3 assets were $58.1 million and net gains on Level 3 liabilities were $50.1 million for the nine months ended August 31, 2020. Net losses on Level 3 assets were primarily due to decreased market values across Investments at fair value, CDOs and CLOs, Loans and other receivables and Corporate equity securities. Net gains on Level 3 liabilities were primarily due to decreased market values across derivatives, partially offset by increased valuations of certain structured notes.



	Three Months Ended August 31, 2019
	Balance at May 31, 2019		Total gains/losses (realized and unrealized) (1)			Purchases			Sales			Settlements			Issuances		Net transfers into/ (out of) Level 3			Balance at August 31, 2019		For instruments still held at August 31, 2019, changes in unrealized gains/(losses) included in:
																						Earnings (1)			Other comprehensive income (1)
Assets:
Financial instruments owned:
Corporate equity securities	$	59,307	$	12,542		$	16,508		$	(17,502	)	$	0		$	0	$	(20,255	)	$	50,600	$	12,062		$	0
Corporate debt securities	7,429		(3,072		)	1,175			(1,942		)	(85		)	0		5,783			9,288		(3,047		)	0
CDOs and CLOs	16,195		(1,514		)	0			0			0			0		6,454			21,135		(1,503		)	0
RMBS	17,266		(1,917		)	0			(65		)	(22		)	0		2,667			17,929		(1,435		)	0
CMBS	12,530		(2,003		)	0			(1,703		)	(3,362		)	0		0			5,462		(3,143		)	0
Other ABS	43,185		(1,689		)	13,497			(6,975		)	(5,500		)	0		(7,920		)	34,598		(1,068		)	0
Loans and other receivables	98,484		(2,847		)	26,921			(33,409		)	(1,287		)	0		(12,299		)	75,563		(2,392		)	0
Investments at fair value	103,833		(6,407		)	240			(296		)	0			0		35,135			132,505		(6,407		)	0
Securities purchased under agreements to resell	25,000		0			0			0			0			0		0			25,000		0			0
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	221	$	401		$	(221	)	$	0		$	(190	)	$	0	$	0		$	211	$	(35	)	$	0
Corporate debt securities	669		(650		)	(34		)	0			(369		)	0		1,586			1,202		649			0
CMBS	0		0			0			35			0			0		0			35		0			0
Loans	9,428		(520		)	(10,281		)	5,384			0			0		12,619			16,630		531			0
Net derivatives (2)	47,449		(19,519		)	0			6,766			(14		)	0		16,081			50,763		18,507			0
Long-term debt	236,562		7,455			0			0			0			114,641		(10,595		)	348,063		(8,162		)	706

Table of Contents

JEFFERIES GROUP LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)


(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 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, 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 asat 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.

~~Table of Contents~~

~~JEFFERIES GROUP LLC AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(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.

Table of Contents

JEFFERIES GROUP LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)


	Nine Months Ended August 31, 2019																																	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		Total gains/losses (realized and unrealized) (1)			Purchases			Sales			Settlements			Issuances		Net transfers into/ (out of) Level 3			Balance at August 31, 2019			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)																								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			$	—	$	51,040	$	16,381		$	23,172		$	(25,431	)	$	(669	)	$	0	$	(13,893	)	$	50,600		$	14,953			$	0
Corporate debt securities	9,484		(4,904		)		6,080				(10,544		)		(553		)		—		9,725				9,288			(5,325		)		—		9,484		(4,904		)	6,080			(10,544		)	(553		)	0		9,725			9,288			(5,325		)		0
CDOs and CLOs	25,815		(5,892		)		48,112				(43,230		)		(275		)		—		(3,395		)		21,135			(5,614		)		—		25,815		(5,892		)	48,112			(43,230		)	(275		)	0		(3,395		)	21,135			(5,614		)		0
RMBS	19,603		(2,573		)		2,166				(2,022		)		(171		)		—		926				17,929			(2,166		)		—		19,603		(2,573		)	2,166			(2,022		)	(171		)	0		926			17,929			(2,166		)		0
CMBS	10,886		(2,196		)		11				(2,023		)		(6,638		)		—		5,422				5,462			(4,326		)		—		10,886		(2,196		)	11			(2,023		)	(6,638		)	0		5,422			5,462			(4,326		)		0
Other ABS	53,175		(929		)		14,698				(2,494		)		(30,623		)		—		771				34,598			(961		)		—		53,175		(929		)	14,698			(2,494		)	(30,623		)	0		771			34,598			(961		)		0
Loans and other receivables	46,985		3,933				178,069				(166,496		)		(8,379		)		—		21,451				75,563			682				—		46,985		3,933			178,069			(166,496		)	(8,379		)	0		21,451			75,563			682				0
Investments at fair value	113,831		(3,971		)		31,583				(296		)		—				—		(8,642		)		132,505			(3,971		)		—		113,831		(3,971		)	31,583			(296		)	0			0		(8,642		)	132,505			(3,971		)		0
Securities purchased under agreements to resell	—		—				—				—				—				25,000		—				25,000			—				—		0		0			0			0			0			25,000		0			25,000			0				0
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	—	$	401			$	—			$	—			$	(190	)		$	—	$	—			$	211		$	(35	)		$	—	$	0	$	401		$	0		$	0		$	(190	)	$	0	$	0		$	211		$	(35	)		$	0
Corporate debt securities	522		(867		)		—				—				(524		)		—		2,071				1,202			867				—		522		(867		)	0			0			(524		)	0		2,071			1,202			867				0
CMBS	—		—				—				35				—				—		—				35			—				—		—		—			—			35			—			—		—			35			—				—
Loans	6,376		(1,342		)		(8,553		)		9,929				—				—		10,220				16,630			1,583				—		6,376		(1,342		)	(8,553		)	9,929			0			0		10,220			16,630			1,583				0
Net derivatives (2)	21,614		(48,746		)		(2,829		)		16,313				1,609				—		62,802				50,763			40,052				—		21,614		(48,746		)	(2,829		)	16,313			1,609			0		62,802			50,763			40,052				0
Long-term debt	200,745		(5,286		)		—				—				(11,250		)		204,710		(40,856		)		348,063			(4,517		)		9,804		200,745		(5,286		)	0			0			(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.

~~Table of Contents~~

~~JEFFERIES GROUP LLC AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(Unaudited)~~

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.

Table of Contents

JEFFERIES GROUP LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

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 )

~~Table of Contents~~

~~JEFFERIES GROUP LLC AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(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)~~

Nine Months Ended August 31, 2018
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:
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
$ —
Corporate debt securities 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 ) —
RMBS 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 ) —
Other ABS 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 ) —
Investments at fair value 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 ) $ —
Corporate debt securities 522
39
—
—
996
—
—
1,557
(39 ) —
Sovereign obligations —
3
(598 ) 629
—

21
55
(124 ) —
CMBS 105
(35 ) —
—
—
—
—
70
(70 ) —
Loans 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 ) —
Long-term debt —
(25,078 ) —
—
—
81,284
107,424
163,630
13,235
11,843


~~(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 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.

~~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, ~~2019~~2020 and November 30, ~~2018~~2019

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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August 31, 2019
August 31, 2020										August 31, 2020
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		$	45,344								$	77,442
Non-exchange-traded securities				Market approach	Price	$3-$177	$	143
Non-exchange traded securities										Non-exchange traded securities			Market approach	Price	$1		-	$213	$84
					Underlying stock price	$3-$5	$	4						EBITDA multiple	$3		-	$4	$3
Corporate debt securities		$	9,288	Scenario analysis	Estimated recovery percentage	38%-49%	42		%		$	23,269	Market approach	Price	$69				—
					Volatility	44%	—
					Credit Spread	750	—
					Underlying stock price	£0.4	—						Scenario analysis	Estimated recovery percentage	22%				—
CDOs and CLOs		$	21,135	Discounted cash flows	Constant prepayment rate	15%-20%	19		%		$	27,936	Discounted cash flows	Constant prepayment rate	2	%	-	20%	19%
					Constant default rate	1%-2%	2		%					Constant default rate	1	%	-	2%	2%
					Loss severity	25%-30%	27		%					Loss severity	25	%	-	50%	28%
					Discount rate/yield	13%-16%	14		%					Discount rate/yield	6	%	-	26%	17%
RMBS		$	17,929	Discounted cash flows	Cumulative loss rate	2%	—				$	28,317	Discounted cash flows	Cumulative loss rate	2	%	-	32%	5%
					Duration (years)	7	—							Duration (years)	1.0		-	13.0	9.7
					Discount rate/yield	3%	—							Discount rate/yield	4	%	-	14%	5%
CMBS		$	5,462	Discounted cash flows	Cumulative loss rate	80%	—				$	4,663	Scenario analysis	Estimated recovery percentage	44%				—
Other ABS											$	63,337	Discounted cash flows	Cumulative loss rate	7	%	-	72%	18%
					Duration (years)	1	—							Duration (years)	0.3		-	4.2	1.8
					Discount rate/yield	5%	—
				Scenario analysis	Estimated recovery percentage	44%	—
Other ABS		$	34,598	Discounted cash flows	Cumulative loss rate	7%-31%	18		%
					Duration (years)	1-3	2							Discount rate/yield	4	%	-	15%	10%
					Discount rate/yield	7%-12%	11		%				Market approach	Price	$100				—
Loans and other receivables		$	74,057	Market approach	Price	$41-$100	$	81			$	104,212	Market approach	Price	$6		-	$100	$76
				Scenario analysis	Estimated recovery percentage	1%-117%	68		%				Scenario analysis	Estimated recovery percentage	2	%	-	100%	62%
Derivatives		$	13,538								$	50,637
Loans total return swaps													Market approach	Price	$97		-	$99	$98
Interest rate swaps				Market approach	Basis points upfront	0-7	3						Market approach	Basis points upfront	3		-	20	9
Investments at fair value		$	106,386								$	49,881
Private equity securities				Market approach	Price	$8-$250	$	125					Market approach	Price	$6		-	$169	$50
				Scenario analysis	Discount rate/yield	20%	—						Scenario analysis	Estimated recovery percentage	33%				—
					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 equity securities											$	4,367	Market approach	Transaction level	$1				—
Corporate debt securities											$	148	Scenario analysis	Estimated recovery percentage	22%				—
Loans		$	16,630	Market approach	Price	$50-$98	$	78			$	46,594	Market approach	Price	$31		-	$97	$70
				Scenario analysis	Estimated recovery percentage	1%-75%	27		%				Scenario analysis	Estimated recovery percentage	2%				—
Derivatives		$	65,927								$	69,615
Equity options				Volatility benchmarking	Volatility	29%-59%	42		%				Volatility benchmarking	Volatility	32	%	-	46%	39%
Interest rate swaps				Market approach	Basis points upfront	0-10	4						Market approach	Basis points upfront	3		-	20	9
Cross currency swaps					Basis points upfront	2	—
Unfunded commitments					Price	$90	—							Price	$97		-	$99	$98
Other secured financings											$	3,402	Scenario analysis	Estimated recovery percentage	60	%	-	100%	79%
Long-term debt
Structured notes		$	348,063	Market approach	Price	$89-$102	$	97			$	630,260	Market approach	Price	$77		-	$105	$99
					Price	€70-€103	€	89						Price	€69		-	€107	€91

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November 30, 2019
Financial Instruments Owned	Fair Value (in thousands)	Valuation Technique	Significant Unobservable Input(s)	Input / Range				Weighted Average
Corporate equity securities	$29,017
Non-exchange-traded securities		Market approach	Price	$1		-	$140	$55
			Underlying stock price	$3		-	$5	$4
Corporate debt securities	$7,490	Scenario analysis	Estimated recovery percentage	23	%	-	85%	46%
			Volatility	44%				—
			Credit spread	750				—
			Underlying stock price	£0.4				—
CDOs and CLOs	$20,081	Discounted cash flows	Constant prepayment rate	20%				—
			Constant default rate	1	%	-	2%	2%
			Loss severity	25	%	-	37%	29%
			Discount rate/yield	12	%	-	21%	15%
RMBS	$17,740	Discounted cash flows	Cumulative loss rate	2%				—
			Duration (years)	6.3				—
			Discount rate/yield	3%				—
CMBS	$6,110	Discounted cash flows	Cumulative loss rate	7.3%				—
			Duration (years)	0.2				—
			Discount rate/yield	85%				—
		Scenario analysis	Estimated recovery percentage	44%				—
Other ABS	$42,563	Discounted cash flows	Cumulative loss rate	7	%	-	31%	16%
			Duration (years)	0.5		-	3.0	1.5
			Discount rate/yield	7	%	-	15%	11%
Loans and other receivables	$62,734	Market approach	Price	$36		-	$100	$90
		Scenario analysis	Estimated recovery percentage	87	%	-	104%	99%
Derivatives	$13,826
Interest rate swaps		Market approach	Basis points upfront	0		-	16	6
Unfunded commitments			Price	$88				—
Equity options		Volatility benchmarking	Volatility	45%				—
Investments at fair value	$75,736
Private equity securities		Market approach	Price	$8		-	$250	$125
Securities purchased under agreements to resell	$25,000
		Market approach	Spread to 6 month LIBOR	500				—
			Duration (years)	1.5				—

Financial Instruments Sold, Not Yet Purchased:
Corporate equity securities	$4,487	Market approach	Transaction level	$1				—
Loans	$9,463	Market approach	Price	$50		-	$100	$88
		Scenario analysis	Estimated recovery percentage	1%				—
Derivatives	$92,057
Equity options		Volatility benchmarking	Volatility	21	%	-	61%	43%
Interest rate swaps		Market approach	Basis points upfront	0		-	22	13
Cross currency swaps			Basis points upfront	2				—
Unfunded commitments			Price	$88				—
Long-term debt
Structured notes	$480,069	Market approach	Price	$84		-	$108	$96
			Price	€74		-	€103	€91

November 30, 2018
Financial Instruments Owned:
Fair Value
(in thousands)
Valuation Technique Significant Unobservable Input(s) Input / Range
Weighted
Average
Corporate equity securities $ 43,664

Non-exchange-traded securities Market approach Price $1-$75 $ 12
Transaction level $47 —
Corporate debt securities $ 9,484
Market approach Estimated recovery percentage 46% —
Transaction level $80 —
CDOs and CLOs $ 25,815
Discounted cash flows Constant prepayment rate 10%-20% 18 %
Constant default rate 1%-2% 2 %
Loss severity 25%-30% 26 %
Discount rate/yield 11%-16% 14 %
Scenario analysis Estimated recovery percentage 2% —
RMBS $ 19,603
Discounted cash flows Cumulative loss rate 4% —
Duration (years) 13 —
Loss severity 0% —
Discount rate/yield 3% —
Market approach Price $100 —
CMBS $ 9,444
Discounted cash flows Cumulative loss rate 8%-85% 45 %
Duration (years) 1-3 1
Loss severity 64% —
Discount rate/yield 2%-15% 6 %
Scenario analysis Estimated recovery percentage 26% —
Price $49 —
Other ABS $ 53,175
Discounted cash flows Cumulative loss rate 12%-30% 22 %
Duration (years) 1-2 1
Discount rate/yield 6%-12% 8 %
Market approach Price $100 —
Loans and other receivables $ 46,078
Market approach Price $50-$100 $ 96
Scenario analysis Estimated recovery percentage 13%-117% 105 %
Derivatives $ 4,602

Total return swaps Market approach Price $97 —
Investments at fair value $ 113,831

Private equity securities Market approach Price $3-$250 $ 108
Transaction level $169 —
Scenario analysis Discount rate/yield 20% —
Revenue growth 0% —
Financial Instruments Sold, Not Yet Purchased:
Loans $ 6,376
Market approach Price $50-$101 $ 74
Derivatives $ 27,536

Equity options Option model/default rate Default probability 0% —
Volatility benchmarking Volatility 39%-62% 50 %
Interest rate swaps Market approach Price $20 —
Total return swaps Market approach Price $97 —
Long-term debt
Structured notes $ 200,745
Market approach Price $78-$94 $ 86
Price €68-€110 € 96

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, ~~2019~~2020 and November 30, ~~2018,~~2019, asset exclusions consisted of ~~$35.4~~$3.2 million and ~~$11.1~~$31.9 million, respectively, primarily comprised of ~~private equity securities, corporate equity securities,~~certain derivatives, loans and other receivables and ~~certain derivatives.~~corporate equity securities. At August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, liability exclusions consisted of ~~$2.3~~$5.0 million and ~~$0.5~~$0.4 million, respectively, primarily comprised of ~~corporate debt~~certain derivatives and ~~certain derivatives.~~CMBS.

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Uncertainty of Fair Value Measurement 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~~Corporate equity securities, corporate debt securities, loans and other receivables, 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 price of the private equity securities, non-exchange-traded securities, ~~total return swaps, interest rate swaps,~~ unfunded commitments, ~~RMBS,~~corporate debt securities, other ABS, loans and other receivables, total return swaps or structured notes would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the ~~estimated recovery rates~~EBITDA multiple related to corporate equity securities would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the underlying stock price of ~~the cash flow outcomes underlying the~~ corporate ~~debt~~equity securities ~~or loans and other receivables~~ would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the yield or duration, in isolation, of securities purchased under agreements to resell would result in a significantly lower (higher) fair value measurement. Depending 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 fair value measurement of cross currency and interest rate swaps.

•

Loans and other receivables, ~~CDOs and CLOs,~~ CMBS, corporate debt ~~and~~securities, private equity securities and other secured financings 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 or~~underlying assets of the financial instrument would 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, CMBS and other ABS 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 investment banking and 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-~~mortgage-backed 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 investment banking and capital markets businesses and are included in Long-term debt and ~~Securities purchased under agreements to resell~~Short-term borrowings in our Consolidated Statements of Financial ~~Condition, respectively.~~Condition. 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 ~~may be~~has been elected for certain other 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.

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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 Short-term borrowing, Other secured financings and Long-term debt 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,
	2019			2018			2019			2018			2020			2019			2020			2019
Financial instruments owned:
Loans and other receivables	$	2,040		$	14,002		$	(5,458	)	$	7,495		$	1,704		$	2,040		$	(11,256	)	$	(5,458	)
Financial instruments sold, not yet purchased:
Loans	$	—		$	(2,708	)	$	—		$	(2,467	)	$	367		$	0		$	(610	)	$	0
Loan commitments	(443		)	(1,695		)	(1,200		)	(1,964		)	1,875			(443		)	464			(1,200		)
Short-term borrowings:
Changes in instrument specific credit risk (1)													$	(23	)	$	0		$	(92	)	$	0
Other changes in fair value (2)													(1,115		)	0			(959		)	0
Other secured financings
Other changes in fair value (2)													$	617		$	0		$	617		$	0
Long-term debt:
Changes in instrument specific credit risk (1)	$	6,922		$	1,401		$	34,414		$	19,986		$	(177,801	)	$	6,922		$	49,369		$	34,414
Other changes in fair value (2)	(46,003		)	(6,842		)	(93,311		)	33,626			(9,943		)	(46,003		)	(78,567		)	(93,311		)


(1)	Changes in ~~instrument-specific~~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.

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


	August 31, 2019		November 30, 2018		August 31, 2020		November 30, 2019
Financial instruments owned:
Loans and other receivables (1)	$	1,356,508	$	961,554	$	1,839,249	$	1,546,516
Loans and other receivables on nonaccrual status and/or 90 days or greater past due (1) (2)	139,795		158,392		334,504		197,215
Long-term debt	59,370		114,669
Long-term debt and short-term borrowings					74,197		74,408
Other secured financings					923		0


(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 ~~$20.9~~$29.0 million and ~~$20.5~~$22.2 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, respectively.

The aggregate fair value of loans and other receivables on nonaccrual status and/or 90 days or greater past due was ~~$113.4~~$162.6 million and ~~$105.3~~$127.0 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, respectively, which includes loans and other receivables 90 days or greater past due of ~~$31.9~~$13.3 million and ~~$19.4~~$24.8 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, 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 within 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 ~~$35.0~~$55.9 million and ~~$34.8~~$35.0 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, respectively.

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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 toto: (1) 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.~~debt, and (2) forward foreign exchange contracts designated as hedges to offset the change in the value of certain net investments in foreign operations.

See Note 4, Fair Value Disclosures, and Note ~~16,~~17, 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. 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, ~~2018~~2019 for additional information regarding the offsetting of derivative contracts.

The following tables present the fair value and related number of derivative contracts at August 31, ~~2019~~2020 and November 30, ~~2018~~2019 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, 2019 (1)								August 31, 2020 (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	$	38,588		1	$	—		—	$	70,159		1	$	0		0
Foreign exchange contracts:
Bilateral OTC									0			0	393			2
Total derivatives designated as accounting hedges	38,588				—				70,159				393

Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded	1,766			39,912	873			45,448	781			48,453	73			69,918
Cleared OTC	863,437			3,335	903,989			3,947	75,125			3,894	168,467			4,199
Bilateral OTC	539,158			1,865	241,817			474	689,581			1,480	316,196			621
Foreign exchange contracts:
Exchange-traded	—			191	—			87	0			0	0			245
Bilateral OTC	550,737			8,564	548,854			8,319	416,298			13,561	391,431			13,449
Equity contracts:
Exchange-traded	741,307			1,998,268	1,091,142			1,611,110	507,083			906,465	517,384			775,309
Bilateral OTC	228,415			4,073	357,356			4,428	351,744			1,939	879,876			1,945
Commodity contracts:
Exchange-traded	1,418			9,523	—			6,239	0			2,073	0			1,503
Bilateral OTC									0			1	0			0
Credit contracts:
Cleared OTC	5,210			12	7,988			16	3,165			15	5,567			13
Bilateral OTC	10,183			34	9,993			21	2,116			11	3,518			10
Total derivatives not designated as accounting hedges	2,941,631				3,162,012				2,045,893				2,282,512
Total gross derivative assets/ liabilities:
Exchange-traded	744,491				1,092,015				507,864				517,457
Cleared OTC	907,235				911,977				148,449				174,034
Bilateral OTC	1,328,493				1,158,020				1,459,739				1,591,414
Amounts offset in our Consolidated Statements of Financial Condition (3):
Exchange-traded	(723,158		)		(723,158		)		(504,400		)		(504,400		)
Cleared OTC	(871,162		)		(881,963		)		(144,200		)		(145,706		)
Bilateral OTC	(900,155		)		(994,085		)		(963,215		)		(1,149,575		)
Net amounts per Consolidated Statements of Financial Condition (4)	$	485,744			$	562,806			$	504,237			$	483,224


(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~~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.


(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, 2018 (1)								November 30, 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	$	—		—	$	29,647		1	$	28,663		1	$	0		0
Total derivatives designated as accounting hedges	—				29,647				28,663				0

Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded	924			32,159	513			66,095	1,191			65,226	103			38,464
Cleared OTC	422,670			2,095	411,833			2,394	213,224			3,329	284,433			3,443
Bilateral OTC	372,899			1,398	491,697			816	421,700			1,325	258,857			738
Foreign exchange contracts:
Exchange-traded	42			538	2			690	0			256	0			199
Cleared OTC	—			—	36			3
Bilateral OTC	311,228			9,548	314,951			9,909	190,570			9,255	187,836			9,187
Equity contracts:
Exchange-traded	1,202,927			2,104,684	2,061,137			1,779,836	717,494			1,714,538	962,535			1,481,388
Bilateral OTC	207,221			5,126	315,996			2,764	248,720			4,731	445,241			4,271
Commodity contracts:
Exchange-traded	213			3,927	270			4,012	0			5,524	0			4,646
Credit contracts:
Cleared OTC	11,204			7	1,556			14	2,514			13	5,768			12
Bilateral OTC	13,768			123	11,618			79	6,281			25	14,219			28
Total derivatives not designated as accounting hedges	2,543,096				3,609,609				1,801,694				2,158,992
Total gross derivative assets/liabilities:
Exchange-traded	1,204,106				2,061,922				718,685				962,638
Cleared OTC	433,874				443,072				244,401				290,201
Bilateral OTC	905,116				1,134,262				867,271				906,153
Amounts offset in our Consolidated Statements of Financial Condition (3):
Exchange-traded	(1,190,951		)		(1,190,951		)		(688,871		)		(688,871		)
Cleared OTC	(407,351		)		(418,779		)		(222,869		)		(266,900		)
Bilateral OTC	(814,184		)		(901,875		)		(521,066		)		(676,016		)
Net amounts per Consolidated Statements of Financial Condition (4)	$	130,610			$	1,127,651			$	397,551			$	527,205


(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~~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.


(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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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)	2019			2018			2019			2018			2020		2019			2020			2019
Interest rate swaps	$	28,052		$	(1,161	)	$	69,843		$	(22,363	)	$	834	$	28,052		$	47,303		$	69,843
Long-term debt	(28,519		)	1,221			(72,288		)	24,055			1,634		(28,519		)	(45,539		)	(72,288		)
Total	$	(467	)	$	60		$	(2,445	)	$	1,692		$	2,468	$	(467	)	$	1,764		$	(2,445	)

The following table provides information related to gains (losses) on our net investment hedges recognized in Currency translation adjustments and other, a component of Other comprehensive income (loss), in our Consolidated Statements of Comprehensive Income (in thousands):



	Three Months Ended August 31,					Nine Months Ended August 31,
Gains (Losses)	2020			2019		2020			2019
Foreign exchange contracts	$	(393	)	$	0	$	(393	)	$	0
Total	$	(393	)	$	0	$	(393	)	$	0

The following table presents unrealized and realized gains (losses) on derivative contracts recognized in Principal transactions 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,						Three Months Ended August 31,						Nine Months Ended August 31,
Gains (Losses)	2019			2018			2019			2018			2020			2019			2020			2019
Interest rate contracts	$	(89,864	)	$	13,951		$	(193,715	)	$	36,053		$	(35,462	)	$	(89,864	)	$	(40,630	)	$	(193,715	)
Foreign exchange contracts	(3,022		)	(4,421		)	(1,604		)	6,207			4,973			(3,022		)	4,126			(1,604		)
Equity contracts	2,236			1,807			(118,354		)	(215,232		)	(32,782		)	2,236			113,253			(118,354		)
Commodity contracts	3,400			281			4,775			3,025			(2,064		)	3,400			(2,845		)	4,775
Credit contracts	2,687			620			11,600			3,026			(179		)	2,687			14,205			11,600
Total	$	(84,563	)	$	12,238		$	(297,298	)	$	(166,921	)	$	(65,514	)	$	(84,563	)	$	88,109		$	(297,298	)

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, ~~2019~~2020 (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	$	57,345	$	1	$	3,579	$	(3,572	)	$	57,353
Credit default swaps	887		826		—		(81		)	1,632
Equity options and forwards													$	21,437	$	44,672	$	15,160	$	(25,445	)	$	55,824
Total return swaps	25,166		70,022		—		(334		)	94,854			74,923		19,764		2,872		(14,666		)	82,893
Foreign currency forwards, swaps and options	111,325		4,740		7		(3,538		)	112,534			63,570		28,993		0		(4,477		)	88,086
Fixed income forwards	556		—		—		—			556
Interest rate swaps, options and forwards	76,320		225,447		183,737		(56,767		)	428,737			94,956		204,309		222,482		(45,025		)	476,722
Total	$	271,599	$	301,036	$	187,323	$	(64,292	)	695,666			$	254,886	$	297,738	$	240,514	$	(89,613	)	703,525
Cross product counterparty netting										(26,934		)										(22,759		)
Total OTC derivative assets included in Financial instruments owned										$	668,732											$	680,766


(1)	At August 31, ~~2019,~~2020, we held net exchange-traded derivative assets and other credit agreements with a fair value of ~~$30.3~~$25.1 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, ~~2019,~~2020, cash collateral received was ~~$213.2~~$201.6 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.



	OTC Derivative Liabilities (1) (2) (3)
	0 – 12 Months		1 – 5 Years		Greater Than 5 Years		Cross-Maturity Netting (4)			Total
Equity options and forwards	$	15,474	$	370,915	$	156,839	$	(25,445	)	$	517,783
Credit default swaps	12		1,108		0		0			1,120
Total return swaps	58,888		103,567		0		(14,666		)	147,789
Foreign currency forwards, swaps and options	55,430		11,792		34		(4,477		)	62,779
Fixed income forwards	1,404		0		0		0			1,404
Interest rate swaps, options and forwards	42,132		80,469		72,462		(45,025		)	150,038
Total	$	173,340	$	567,851	$	229,335	$	(89,613	)	880,913
Cross product counterparty netting										(22,759		)
Total OTC derivative liabilities included in Financial instruments sold, not yet purchased										$	858,154


(1)	At August 31, 2020, we held net exchange-traded derivative liabilities and other credit agreements with a fair value of $14.5 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, 2020, cash collateral pledged was $389.5 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)
0 – 12 Months 1 – 5 Years Greater Than 5 Years Cross-Maturity Netting (4) Total
Equity swaps and options $ 8,679
$ 123,854
$ 49,873
$ (3,572 ) $ 178,834
Credit default swaps 35
6,291
—
(81 ) 6,245
Total return swaps 77,259
25,160
—
(334 ) 102,085
Foreign currency forwards, swaps and options 108,267
2,758
2,984
(3,538 ) 110,471
Fixed income forwards 868
—
—
—
868
Interest rate swaps, options and forwards 42,416
43,161
109,564
(56,767 ) 138,374
Total $ 237,524
$ 201,224
$ 162,421
$ (64,292 ) 536,877
Cross product counterparty netting (26,934 )
Total OTC derivative liabilities included in Financial instruments sold, not yet purchased $ 509,943


~~(1)~~	~~At August 31, 2019, we held net exchange-traded derivative liabilities and other credit agreements with a fair value of $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, 2019, cash collateral pledged was $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.~~

The following table presents the counterparty credit quality with respect to the fair value of our OTC derivative assets at August 31, ~~2019~~2020 (in thousands):


Counterparty credit quality (1):
A- or higher	$	146,495	$	113,989
BBB- to BBB+	42,072		15,949
BB+ or lower	275,252		353,564
Unrated	204,913		197,264
Total	$	668,732	$	680,766


(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, 2019
External Credit Rating
Investment Grade Non-investment Grade Unrated Total Notional
Credit protection sold:
Index credit default swaps $ —
$ 96.8
$ —
$ 96.8
Single name credit default swaps 7.6
31.6
32.9
72.1



	August 31, 2020
	External Credit Rating
	Investment Grade		Non-investment Grade		Unrated		Total Notional
Credit protection sold:
Index credit default swaps	$	2.0	$	45.9	$	0	$	47.9
Single name credit default swaps	0		6.2		0.2		6.4

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	November 30, 2018								November 30, 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	$	25.7	$	167.4	$	—	$	193.1	$	3.0	$	32.0	$	0	$	35.0
Single name credit default swaps	57.7		84.5		3.0		145.2		3.4		29.0		1.5		33.9

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			August 31, 2020			November 30, 2019
Derivative instrument liabilities with credit-risk-related contingent features	$	113.7		$	93.5		$	191.4		$	42.9
Collateral posted	(80.0		)	(61.5		)	(120.6		)	(3.1		)
Collateral received	57.0			91.5			64.5			114.1
Return of and additional collateral required in the event of a credit rating downgrade below investment grade (1)	90.6			123.3			135.3			154.0


(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

Our repurchase agreements and securities borrowing and lending arrangements are generally recorded at cost in our Consolidated Statements of Financial Condition, which is a reasonable approximation of their fair values due to their short-term nature. 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 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 our Consolidated Statements of Financial Condition.

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



	August 31, 2020
	Securities Lending Arrangements		Repurchase Agreements		Obligation To Return Securities Received As Collateral, at fair value		Total
Collateral Pledged:
Corporate equity securities	$	1,317,023	$	176,221	$	4,413	$	1,497,657
Corporate debt securities	605,527		1,661,854		0		2,267,381
Mortgage-backed and asset-backed securities	0		1,680,052		0		1,680,052
U.S. government and federal agency securities	7,187		12,187,529		0		12,194,716
Municipal securities	0		180,837		0		180,837
Sovereign obligations	0		2,636,878		0		2,636,878
Loans and other receivables	0		1,313,667		0		1,313,667
Total	$	1,929,737	$	19,837,038	$	4,413	$	21,771,188

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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						November 30, 2019
	Securities Lending Arrangements		Repurchase Agreements		Total		Securities Lending Arrangements		Repurchase Agreements		Obligation To Return Securities Received As Collateral, at fair value		Total
Collateral Pledged:
Corporate equity securities	$	1,505,218	$	487,124	$	1,992,342	$	1,314,395	$	129,558	$	0	$	1,443,953
Corporate debt securities	333,221		1,853,309		2,186,530		191,311		1,730,526		0		1,921,837
Mortgage- and asset-backed securities	249		2,820,543		2,820,792
Mortgage-backed and asset-backed securities							0		1,745,145		0		1,745,145
U.S. government and federal agency securities	—		8,181,947		8,181,947		19,434		10,863,997		9,500		10,892,931
Municipal securities	—		604,274		604,274		0		498,202		0		498,202
Sovereign obligations	—		2,945,521		2,945,521		0		3,016,563		0		3,016,563
Loans and other receivables	—		300,768		300,768		0		772,926		0		772,926
Total	$	1,838,688	$	17,193,486	$	19,032,174	$	1,525,140	$	18,756,917	$	9,500	$	20,291,557

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


	August 31, 2019										August 31, 2020
	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	$	1,305,512	$	70,319	$	635,864	$	171,170	$	2,182,865	$	630,163	$	0	$	553,062	$	746,512	$	1,929,737
Repurchase agreements	9,207,762		2,376,018		3,897,096		5,842,206		21,323,082		10,606,433		1,695,229		4,243,474		3,291,902		19,837,038
Obligation to return securities received as collateral, at fair value											4,413		0		0		0		4,413
Total	$	10,513,274	$	2,446,337	$	4,532,960	$	6,013,376	$	23,505,947	$	11,241,009	$	1,695,229	$	4,796,536	$	4,038,414	$	21,771,188


	November 30, 2018										November 30, 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	$	807,347	$	—	$	560,417	$	470,924	$	1,838,688	$	694,821	$	0	$	672,969	$	157,350	$	1,525,140
Repurchase agreements	7,849,052		1,915,325		6,042,951		1,386,158		17,193,486		6,614,026		1,556,260		8,988,528		1,598,103		18,756,917
Obligation to return securities received as collateral, at fair value											0		0		9,500		0		9,500
Total	$	8,656,399	$	1,915,325	$	6,603,368	$	1,857,082	$	19,032,174	$	7,308,847	$	1,556,260	$	9,670,997	$	1,755,453	$	20,291,557

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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, ~~2019~~2020 and November 30, ~~2018,~~2019, the approximate fair value of securities received as collateral by us that may be sold or repledged was ~~$31.1~~$29.9 billion and ~~$23.1~~$28.7 billion, respectively. At August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, a substantial portion of the securities received by us had been sold or repledged.

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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, ~~2018~~2019 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, at fair value, and obligation to return securities received as collateral, at fair value, 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, 2019															August 31, 2020
	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)		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	$	7,268,413	$	0		$	7,268,413	$	(429,615	)	$	(1,691,674	)	$	5,147,124
Reverse repurchase agreements	17,586,096		(13,086,101		)	4,499,995		(454,507		)	(3,817,544		)	227,944		17,905,457		(12,578,066		)	5,327,391		(144,353		)	(5,141,297		)	41,741
Securities received as collateral, at fair value																4,413		—			4,413		—			—			4,413
Liabilities:
Securities lending arrangements	$	2,182,865	$	—		$	2,182,865	$	(707,436	)	$	(1,452,911	)	$	22,518	$	1,929,737	$	0		$	1,929,737	$	(429,615	)	$	(1,467,230	)	$	32,892
Repurchase agreements	21,323,082		(13,086,101		)	8,236,981		(454,507		)	(6,269,894		)	1,512,580		19,837,038		(12,578,066		)	7,258,972		(144,353		)	(6,622,623		)	491,996
Obligation to return securities received as collateral, at fair value																4,413		—			4,413		—			—			4,413


	November 30, 2018															November 30, 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 (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	$	6,538,212	$	—		$	6,538,212	$	(468,778	)	$	(1,193,986	)	$	4,875,448	$	7,624,642	$	0		$	7,624,642	$	(361,394	)	$	(1,479,433	)	$	5,783,815
Reverse repurchase agreements	11,336,175		(8,550,417		)	2,785,758		(609,225		)	(2,126,730		)	49,803		15,551,845		(11,252,247		)	4,299,598		(291,316		)	(3,929,977		)	78,305
Securities received as collateral, at fair value																9,500		—			9,500		—			—			9,500
Liabilities:
Securities lending arrangements	$	1,838,688	$	—		$	1,838,688	$	(468,778	)	$	(1,343,704	)	$	26,206	$	1,525,140	$	0		$	1,525,140	$	(361,394	)	$	(970,799	)	$	192,947
Repurchase agreements	17,193,486		(8,550,417		)	8,643,069		(609,225		)	(7,070,967		)	962,877		18,756,917		(11,252,247		)	7,504,670		(291,316		)	(6,663,807		)	549,547
Obligation to return securities received as collateral, at fair value																9,500		—			9,500		—			—			9,500

(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.

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(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 ~~$5,473.0~~$5,089.0 million of securities borrowing arrangements, for which we have received securities collateral of ~~$5,322.7~~$4,921.2 million, and ~~$382.9~~$439.7 million of repurchase agreements, for which we have pledged securities collateral of ~~$392.4~~$451.6 million, which are subject to master netting agreements, but we have not determined the agreements to be legally enforceable.

(4)

Amounts include ~~$4,825.7~~$5,683.4 million of securities borrowing arrangements, for which we have received securities collateral of ~~$4,711.7~~$5,523.6 million, and ~~$931.7~~$439.7 million of repurchase agreements, for which we have pledged securities collateral of ~~$963.6~~$447.5 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 ~~$658.3~~$986.1 million and ~~$708.0~~$796.8 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, 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.

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-~~mortgage-backed and other-asset backed securities or CLOs). 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. 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, ~~2018.~~2019.

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,				Three Months Ended August 31,				Nine Months Ended August 31,
	2019		2018		2019		2018		2020		2019		2020		2019
Transferred assets	$	789.3	$	1,865.5	$	2,894.4	$	5,665.9	$	983.9	$	789.3	$	4,794.3	$	2,894.4
Proceeds on new securitizations	789.3		1,866.2		2,966.3		5,668.6		983.9		789.3		4,794.3		2,966.3
Cash flows received on retained interests	16.8		17.2		47.2		35.7		6.3		16.8		18.6		47.2

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, ~~2019~~2020 and November 30, ~~2018.~~2019.

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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				August 31, 2020				November 30, 2019
Securitization Type	Total Assets		Retained Interests		Total Assets		Retained Interests		Total Assets		Retained Interests		Total Assets		Retained Interests
U.S. government agency RMBS	$	11,351.8	$	123.8	$	13,633.5	$	365.3	$	928.7	$	12.4	$	10,671.7	$	103.3
U.S. government agency CMBS	1,374.9		48.4		2,027.6		185.6		439.2		138.3		1,374.8		45.8
CLOs	3,430.0		29.8		3,512.0		20.9		3,419.9		41.8		3,006.7		58.4
Consumer and other loans	975.0		56.8		604.1		48.9		884.0		45.6		1,149.3		71.8

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-~~mortgage-backed 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-~~mortgage-backed 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-~~mortgage-backed and other asset-backed securities;

Warehouse funding arrangements for client-sponsored consumer and mortgage loan vehicles and CLOs through participation ~~certificates,~~agreements, 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 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 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.

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Consolidated VIEs

The following table presents information about our consolidated VIEs at August 31, ~~2019~~2020 and November 30, ~~2018~~2019 (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, 2019				November 30, 2018				August 31, 2020				November 30, 2019
	Securitization Vehicles		Other		Securitization Vehicles		Other		Secured Funding Vehicles		Other		Secured Funding Vehicles		Other
Cash(1)	$	—	$	1.2	$	—	$	1.1	$	0	$	1.2	$	0	$	1.2
Financial instruments owned	—		0.3		—		0.4		0		3.6		0		0.3
Securities purchased under agreements to resell ~~(1)~~(2)	1,822.1		—		883.1		—		2,919.8		0		2,467.3		0
Receivable from brokers									0		13.5		0		0
Other assets									0		0.1		0		0
Total assets	$	1,822.1	$	1.5	$	883.1	$	1.5	$	2,919.8	$	18.4	$	2,467.3	$	1.5
Other secured financings (2)	$	1,820.8	$	—	$	882.5	$	—
Other liabilities	1.3		0.2		0.6		0.2
Financial instruments sold, not yet purchased									$	0	$	2.1	$	0	$	0
Other secured financings (3)									2,918.4		0		2,465.8		0
Other liabilities (4)									1.4		0.4		1.5		0.2
Total liabilities	$	1,822.1	$	0.2	$	883.1	$	0.2	$	2,919.8	$	2.5	$	2,467.3	$	0.2


(1)	Approximately $0.6 million of the cash amount at August 31, 2020 represents cash on deposit with related consolidated entities and is eliminated in consolidation.


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


~~(2)~~(3)	Approximately ~~$1.0~~$130.1 million of the other secured ~~financing~~financings amount at August 31, 2020 is with related consolidated entities, which is eliminated in consolidation.


(4)	Approximately $0.3 million and $0.2 million of the other liabilities amounts at August 31, 2020 and November 30, 2019, respectively, represent ~~amounts held by us in inventory and~~intercompany payables with related consolidated entities, which are eliminated in ~~consolidation at November 30, 2018.~~consolidation.

~~Securitization~~Secured Funding 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~~asset-backed securities ~~and consumer loans~~ pursuant to the terms of a master repurchase agreement. 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.~~

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, 2019										August 31, 2020
	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	$	124.0	$	0.9	Maximum Exposure to Loss	$	801.5		VIE Assets		$	7,889.6	$	66.3		$	1.4		$	470.4		$	6,509.5
Consumer loan and other asset-backed vehicles	525.1		—		668.8				3,020.6		308.4			0			435.0			2,300.4
Related party private equity vehicles	28.7		—		46.2				83.7		18.6			0			29.6			50.7
Other investment vehicles	399.1		—		410.0				6,550.7		747.1			0			753.8			13,257.0
Total	$	1,076.9	$	0.9	$	1,926.5			$	17,544.6	$	1,140.4		$	1.4		$	1,688.8		$	22,117.6

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	November 30, 2019
	Carrying Amount				Maximum Exposure to Loss		VIE Assets
	Assets		Liabilities		Maximum Exposure to Loss		VIE Assets
CLOs	$	152.6	$	0.6	$	505.3	$	7,845.0
Consumer loan and other asset-backed vehicles	358.3		0		490.6		2,354.8
Related party private equity vehicles	23.0		0		34.3		71.4
Other investment vehicles	404.1		0		411.9		6,102.7
Total	$	938.0	$	0.6	$	1,442.1	$	16,373.9

November 30, 2018
Carrying Amount Maximum Exposure to Loss VIE Assets
Assets Liabilities
CLOs $ 42.1
$ —
$ 568.3
$ 3,088.9
Consumer loan and other asset-backed vehicles 462.1
—
807.1
3,273.1
Related party private equity vehicles 35.5
—
53.5
108.3
Other investment vehicles 95.0
—
99.1
3,558.1
Total $ 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.

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, 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, mortgage 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 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 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, ~~2019~~2020 and November 30, ~~2018,~~2019, our total equity commitment in the JCP Entities was ~~$139.3~~$133.0 million, of which ~~$121.7~~$122.0 million and ~~$121.3~~$121.7 million had been funded, respectively. The carrying value of our equity investments in the JCP Entities was ~~$28.7~~$18.6 million and ~~$35.5~~$23.0 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, 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 Investment Vehicles. At August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, we had equity commitments to invest ~~$400.2~~$772.9 million and ~~$112.2~~$398.6 million, respectively, in various other investment vehicles, of which ~~$389.2~~$766.3 million and ~~$108.1~~$390.8 million was funded, respectively. The carrying value of our equity investments was ~~$399.1~~$747.1 million and ~~$95.0~~$404.1 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, respectively. Our exposure to loss is limited to the total of our carrying value and unfunded equity commitment. These 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-~~Mortgage-Backed and Other Asset-Backed ~~Securitization~~Secured Funding 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.

At August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, we held ~~$1,712.9~~$1,808.6 million and ~~$2,913.0~~$1,453.5 million of agency mortgage-backed securities, respectively, and ~~$191.2~~$130.8 million and ~~$170.5~~$134.8 million of non-agency ~~mortgage~~mortgage-backed and other asset-backed securities, respectively, as a result of our secondary trading and market-making activities, and underwriting, placement and structuring activities. Our maximum exposure to loss on these securities is limited to the carrying value of our investments in these securities. These ~~mortgage-~~mortgage-backed and other asset-backed ~~securitization~~secured funding vehicles discussed are not included in the above table containing information about our variable interests in nonconsolidated VIEs.

Note 9. Investments

At August 31, ~~2019,~~2020, we had investments in Jefferies Finance LLC (“Jefferies Finance”) and Berkadia. In addition, we had an investment in 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 one of our directors and our Chairman of the Executive Committee.

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~~that structures, underwrites and ~~syndication of~~arranges primarily senior secured ~~debt~~loans to ~~middle market and growth companies in the form of term and revolving loans.~~corporate borrowers. Loans are originated primarily through the investment banking efforts of Jefferies LLC. Jefferies Finance may also ~~originate~~underwrite and arrange other debt products such as second lien term, bridge and mezzanine loans, as well as related equity co-investments. In addition, Jefferies Finance ~~also purchases syndicated loans in~~is a registered investment advisor under the ~~secondary market~~Investment Advisers Act of 1940 and, through two of its wholly-owned subsidiaries, Apex Credit Partners LLC and JFIN Asset Management LLC, acts as an investment advisor for various loan ~~funds.~~funds and CLOs managing direct lending and broadly syndicated loan products.

At August 31, ~~2019,~~2020, 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, ~~2019,~~2020, we had funded ~~$643.7~~$652.4 million of our $750.0 million commitment, leaving ~~$106.3~~$97.6 million unfunded. The investment commitment is scheduled to expire on March 1, ~~2020~~2021 with automatic one year extensions absent a 60 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, ~~2019.~~2020. Advances are shared equally between us and MassMutual. The facility is scheduled to mature on March 1, ~~2020~~2021 with automatic one year extensions absent a 60 days termination notice by either party. At August 31, ~~2019,~~2020, 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,				Three Months Ended August 31,				Nine Months Ended August 31,
	2019		2018		2019		2018		2020		2019		2020		2019
Interest income	$	—	$	—	$	—	$	1.2	$	0	$	0	$	2.2	$	0
Unfunded commitment fees	0.3		0.3		0.9		0.8		0.4		0.3		0.8		0.9

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, 2020		November 30, 2019
Our total equity balance	$	591.0	$	642.0

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



	Three Months Ended August 31,						Nine Months Ended August 31,
	2020			2019			2020			2019
Net earnings (loss)	$	(23.6	)	$	(16.3	)	$	(102.1	)	$	31.5

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,
	2019		2018			2019		2018			2020		2019		2020		2019
Origination and syndication fee revenues (1)	$	44.6	$	71.1		$	135.8	$	282.1		$	42.4	$	44.6	$	123.9	$	135.8
Origination fee expenses (1)	8.2		12.1			21.8		45.5			3.8		8.2		12.4		21.8
CLO placement fee revenues (2)	1.0		0.4			2.3		3.1			1.3		1.0		1.7		2.3
Derivative losses (3)	—		(0.3		)	—		(0.9		)
Underwriting fees (4)	2.9		—			3.9		0.3
Service fees (5)	12.3		13.3			50.6		48.3
Underwriting fees (3)											0		2.9		0.3		3.9
Service fees (4)											13.5		12.3		49.4		50.6

(1)

We engage in debt ~~capital markets~~underwriting 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, ~~2019~~2020 and November 30, ~~2018,~~2019, we held securities issued by CLOs managed by Jefferies Finance, which are included in Financial instruments owned, at fair value.


(3)	We have entered into participation agreements and derivative contracts with Jefferies Finance based upon certain securities issued by 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)~~(4)	Under a service agreement, we charge Jefferies Finance for services provided.

In connection with non-U.S. dollar loans originated by Jefferies Finance to borrowers who are investment banking clients of ours, we have entered into an agreement to indemnify Jefferies Finance with respect to any foreign currency exposure.

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Receivables from Jefferies Finance, included in Other assets in our Consolidated Statements of Financial Condition, were ~~$12.9~~$13.2 million and ~~$35.2~~$17.2 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, respectively. Payables 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 both August 31, ~~2019~~2020 and November 30, ~~2018, respectively.~~

~~Table~~2019. At November 30, 2019, a payable to Jefferies Finance of ~~Contents~~

~~JEFFERIES GROUP LLC AND SUBSIDIARIES~~

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~~We enter into OTC foreign exchange contracts with Jefferies Finance. In connection with these contracts we had $2.1~~$17.6 million ~~recorded~~related to its lending transactions is included in ~~Financial instruments sold, at fair value~~Payables to customers 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.Condition.

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.~~Earnings for the nine months ended August 31, 2019.

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



	August 31, 2020		November 30, 2019
Our total equity balance	$	273.2	$	268.9

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



	Three Months Ended August 31,				Nine Months Ended August 31,
	2020		2019		2020		2019
Net earnings	$	41.0	$	53.8	$	89.7	$	160.3

At August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, we had commitments to purchase ~~$464.4~~$325.6 million and ~~$723.8~~$360.4 million, respectively, in agency CMBS from Berkadia. ~~During the three and nine months ended August 31, 2019, we~~

We received ~~$29.6 million and $47.7 million, respectively, in~~ distributions from Berkadia on our equity ~~interest.~~interest as follows (in millions):



	Three Months Ended August 31,				Nine Months Ended August 31,
	2020		2019		2020		2019
Distributions	$	0	$	29.6	$	36.6	$	47.7

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 ~~$26.0~~$17.0 million and ~~$31.9~~$20.6 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, 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, ~~2018)~~2019). 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



	Three Months Ended August 31,					Nine Months Ended August 31,
	2020		2019			2020			2019
Net gains (losses) from our investments in JCP Fund V	$	2.0	$	(2.5	)	$	(3.5	)	$	(1.9	)

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

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At both August 31, 2020 and November 30, 2019, we were committed to invest equity of up to $85.0 million in JCP Fund V. At August 31, 2020 and November 30, 2019, our unfunded commitment relating to JCP Fund V was $9.1 million and $9.4 million, respectively.

The following is a summary of the Net change in net assets resulting from operations for 100.0% of JCP Fund V, in which we owned effectively 35.2% of the combined equity interests (in thousands):

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



	Three Months Ended
	June 30, 2020		March 31, 2020			December 31, 2019			June 30, 2019			March 31, 2019			December 31, 2018
Net increase (decrease) in net assets resulting from operations (1)	$	6,233	$	(19,893	)	$	(1,397	)	$	(7,174	)	$	(1,169	)	$	(8,412	)


(1)	Financial information for JCP Fund V within our results of operations for the three and nine months ended August 31, ~~2019~~2020 and ~~2018~~August 31, 2019 is included based on the presented periods.

Epic Gas

On July 14, 2015, Jefferies LLC purchased common shares of Epic Gas. At ~~November 30, 2018,~~February 28, 2019, we owned approximately 21.1% of the outstanding common stock of Epic Gas and one of our directors served on the Board of Directors of Epic Gas and owned common shares of Epic Gas. During the ~~nine~~three months ended ~~August~~May 31, 2019, we sold all of our common shares of Epic Gas, at fair value, for a total of $24.6 million. There was a gain of $2.8 million on this transaction, which is included in Other revenue in our Consolidated Statements of ~~Earnings.~~Earnings for the nine months ended August 31, 2019. At ~~November 30, 2018,~~February 28, 2019, our investment in Epic Gas of ~~$21.7~~$22.1 million was included in Loans to and investments in related parties in our Consolidated Statements of Financial Condition. For the three months ended December 31, 2018, ~~March 31, 2018 and December 31, 2017,~~ Epic Gas reported net earnings ~~(losses)~~ of $0.9 million, ~~$(2.7) million, and $(16.4) million, respectively.~~which was included in our results of operations for the nine months ended August 31, 2019.

Note 10. Goodwill and Intangible Assets

Goodwill

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


	August 31, 2019		November 30, 2018		August 31, 2020		November 30, 2019
Capital Markets	$	1,635,200	$	1,638,778
Investment Banking and Capital Markets					$	1,643,633	$	1,640,201
Asset Management	3,374		3,392		411		3,398
Total goodwill	$	1,638,574	$	1,642,170	$	1,644,044	$	1,643,599

The following table is a summary of the changes to goodwill for the nine months ended August 31, ~~2019~~2020 (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, 2019	$	1,643,599
Translation adjustments	3,445
Impairment losses (1)	(3,000		)
Balance at August 31, 2020	$	1,644,044

(1) Impairment losses are related to our wind down of an asset management platform.

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.

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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 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, ~~2019.~~2020.

Our annual goodwill impairment testing at August 1, ~~2019~~2020 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 Investment Banking and 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, ~~2019,~~2020, goodwill allocated to these reporting units is ~~$1,635.2~~$1,643.6 million of total goodwill of ~~$1,638.6~~$1,644.0 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, ~~2019~~2020 and November 30, ~~2018~~2019 (dollars in thousands):


	August 31, 2019										Weighted average remaining lives (years)	August 31, 2020										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(1)	$	125,066	$	—		$	(64,792	)	$	60,274	10.1	$	126,132	$	(26	)	$	(73,720	)	$	52,386	9.5
Trade name(1)	127,600		—			(23,697		)	103,903		28.5	129,154		(274		)	(27,673		)	101,207		27.5
Exchange and clearing organization membership interests and registrations	8,516		(291		)	—			8,225		N/A	8,342		(468		)	—			7,874		N/A
Total	$	261,182	$	(291	)	$	(88,489	)	$	172,402		$	263,628	$	(768	)	$	(101,393	)	$	161,467

(1) Impairment losses are related to our wind down of an asset management platform.


	November 30, 2018							Weighted average remaining lives (years)	November 30, 2019							Weighted average remaining lives (years)
	Gross cost		Accumulated amortization			Net carrying amount		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	$	125,736	$	(67,257	)	$	58,479	9.9
Trade name	128,348		(21,086		)	107,262		29.3	128,590		(24,800		)	103,790		28.3
Exchange and clearing organization membership interests and registrations	8,524		—			8,524		N/A	8,273		—			8,273		N/A
Total	$	262,446	$	(79,978	)	$	182,468		$	262,599	$	(92,057	)	$	170,542

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, ~~2019.~~2020. We also deemed it appropriate to consider the impact of the global novel coronavirus pandemic as a triggering event and performed an interim impairment test for our indefinite-lived intangible assets at May 31, 2020. At May 31, 2020 and August 1, 2020, 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~~Qualitative assessments were performed on the remainder of our indefinite-life intangible assets. In applying our quantitative assessment at both May 31, 2020 and August 1, ~~2019,~~2020, we recognized an impairment ~~loss of $291,000~~losses on certain exchange membership interests and registrations. With regard to our qualitative ~~assessment~~assessments of the remaining ~~indefinite-life~~indefinite life intangible assets, based on our ~~assessment~~assessments 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 the three and nine months ended August 31, 2019 and 2018, respectively. These expenses are included in Other expenses in our Consolidated Statements of Earnings.

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Amortization Expense

For finite life intangible assets, aggregate amortization expense amounted to $3.0 million and $9.3 million for the three and nine months ended August 31, 2020, respectively, and $3.0 million and $9.0 million for the three and nine months ended August 31, 2019, respectively. These expenses are included in Other expenses in our Consolidated Statements of Earnings.

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
Remainder of fiscal 2020			$	3,045
Year ending November 30, 2021	12,198		12,181
Year ending November 30, 2022	9,256		9,239
Year ending November 30, 2023	8,268		8,258
Year ending November 30, 2024			8,258

Note 11. Short-Term Borrowings

Short-term borrowings at August 31, ~~2019~~2020 and November 30, ~~2018~~2019 include the following and mature in one year or less (in thousands):


	August 31, 2019		November 30, 2018		August 31, 2020		November 30, 2019
Bank loans(1)	$	518,914	$	330,942	$	776,752	$	527,509
Floating rate puttable notes(1)	—		56,550		6,800		0
Equity-linked notes (2)					21,829		20,981
Total short-term borrowings	$	518,914	$	387,492	$	805,381	$	548,490


(1)	These Short-term borrowings are recorded at cost in our Consolidated Statements of Financial Condition, which is a reasonable approximation of their fair values due to their liquid and short-term nature.


(2)	See Note 4, Fair Value Disclosures, for further information on these notes.

At August 31, ~~2019,~~2020, the weighted average interest rate on short-term borrowings outstanding is ~~3.42%~~1.83% per annum. ~~Average daily short-term borrowings outstanding were $496.5 million and $580.8 million for~~

During 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.~~

~~Our~~2020, we issued floating rate puttable notes with a principal amount of ~~€50.0~~$6.8 million and equity-linked notes with a principal amount of $5.0 million and our equity-linked notes with a principal amount of $5.2 million matured on ~~July 29, 2019.~~March 13, 2020. Subsequent to quarter-end, on October 7, 2020, our equity-linked notes with a principal amount of $15.1 million matured.

~~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~~One of our subsidiaries ~~entered into~~has a credit facility agreement (“Credit Facility”) with JPMorgan Chase Bank, N.A. under which we have borrowed for a committed amount of ~~$135.0~~$246.0 million at August 31, 2020, 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 impose certain restrictions on the borrower’s future indebtedness. During the nine months ended August 31, ~~2019,~~2020, we were in compliance with all debt covenants under the Credit Facility.

One of our subsidiaries has a credit facility agreement with the Royal Bank of Canada (“RBC Credit Facility”) for a committed amount of $200.0 million, which is included in bank loans. Interest is based on a rate per annum equal to LIBOR plus an applicable margin of 2.05%. The RBC 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 impose certain restrictions on the borrower’s future indebtedness. At August 31, 2020, we were in compliance with all debt covenants under the RBC Credit Facility.

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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 is structured so that advances are generally repaid before the end of each business day. However, if an advance is not repaid by the end of any business day, the advance is converted to an overnight loan. Intraday loans accrue interest at a rate of 0.12%. Interest is charged based on the number of minutes in a day the advance is outstanding. Overnight loans are charged interest at the base rate plus 3% on a daily basis. The base rate is the higher of the federal funds rate plus 0.50% or the prime rate in effect at that time. The Intraday Credit Facility contains financial covenants, which 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.~~ At August 31, ~~2019,~~2020, 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, 2019		November 30, 2018		Maturity	Effective Interest Rate	August 31, 2020		November 30, 2019
Unsecured long-term debt:
8.500% Senior Notes	July 15, 2019	—%	$	—	$	699,659
2.375% Euro Medium Term Notes	May 20, 2020	2.42%	548,566		564,702		May 20, 2020	0%	$	0	$	550,622
6.875% Senior Notes	April 15, 2021	4.40%	779,078		791,814		April 15, 2021	4.40%	761,430		774,738
2.250% Euro Medium Term Notes	July 13, 2022	4.08%	4,171		4,243		July 13, 2022	4.08%	4,613		4,204
5.125% Senior Notes	January 20, 2023	4.55%	610,762		612,928		January 20, 2023	4.47%	760,999		610,023
1.000% Euro Medium Term Notes	July 19, 2024	1.00%	546,855		—		July 19, 2024	1.00%	594,965		548,880
4.850% Senior Notes (1)	January 15, 2027	4.93%	782,156		709,484		January 15, 2027	4.93%	814,873		768,931
6.450% Senior Debentures	June 8, 2027	5.46%	371,998		373,669		June 8, 2027	5.46%	369,662		371,426
4.150% Senior Notes	January 23, 2030	4.26%	988,440		987,788		January 23, 2030	4.26%	989,342		988,662
6.250% Senior Debentures	January 15, 2036	6.03%	511,363		511,662		January 15, 2036	6.03%	510,943		511,260
6.500% Senior Notes	January 20, 2043	6.09%	420,338		420,625		January 20, 2043	6.09%	419,931		420,239
Structured notes (2)	Various	Various	1,014,509		686,170		Various	Various	1,522,105		1,215,285
Total unsecured long-term debt			6,578,236		6,362,744				6,748,863		6,764,270
Secured long-term debt:
Revolving Credit Facility			188,927		183,539				189,571		189,088
Secured Bank Loan							September 27, 2021		50,000		50,000
Total long-term debt (3)			$	6,767,163	$	6,546,283			$	6,988,434	$	7,003,358

(1)

~~These senior notes with a principal amount of $750.0 million were issued on January 17, 2017.~~ The carrying value of these senior notes includes ~~a loss~~losses of ~~$72.3~~$45.5 million and ~~a gain of $24.1~~$72.3 million in the nine months ended August 31, ~~2019~~2020 and ~~2018,~~2019, 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.

(2)

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 transactions revenues. A weighted average coupon rate is not meaningful, as all of the structured notes are carried at fair value.


(3)	The ~~total~~Total Long-term debt has a fair value of ~~$7,046.6~~$7,465.6 million and ~~$6,423.6~~$7,280.4 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, respectively, which would be classified as Level 2 and Level 3 in the fair value hierarchy.

~~During~~The net decrease in long-term debt during the nine months ended August 31, ~~2019, long-term debt increased $220.9 million. This increase~~2020 is primarily due to the maturity and repayment of our 2.375% Euro Medium Term Notes, partially offset by approximately $244.4 million structured notes issuances, ~~with~~net of retirements, and a ~~total~~$150.0 million principal amount issuance of ~~approximately $283.2 million, net of retirements. In addition,~~additional 5.125% Senior Notes due 2023. Subsequent to quarter-end, on ~~July 19, 2019, under our $2.5 billion Euro Medium Term Note Program,~~October 7, 2020, we issued ~~1.000% senior unsecured notes~~2.75% Senior Notes with a principal amount of ~~$553.6~~$500.0 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, and structured notes with a total principal amount of approximately $162.6 million, net of retirements.

In addition, on January 5, 2018, our remaining convertible debentures ($324.8 million at November 30, 2017) were 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. In addition, in April 2018, our remaining 5.125% senior notes with a principal amount of $668.3 million were redeemed.

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2032.

We have a senior secured revolving credit facility (“Revolving Credit Facility”) with a group of commercial banks for an aggregate principal amount of $190.0 million. 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. Interest is based on an annual

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alternative base rate or an adjusted LIBOR, as defined in the Revolving Credit ~~Facility agreement.~~Facility. The obligations of certain of our subsidiaries under the Revolving Credit Facility are secured by substantially all its assets. At August 31, ~~2019,~~2020, we were in compliance with the debt covenants under the Revolving Credit Facility.

On September 27, 2019, one of our subsidiaries entered into a Loan and Security Agreement for a term loan with a principal amount of $50.0 million (“Secured Bank Loan”). This Secured Bank Loan matures on September 27, 2021 and is collateralized by certain trading securities. Interest on the Secured Bank Loan is 1.25% plus LIBOR. The agreement contains certain covenants that, among other things, restrict lien or encumbrance upon any of the pledged collateral. At August 31, 2020, we were in compliance with all covenants under the Loan and Security Agreement.

Note 13. Leases

We enter into lease and sublease agreements, primarily for office space, across our geographic locations. Finance lease ROU assets and finance lease liabilities are not material. Information related to operating leases in our Consolidated Statement of Financial Condition at August 31, 2020 was as follows (in thousands, except lease term and discount rate):



Premises and equipment - ROU assets	$	499,856

Weighted average:
Remaining lease term (in years)	11.1
Discount rate	2.9		%

The following table presents the maturities of our operating lease liabilities and a reconciliation to the Lease liabilities included in our Consolidated Statement of Financial Condition at August 31, 2020 (in thousands):



Fiscal Year	Lease Liabilities
Remainder of 2020	$	20,495
2021	69,850
2022	68,063
2023	60,928
2024	59,624
2025 and thereafter	398,951
Total undiscounted cash flows	677,911
Less: Difference between undiscounted and discounted cash flows	(104,595		)
Operating leases amount in our Consolidated Statement of Financial Condition	573,316
Finance leases amount in our Consolidated Statement of Financial Condition	247
Total amount in our Consolidated Statement of Financial Condition	$	573,563

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The following table presents our lease costs (in thousands):



	Three Months Ended August 31, 2020			Nine Months Ended August 31, 2020
Operating lease costs (1)	$	17,866		$	53,255
Variable lease costs (2)	3,413			9,379
Less: Sublease income	(1,475		)	(4,475		)
Total lease cost, net	$	19,804		$	58,159


(1)	Includes short-term leases, which are not material.


(2)	Includes property taxes, insurance costs, common area maintenance, utilities, and other costs that are not fixed. The amount also includes rent increases resulting from inflation indices and periodic market rent reviews.

Consolidated Statement of Cash Flows supplemental information was as follows (in thousands):



	Nine Months Ended August 31, 2020
Cash outflows - lease liabilities	$	54,001
Non-cash - ROU assets recorded for new and modified leases	20,756

Minimum Future Lease Commitments (under Previous GAAP). As lessee, we lease certain premises and equipment under non-cancelable agreements expiring at various dates through 2039 which are operating leases. At November 30, 2019, future minimum aggregate annual lease payments under such leases (net of subleases) for fiscal years ended November 30, 2020 through 2024 and the aggregate amount thereafter, were as follows (in thousands):



Fiscal Year	Operating Leases
2020	$	57,952
2021	60,395
2022	62,916
2023	57,574
2024	56,878
Thereafter	389,245
Total	$	684,960

The total minimum payments to be received in the future under non-cancelable subleases at November 30, 2019 was $16.2 million.

Rental expense, net of subleases, amounted to $61.2 million, $52.3 million, and $56.1 million for the years ended November 30, 2019, 2018 and 2017, respectively.

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Note ~~13.~~14. 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,				Three Months Ended August 31,				Nine Months Ended August 31,
	2019		2018		2019		2018		2020		2019		2020			2019
Revenues from contracts with customers:
Commissions and other fees ~~(1)~~	$	171,003	$	162,700	$	493,843	$	482,194	$	204,313	$	171,003	$	627,115		$	493,843
Investment banking	412,533		465,326		1,128,216		1,405,614		615,837		412,533		1,595,330			1,128,216
Asset management fees	3,340		5,184		14,559		16,130		1,613		3,340		8,254			14,559
Total revenue from contracts with customers	586,876		633,210		1,636,618		1,903,938		821,763		586,876		2,230,699			1,636,618
Other sources of revenue:
Principal transactions	148,873		143,308		632,002		498,583		560,665		148,873		1,399,850			632,002
Revenues from arrangements with strategic partners									5,159		880		14,814			1,791
Interest	383,596		305,347		1,163,022		870,490		195,960		383,596		702,569			1,163,022
Other	22,286		6,420		79,354		58,678		11,526		21,406		(6,020		)	77,563
Total revenues	$	1,141,631	$	1,088,285	$	3,510,996	$	3,331,689	$	1,595,073	$	1,141,631	$	4,341,912		$	3,510,996

~~(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.

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~~our Consolidated Statements of Financial Condition. Distribution fees are variable and recognized when the uncertainties with respect to the amounts are resolved.

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Investment Banking. We provide our clients with a full range of ~~capital markets and~~ financial advisory and underwriting 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.

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~~our 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~~our Consolidated Statements of Earnings and any expenses reimbursed by our clients are recognized as Investment banking revenues.

Underwriting 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-backed 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 underwriting offering at that point. Costs associated with underwriting 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 our 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.

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 (in thousands):


	Three Months Ended August 31,												Nine Months Ended August 31,												Three Months Ended August 31,												Nine Months Ended August 31,
	2019						2018						2019						2018						2020						2019						2020						2019
	Reportable Segment						Reportable Segment						Reportable Segment						Reportable Segment						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		Investment Banking and Capital Markets		Asset Management		Total		Investment Banking and Capital Markets		Asset Management		Total		Investment Banking and Capital Markets		Asset Management		Total		Investment Banking and Capital Markets		Asset Management		Total
Major business activity:
Equities (1)	$	167,528	$	—	$	167,528	$	159,693	$	—	$	159,693	$	483,771	$	—	$	483,771	$	471,683	$	—	$	471,683	$	201,157	$	0	$	201,157	$	167,528	$	0	$	167,528	$	614,089	$	0	$	614,089	$	483,771	$	0	$	483,771
Fixed income (1)	3,475		—		3,475		3,007		—		3,007		10,072		—		10,072		10,511		—		10,511		3,156		0		3,156		3,475		0		3,475		13,026		0		13,026		10,072		0		10,072
Investment banking - Capital markets	199,183		—		199,183		277,735		—		277,735		555,830		—		555,830		809,884		—		809,884
Investment banking - Advisory	213,350		—		213,350		187,591		—		187,591		572,386		—		572,386		595,730		—		595,730		171,438		0		171,438		213,350		0		213,350		696,677		0		696,677		572,386		0		572,386
Investment banking - Underwriting																									444,399		0		444,399		199,183		0		199,183		898,653		0		898,653		555,830		0		555,830
Asset management	—		3,340		3,340		—		5,184		5,184		—		14,559		14,559		—		16,130		16,130		0		1,613		1,613		0		3,340		3,340		0		8,254		8,254		0		14,559		14,559
Total	$	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	$	820,150	$	1,613	$	821,763	$	583,536	$	3,340	$	586,876	$	2,222,445	$	8,254	$	2,230,699	$	1,622,059	$	14,559	$	1,636,618
Primary geographic region:
Americas	$	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	$	684,441	$	244	$	684,685	$	476,983	$	1,937	$	478,920	$	1,858,137	$	1,790	$	1,859,927	$	1,288,046	$	8,818	$	1,296,864
Europe	88,890		1,403		90,293		62,914		—		62,914		280,605		5,741		286,346		203,103		—		203,103		90,132		1,369		91,501		88,890		1,403		90,293		237,652		6,464		244,116		280,605		5,741		286,346
Asia	17,663		—		17,663		18,893		—		18,893		53,408		—		53,408		56,202		—		56,202		45,577		0		45,577		17,663		0		17,663		126,656		0		126,656		53,408		0		53,408
Total	$	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	$	820,150	$	1,613	$	821,763	$	583,536	$	3,340	$	586,876	$	2,222,445	$	8,254	$	2,230,699	$	1,622,059	$	14,559	$	1,636,618


(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,~~19, Segment Reporting, for a further discussion on the allocation of revenues to geographic regions.

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, ~~2019.~~2020. 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, ~~2019.~~2020.

During the three and nine months ended August 31, ~~2019,~~2020, we recognized $15.6 million and $10.8 million, respectively, compared with $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,~~2019, 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 $4.3 million, and $14.4 million, during the three and nine months ended August 31, 2020, respectively, compared with $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, 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 ~~$205.8~~$252.9 million and ~~$199.0~~$209.3 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, respectively. We had no significant impairments related to these receivables during the three and nine months ended August 31, ~~2019~~2020 and ~~2018.~~2019.

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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 revenues at August 31, ~~2019~~2020 and November 30, ~~2018~~2019 were ~~$8.5~~$12.0 million and ~~$10.6~~$9.0 million, respectively, which are recorded in Accrued expenses and other liabilities in ~~the~~our Consolidated Statements of Financial Condition. During the three and nine months ended August 31, ~~2019,~~2020, we recognized revenues of ~~$9.4~~$15.4 million and $6.3 million, respectively, compared with ~~$2.2~~$9.4 million and ~~$4.0~~$6.3 million, respectively, during the three and nine months ended August 31, ~~2018,~~2019, respectively, that 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 costs to fulfill a contract are recognized at the point in time that the related revenue is recognized.

At August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, capitalized costs to fulfill a contract were ~~$4.4~~$2.8 million and ~~$4.7~~$4.8 million, respectively, which are recorded in Receivables – Fees, interest and other in ~~the~~our Consolidated Statements of Financial Condition. For the three and nine months ended August 31, ~~2019,~~2020, we recognized expenses of $0.8 million and $3.6 million, respectively, compared with $1.6 million and $3.8 million ~~respectively, compared with $1.5 million~~ for ~~both~~ the three and nine months ended August 31, ~~2018,~~2019, respectively, 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~~2020 and ~~2018.~~2019.

Note ~~14.~~15. Compensation Plans

Jefferies sponsors our following share-based compensation plans: the Incentive Compensation Plan, the Employee Stock Purchase Plan 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.

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,
	2019		2018		2019		2018		2020		2019		2020		2019
Components of compensation cost:
Restricted cash awards	$	72.3	$	60.0	$	205.1	$	183.6	$	67.5	$	72.3	$	223.5	$	205.1
Restricted stock and RSUs (1)	6.6		7.1		19.6		21.1		5.5		6.6		18.0		19.6
Profit sharing plan	1.2		1.1		6.4		5.6		1.5		1.2		6.9		6.4
Total compensation cost	$	80.1	$	68.2	$	231.1	$	210.3	$	74.5	$	80.1	$	248.4	$	231.1


(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, ~~2019~~2020 are as follows (dollars in millions):


	Remaining Unamortized Amounts		Weighted Average Vesting Period (in Years)	Remaining Unamortized Amounts		Weighted Average Vesting Period (in Years)
Non-vested share-based awards	$	53.7	3	$	35.4	2
Restricted cash awards(1)	498.1		3	606.2		3
Total	$	551.8		$	641.6

(1) The remaining unamortized amount is included within Other assets in our Consolidated Statement of Financial Condition.

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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 year ended November 30, ~~2018.~~2019.

Note ~~15.~~16. Income Taxes

At August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, we had approximately ~~$126.2~~$169.4 million and $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 ~~$99.8~~$133.9 million and ~~$99.4~~$99.5 million (net of Federal benefit) at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, 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, ~~2019~~2020 and November 30, ~~2018,~~2019, we had interest accrued of approximately ~~$53.9~~$63.8 million and ~~$49.3~~$55.6 million, respectively, included in Accrued expenses and other liabilities. NaN penalties were accrued for the nine months ended August 31, ~~2019~~2020 and the year ended November 30, ~~2018.~~2019.

We are currently under examination in 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	2016
~~California~~	~~2009~~
New Jersey	2010
New York State	2001
New York City	~~2003~~2006
United Kingdom	~~2016~~2018
Hong Kong	~~2013~~2014
India	2010
Italy	2012

~~During~~For the ~~quarter~~nine months ended ~~February 28, 2019, we increased~~August 31, 2020, the ~~provisional tax charge that had been recorded during the year ended November 30, 2018 by $0.2~~provision for income taxes was $203.9 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~~equating to ~~the write down of our deferred tax asset, reflecting the impact of a lower federal~~an effective 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 quarter ended February 28, 2019 and we have completed our accounting as it relates to the Tax Act.

The new tax on global intangible low-taxed income ("GILTI"), became applicable in fiscal 2019. As a result, we made an accounting policy election in the first quarter of 2019 to treat GILTI as a period cost if and when incurred.

26.4%. For the nine months ended August 31, 2019, the provision for income taxes was $79.8 million, equating to an effective tax rate of 26.5%. For the nine months ended August 31, 2018, the provision for income taxes was $234.3 million, equating to an effective tax 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 the enactment of the Tax Act.

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Note ~~16.~~17. Commitments, Contingencies and Guarantees

Commitments

The following table summarizes our commitments at August 31, ~~2019~~2020 (in millions):


	Expected Maturity Date (fiscal years)												Expected Maturity Date (fiscal years)
	2019		2020		2021 and 2022		2023 and 2024		2025 and Later		Maximum Payout		2020		2021		2022 and 2023		2024 and 2025		2026 and Later		Maximum Payout
Equity commitments (1)	$	—	$	123.5	$	—	$	—	$	11.5	$	135.0	$	0.2	$	106.7	$	1.4	$	0	$	7.2	$	115.5
Loan commitments (1)	—		250.0		54.1		12.0		—		316.1		0		295.0		35.0		0		0		330.0
Underwriting commitments	31.5		—		—		—		—		31.5		64.0		0		0		0		0		64.0
Forward starting reverse repos (2)	2,994.6		—		—		—		—		2,994.6		6,184.5		0		0		0		0		6,184.5
Forward starting repos (2)	4,082.9		—		—		—		—		4,082.9		3,870.8		100.0		0		0		0		3,970.8
Other unfunded commitments (1)	80.0		—		143.7		—		4.9		228.6		0		136.4		0		5.1		0		141.5
Total commitments	$	7,189.0	$	373.5	$	197.8	$	12.0	$	16.4	$	7,788.7	$	10,119.5	$	638.1	$	36.4	$	5.1	$	7.2	$	10,806.3


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


(2)	~~$2,991.6~~At August 31, 2020, $6,183.8 million within forward starting securities purchased under agreements to resell and ~~all of the~~$3,670.6 million within forward starting 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 one of our directors and Chairman of the Executive Committee. At August 31, ~~2019,~~2020, our outstanding commitments relating to Jefferies Capital Partners, LLC and its private equity funds were ~~$17.7~~$11.2 million.

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

Additionally, at August 31, ~~2019,~~2020, we had other outstanding equity commitments to invest up to ~~$11.0~~$6.7 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, ~~2019,~~2020, we had ~~$66.1~~$80.0 million of outstanding loan commitments to clients.

Loan commitments outstanding at August 31, ~~2019~~2020 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, ~~2019~~2020 (in millions):


	Expected Maturity Date (Fiscal Years)												Expected Maturity Date (Fiscal Years)
	2019		2020		2021 and 2022		2023 and 2024		2025 and Later		Notional/ Maximum Payout		2020		2021		2022 and 2023		2024 and 2025		2026 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	$	6,295.6	$	4,149.9	$	6,458.1	$	1,345.6	$	52.0	$	18,301.2
Written derivative contracts—credit related	—		32.9		—		39.2		—		72.1		0		0		1.0		5.4		0		6.4
Total derivative contracts	$	7,075.0	$	4,148.4	$	4,627.6	$	3,651.2	$	320.6	$	19,822.8	$	6,295.6	$	4,149.9	$	6,459.1	$	1,351.0	$	52.0	$	18,307.6

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, ~~2019,~~2020, the fair value of derivative contracts meeting the definition of a guarantee is approximately ~~$239.0~~$197.9 million.

Standby Letters of Credit. At August 31, ~~2019,~~2020, we provided guarantees to certain counterparties in the form of standby letters of credit ~~totaling $36.9~~in the amount of $20.4 million, all of 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.

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. Additionally, we provide certain indemnifications in connection with third-party clearing and execution arrangements whereby a third party may clear and settle transactions on behalf of our clients. These indemnifications generally have standard contractual terms and are entered into in the ordinary course of business. Our obligations in respect of such transactions are secured by the assets in our client’s account, as well as any proceeds received from the transactions cleared and settled on behalf of our client. However, we believe that it is unlikely we would have to make any material payments under these arrangements and no material liabilities related to these indemnifications have been recognized.

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Note ~~17.~~18. Net Capital Requirements

As a broker-dealer registered with the SEC and a member ~~firms~~firm 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, ~~2019,~~2020, 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	$	1,612,465	$	1,531,871

FINRA is the designated examining authority for ~~our U.S. broker-dealer~~Jefferies LLC 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.~~19. Segment Reporting

We operate in 2 reportable business segments – (1) Investment Banking and Capital Markets and (2) Asset Management. The Investment Banking and Capital Markets reportable business segment includes our securities, commodities, futures and foreign exchange ~~trading~~capital markets activities and investment banking business, which is composed of ~~underwriting and~~ financial advisory and underwriting activities. The Investment Banking and 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 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.

In the fourth quarter of 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,
2019 2018 2019 2018
Capital Markets:
Net revenues $ 757.4
$ 767.0
$ 2,274.9
$ 2,389.0
Non-interest expenses 671.2
678.6
1,991.0
2,048.8
Earnings before income taxes $ 86.2
$ 88.4
$ 283.9
$ 340.2
Asset Management:

Net revenues $ 19.8
$ 10.6
$ 89.8
$ 32.4
Non-interest expenses 22.9
11.9
72.9
40.9
Earnings (loss) before income taxes $ (3.1 ) $ (1.3 ) $ 16.9
$ (8.5 )
Total:

Net revenues $ 777.2
$ 777.6
$ 2,364.7
$ 2,421.4
Non-interest expenses 694.1
690.5
2,063.9
2,089.7
Earnings before income taxes $ 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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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,
	2020		2019			2020		2019
Investment Banking and Capital Markets:
Net revenues	$	1,274.1	$	757.4		$	3,451.8	$	2,274.9
Non-interest expenses	992.7		671.2			2,706.0		1,991.0
Earnings before income taxes	$	281.4	$	86.2		$	745.8	$	283.9
Asset Management:
Net revenues	$	109.3	$	19.8		$	136.7	$	89.8
Non-interest expenses	27.3		22.9			110.9		72.9
Earnings (loss) before income taxes	$	82.0	$	(3.1	)	$	25.8	$	16.9
Total:
Net revenues	$	1,383.4	$	777.2		$	3,588.5	$	2,364.7
Non-interest expenses	1,020.0		694.1			2,816.9		2,063.9
Earnings before income taxes	$	363.4	$	83.1		$	771.6	$	300.8

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



	August 31, 2020		November 30, 2019
Investment Banking and Capital Markets	$	43,552.0	$	40,565.8
Asset Management	3,108.4		2,950.3
Total assets	$	46,660.4	$	43,516.1

Net Revenues by Geographic Region

Net revenues for the Investment Banking and Capital ~~Market~~Markets 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,
	2019		2018		2019		2018		2020		2019		2020		2019
Americas (1)	$	613.4	$	639.7	$	1,871.3	$	2,042.4	$	1,102.6	$	613.4	$	2,807.0	$	1,871.3
Europe (2)	136.9		115.9		413.6		313.4		209.1		136.9		558.0		413.6
Asia	26.9		22.0		79.8		65.6		71.7		26.9		223.5		79.8
Net revenues	$	777.2	$	777.6	$	2,364.7	$	2,421.4	$	1,383.4	$	777.2	$	3,588.5	$	2,364.7


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


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

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Note ~~19.~~20. Related Party Transactions

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

At August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, we had ~~$34.9~~$30.8 million and ~~$39.3~~$34.8 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.

In June 2020, we sold an investment in a limited partnership to one of our employees for $0.5 million.

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~~had an investment in a hedge fund managed by us of approximately $3.6 million ~~and $4.6 million~~ at ~~August 31, 2019 and~~ November 30, ~~2018, respectively.~~2019. In May 2020, the director fully redeemed his interest in this fund due to the wind down of an asset management platform.

See Note 8, Variable Interest Entities, and Note ~~16,~~17, Commitments, Contingencies and Guarantees, for further information regarding related party transactions with our officers, directors and employees.

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

We provide services to and receive services from Jefferies under service agreements (in millions):

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

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~~(Unaudited)~~



	Three Months Ended August 31,				Nine Months Ended August 31,
	2020		2019		2020		2019
Charges to Jefferies for services provided	$	13.8	$	9.8	$	34.3	$	36.1
Charges from Jefferies for services received	4.2		6.4		19.6		7.8

We also provide investment banking and 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,
	2019		2018		2019		2018		2020		2019		2020		2019
Investment banking	$	2.4	$	5.6	$	10.3	$	5.6	$	0	$	2.4	$	0	$	10.3
Commissions and other fees	—		0.1		0.3		0.5		0.4		1.1		1.1		2.3
Principal transactions	—		—		—		0.1
Other revenues	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:~~Condition (in millions):


	August 31, 2019		November 30, 2018		August 31, 2020		November 30, 2019
Receivable from Jefferies	$	2.1	$	1.2	$	3.2	$	0.9
Payable to Jefferies	8.7		2.9		0		4.3

During the nine months ended August 31, ~~2019,~~2020, we paid distributions of ~~$108.7~~$164.7 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.~~2020. At August 31, ~~2019,~~2020, we have accrued a distribution payable of ~~$32.5~~$134.0 million, based on our results for the three months ended August 31, ~~2019.~~2020.

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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, ~~2019, a net current tax receivable of $5.6 million is included in Other assets, and at November 30, 2018,~~2020, a net current tax payable to Jefferies of ~~$34.1~~$206.7 million is included in Accrued expenses and other liabilities, in our Consolidated Statements of Financial Condition. ~~In December 2018,~~At November 30, 2019, a net current tax receivable from Jefferies of $24.4 million is included in Other assets, in our Consolidated Statements of Financial Condition. During the three and nine months ended August 31, 2020, we made ~~a payment~~payments of ~~$35.0~~$10.0 million and $42.0 million, respectively, to Jefferies, which reduced the cumulative net current tax ~~payable balance.~~payable.

~~During the three~~We purchase securities from and ~~nine months ended August 31, 2019, we sold~~sell securities to Jefferies, 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, at fair value.(in millions). There were 0 gains or losses on these transactions.



	Three Months Ended August 31,				Nine Months Ended August 31,
	2020		2019		2020		2019
Securities purchased from Jefferies	$	20.2	$	0	$	60.1	$	885.6
Securities sold to Jefferies	0.1		22.9		0.1		40.8

•

WeIn connection with foreign exchange contracts entered into under 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~~$2.7 million and $9.9 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, 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.~~organizations.

We enter into OTC foreign exchange contracts with a subsidiary of Jefferies. In connection with these contracts, we had $0.1 million included in Financial instruments owned, at fair value and $0.6 million included in Financial instruments sold, not yet purchased, at fair value, in our Consolidated Statements of Financial Condition at August 31, 2020 and November 30, 2019, respectively. Net gains (losses) relating to these contracts, which are included in Principal transactions revenues in our Consolidated Statements of Earnings, are as follows (in millions):



	Three Months Ended August 31,				Nine Months Ended August 31,
	2020		2019		2020		2019
Net gains on foreign exchange contracts	$	0.6	$	1.2	$	1.6	$	1.9

Two of our directors ~~have~~had investments totaling ~~$2.5 million and $2.7~~$0.4 million at ~~August 31, 2019 and~~ November 30, ~~2018, respectively,~~2019 in a hedge fund managed by Jefferies. In December 2019, both directors fully redeemed their interests in this fund.

We have investments in hedge funds managed by Jefferies of ~~$222.1~~$237.0 million and ~~$218.7~~$223.5 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, 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, are as follows (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



	Three Months Ended August 31,				Nine Months Ended August 31,
	2020		2019		2020		2019
Net gains from our investments	$	7.7	$	1.0	$	14.0	$	3.3

•

In connection with our ~~sales and trading~~capital markets 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~~2020 and November 30, ~~2018,~~2019, approximately ~~$3.1~~$2.5 million and ~~$0.3~~$0.1 million, respectively, of debt issued by Jefferies ~~are~~is included in Financial instruments owned, at fair value in our Consolidated Statements of Financial Condition.


•	We have entered into a sublease agreement with an affiliate of Jefferies for office space. For the three and nine months ended August 31, 2020, we received payments for rent and other expenses of $0.2 million and $0.6 million, respectively, from this affiliate.

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~~(Unaudited)~~

~~HRG Group Inc. (“HRG”).~~ ~~We recognized investment banking revenues of $3.0~~In June 2020, Jefferies paid us $2.9 million for the ~~three and nine months ended August 31, 2018 in connection with the merger~~transfer of ~~HRG into Spectrum Brands Holdings, Inc.,~~one of its asset management divisions, which ~~is partially owned by Jefferies.~~included a net related liability to us.

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

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JEFFERIES GROUP LLC AND SUBSIDIARIES

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, ~~2018~~2019 and filed with the Securities and Exchange Commission (“SEC”) on January 29, ~~2019;~~2020;

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 II, Item 1A in this Quarterly Report on Form 10-Q and Part I, Item IA1A of our Annual Report on Form 10-K for the year ended November 30, ~~2018.~~2019.

During March 2020, the global novel coronavirus (“COVID-19”) pandemic and initial actions taken in response wreaked havoc on the global economy and all financial markets, and adversely affected our businesses. Subsequently, with various government actions and more clarity from the U.S. Federal Reserve Bank on future interest rate policy, the equity markets have experienced a strong rebound and a supportive trading environment for investors has emerged along with renewed activity in the equity and debt new issue capital markets. We have experienced strong market volumes and increased client activity across our capital markets business with considerably improved performance. Our investment banking backlog remains solid and our current level of incoming new business is strong.

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JEFFERIES GROUP LLC AND SUBSIDIARIES

Consolidated Results of Operations

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
	2019			2018					2019				2018				2020				2019				2020				2019						% Change
Net revenues	$	777,159		$	777,615		% Change	(0.1	)%		$	2,364,728			$	2,421,418		% Change			(2.3	)%	$	1,383,444		$	% Change	777,159		78.0	%	$	3,588,507		$	2,364,728	51.8	%
Non-interest expenses	694,084			690,514			0.5	%		2,063,930				2,089,714				(1.2	)%	1,020,043				694,084			47.0	%	2,816,860			2,063,930			36.5	%
Earnings before income taxes	83,075			87,101			(4.6	)%		300,798				331,704				(9.3	)%	363,401				83,075			337.4	%	771,647			300,798			156.5	%
Income tax expense	18,250			26,923			(32.2	)%		79,789				234,337				(66.0	)%	95,870				18,250			425.3	%	203,855			79,789			155.5	%
Net earnings	64,825			60,178			7.7	%		221,009				97,367				127.0	%	267,531				64,825			312.7	%	567,792			221,009			156.9	%
Net earnings (loss) attributable to noncontrolling interests	(143		)	(4		)	N/M			140				(1		)		N/M		(531		)		(143	)		271.3	%	(4,397		)	140			N/M
Net earnings attributable to Jefferies Group LLC	64,968			60,182			8.0	%		220,869				97,368				126.8	%	268,062				64,968			312.6	%	572,189			220,869			159.1	%

Effective tax rate	22.0		%	30.9		%	(28.8	)%		26.5		%		70.6		%		(62.5	)%	26.4		%		22.0	%				26.4		%	26.5		%

N/M — Not Meaningful

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~~JEFFERIES GROUP LLC AND SUBSIDIARIES~~

Executive Summary

Three Months Ended August 31, ~~2019~~2020

Consolidated Results

Net revenues for the three months ended August 31, ~~2019~~2020 were ~~$777.2~~a record of $1,383.4 million, up 78.0% compared with ~~$777.6~~$777.2 million for the three months ended August 31, ~~2018.~~2019.

Our results in the three months ended August 31, ~~2019~~2020 reflect ~~solid~~record results in our investment banking business, record equities net revenues, strong fixed income net revenues, and record performance in ~~equities, fixed income,~~asset management. Our record results reflect our increasing market share as a result of our continual investment ~~banking~~in expanding and ~~asset management.~~

Westrengthening our business, which includes our longstanding and significant position in the U.S., our meaningfully strengthened effort in Europe and our growing presence across Asia, as well as a strong trading backdrop as our clients continued to ~~maintain strong leverage ratios and liquidity and a strong capital base during~~navigate the ~~three months ended August 31, 2019.~~COVID-19 pandemic.

Business Results

Our investment banking net revenues of $588.8 million for the three months ended August 31, ~~2019~~2020 were ~~relatively flat as compared to~~an increase of 46.0% from the ~~three months ended August 31, 2018. The results reflect~~prior year quarter, reflecting record revenues in equity underwriting and solid ~~equities and fixed income net revenues, as well as increased asset management revenues due to higher investment returns,~~performance in debt underwriting, partially offset by lower revenues in mergers and acquisitions. Our record results in equity underwriting and our solid performance in debt underwriting was a result of clients taking advantage of both a strong rebound in equity valuations, and in loan and bond prices to raise capital. Our advisory revenues were lower than the prior year quarter due to the impact of the uncertainty created by COVID-19 on initiating and completing merger and acquisition transactions. Our investment banking ~~revenues.~~backlog remains solid across all products.

Our investment banking results also include a net loss of $11.8 million from our share of the net earnings of our Jefferies Finance LLC (“Jefferies Finance”) joint venture, compared with a net loss of $8.2 million from our share of the net earnings from our Jefferies Finance joint venture in the prior year quarter, which included $12.5 million in costs from refinancing its debt.

Our record equities net revenues increased ~~13.3%~~65.0% compared to the prior year quarter, primarily due to ~~higher results across many~~the continued expansion of our ~~core equities sales~~business both from a product and ~~trading businesses.~~geographic perspective, as well as increased market volumes.

Our fixed income net revenues were solid and improved by ~~6.1%~~126.7% compared to the prior year quarter, ~~primarily due to~~driven by continued strong ~~trading volumes during June~~client activity across products and July, which were partially offset by 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 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 in our other business category in the three months ended August 31, 2019 were $12.4 million, compared with $4.9 million in the prior year quarter. Results in the current year quarter include net revenues of $24.3 million due to our share of income from Berkadia Commercial Mortgage Holding LLC (“Berkadia”), which was transferred to us on October 1, 2018 from Jefferies Financial Group Inc. (“Jefferies”).

~~Expenses~~

~~Non-interest expenses for the three months ended August 31, 2019 increased $3.6 million to $694.1 million, compared with $690.5 million for the three months ended August 31, 2018.~~

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

~~Consolidated Results~~

~~Net revenues for the nine months ended August 31, 2019 were $2,364.7 million, compared with $2,421.4 million for the nine months ended August 31, 2018, a decrease of $56.7 million, or 2.3%.~~

Our results in the nine months ended August 31, 2019 reflect 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.geographies.

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Record asset management net revenues of $109.3 million for the three months ended August 31, 2020, were meaningfully higher than the $19.8 million recorded in the prior year quarter, primarily as a result of higher investment returns. Since the prior year quarter, we made capital investments in several new separately managed accounts and funds. In addition, our results reflect improved performance across most of our historical platforms.

Net revenues in our other business category in the three months ended August 31, 2020 were $30.1 million, compared with net revenues of $12.4 million in the prior year quarter. Results in the current year quarter include net revenues of $18.5 million due to our share of the net income of Berkadia Commercial Mortgage Holding LLC (“Berkadia”) compared with $24.3 million in the prior year quarter. The results in the current year quarter also include unrealized net mark-to-market gains related to certain investments, compared with mark-to-market losses in the prior year quarter.

Expenses

Non-interest expenses for the three months ended August 31, 2020 increased $325.9 million to $1,020.0 million, compared with $694.1 million for the prior year quarter, consistent with the higher net revenues in our core operating businesses.

Compensation and benefits expense for the three months ended August 31, 2020 was $725.6 million, an increase of $313.7 million, or 76.1%, from the comparable prior year quarter, consistent with higher net revenues. Compensation and benefits expense as a percentage of Net revenues was 52.4% for the three months ended August 31, 2020, compared with 53.0%, in the prior year quarter.

Non-compensation expenses for the three months ended August 31, 2020 increased $12.4 million, or 4.4%, to $294.5 million, compared with $282.1 million for the three months ended August 31, 2019. The increase in non-compensation expenses was primarily due to increased Underwriting costs and Floor brokerage and clearing fees on increased volumes, as well as higher Technology and communication expenses, partially offset by lower Business development expenses.

Nine Months Ended August 31, 2020

Consolidated Results

Net revenues for the nine months ended August 31, ~~2019, as~~2020 were a record of $3,588.5 million, compared towith $2,364.7 million for the nine months ended August 31, ~~2018, reflects solid performance~~2019.

Our record results in the nine months ended August 31, 2020 reflect record net revenues in all of investment banking, equities, fixed income and asset management for the period. We believe our record equities and fixed income ~~as these businesses successfully navigated~~net revenues were primarily due to increasing market share, higher trading volumes and increased levels of volatility resulting primarily from the impact of COVID-19, and ~~benefited from increased investment returns~~the effect of governments’ policy response on the markets in ~~asset management. The results were offset by below-normal investment banking revenues.~~the second and third quarter of the current year.

Business Results

Our ~~equities~~ net revenues ~~improved 14.4%~~for the nine months ended August 31, 2020 increased 51.8% as compared to the prior ~~year period, primarily due to increases across most~~nine months ended August 31, 2019. These results reflect record nine months performance in mergers and acquisitions, record net revenues in equity underwriting and solid performance in debt underwriting, as well as record net revenues in all of ~~our core~~ equities, ~~businesses~~fixed income and ~~lower losses in block positions.~~asset management.

Our ~~fixed income net~~investment banking results were strong during the nine months ended August 31, 2020, reflecting record nine month performance in mergers and acquisitions, record results in equity underwriting and solid performance in debt underwriting. Our advisory revenues ~~increased 9.6%~~were a record $696.7 million, an increase of 21.7%, or $124.3 million, compared to the prior ~~year period,~~nine months ended August 31, 2019, while our underwriting revenues for the nine months ended August 31, 2020 were $898.7 million, up $334.8 million, or 59.4%, with broad contribution across sectors.

Our investment banking results also include a net loss of $51.1 million from our share of the net earnings of our Jefferies Finance joint venture, reflecting unrealized losses related to the write-down of commitments and loans held-for-sale, as well as reserves recorded on the loan portfolio, primarily due to ~~more active~~the impact of COVID-19 on the markets ~~throughout most~~and the economy. This compares with net revenues of $15.7 million from our share of the ~~current period. The increase was partially offset by increased volatility~~net earnings from our Jefferies Finance joint venture in ~~U.S. Rates markets and increased volatility~~the prior year period, inclusive of $12.5 million in ~~risk assets.~~

~~Our~~costs from refinancing its debt. Other investment banking results during the nine months ended August 31, ~~2019~~2020 also includes a $28.5 million write-down of an investment.

Our record equities net revenues reflect ~~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~~an increase of 39.7% compared ~~with~~to the prior year period, ~~due to the severe market downturn in December, which heavily muted issuance activity. This~~driven by strong results across most businesses. Our strong performance was ~~exacerbated by the five-week shutdown~~a result of the ~~U.S. Government in late December~~continued expansion of our business both from a product and ~~January, which further dampened new issue transactions~~geographic perspective, increased market volumes and strong client activity and continued momentum across our client franchise. We increased our market share globally in the ~~capital markets.~~ first half of this year and remain positioned to be able to respond to our clients’ dynamic needs.

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Our capital markets revenues for the period were $563.8 million, down $246.1 million, or 30.4%, from 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~~record fixed income net revenues of $15.7 million in the current year period from our 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 dueimproved by 107.9% compared to ~~the volatility experienced in the leveraged finance markets during the first and third quarters of this year.~~

~~Net revenues 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 strong trading volumes, as clients continued to navigate through uncertainty, and the businesses having successfully managed through the markets’ high level of volatility during the period.

Asset management record net revenues of $136.7 million for the nine months ended August 31, 2020 were higher than the $89.8 million recorded in the prior year period, primarily as a result of higher investment returns. Since the prior year period, we made capital investments in several new separately managed accounts and funds. In addition, our results reflect improved performance across most of our historical platforms.

Net revenues in our other business category in the nine months ended August 31, ~~2019~~2020 were ~~$53.6~~$90.0 million, compared with ~~$22.9~~$53.6 million in the prior year period. Results in the current year period include gains of $61.5 million from hedges that were bought and sold in the first quarter. Results in the current year period also include net revenues of ~~$72.2~~$40.4 million due to our share of the net income ~~from~~of Berkadia, compared with ~~foreign currency gains, which were recognized~~net revenues of $72.2 million from Berkadia in the prior year period.

Expenses

Non-interest expenses for the nine months ended August 31, ~~2019 decreased $25.8~~2020 increased $753.0 million ~~or 1.2%,~~ to ~~$2,063.9~~$2,816.9 million, compared with ~~$2,089.7~~$2,063.9 million for the ~~nine months ended August 31, 2018.~~prior year period, consistent with the higher net revenues in our core operating businesses.

Compensation and benefits expense for the nine months ended August 31, ~~2019~~2020 was ~~$1,261.5~~$1,932.3 million, ~~a decrease~~an increase of ~~$66.3~~$670.8 million, or ~~5.0%~~53.2%, from the comparable prior year ~~period.~~period, consistent with the 51.8% growth in net revenues. Compensation and benefits expense as a percentage of Net revenues was ~~53.3%~~53.8% for the nine months ended August 31, ~~2019,~~2020, compared with ~~54.8%~~53.3% in the prior year period.

Non-compensation expenses for the nine months ended August 31, ~~2019~~2020 increased ~~$40.4~~$82.1 million, or ~~5.3%~~10.2%, to ~~$802.4~~$884.5 million, compared with ~~$762.0~~$802.4 million for the nine months ended August 31, ~~2018.~~2019. The increase in non-compensation expenses was primarily due to increased Floor brokerage and clearing fees and Underwriting costs, as well as higher Technology and communication expenses and higher Other expenses, which included our charitable donations of $8.6 million, in memory of Peg Broadbent, our longstanding, esteemed Chief Financial Officer (“CFO”) who tragically died from complications of COVID-19 in March, which was partially offset by lower Business development expenses as business travel and events were curtailed due to COVID-19.

Headcount

At August 31, ~~2019,~~2020, we had ~~3,776~~3,893 employees globally, an increase of ~~250~~117 employees from our headcount of ~~3,526~~3,776 at August 31, ~~2018.~~2019. Our headcount increased primarily as a result of ~~continued hiring~~our expansion in ~~investment banking, asset management~~equities and ~~equities, as well as~~research in Asia and Australia. We also had continued additions in corporate ~~services.~~services to support business growth. The increase was partially offset by reductions in our asset management business due to the wind down of an asset management platform.

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~~JEFFERIES GROUP LLC AND SUBSIDIARIES~~

Revenues by Source

For presentation purposes, the remainder of ~~“Results~~“Consolidated Results of Operations” is presented on a detailed product and expense basis, rather than on a business segment basis. Net revenues presented for our Investment Banking and 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.

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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,												Three Months Ended August 31,												Nine Months Ended August 31,
	2019					2018							2019					2018							2020					2019							2020					2019
	Amount			% of Net Revenues		Amount			% of Net Revenues		% Change		Amount			% of Net Revenues		Amount			% of Net Revenues		% Change		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	%
Advisory																									$	171,438		12.4	%	$	213,350		27.5	%	(19.6	)%	$	696,677		19.4	%	$	572,386		24.2	%	21.7	%

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	)%
Equity underwriting																									305,380			22.1		97,494			12.5		213.2	%	561,455			15.6		256,853			10.8		118.6	%
Debt underwriting																									139,019			10.0		101,689			13.1		36.7	%	337,198			9.4		306,977			13.0		9.8	%
Total underwriting																									444,399			32.1		199,183			25.6		123.1	%	898,653			25.0		563,830			23.8		59.4	%
Other investment banking	(9,108		)	(1.2	)	(13,732		)	(1.8	)	(33.7	)%	(7,116		)	(0.3	)	(13,885		)	(0.6	)	(48.8	)%	(27,013		)	(2.0	)	(9,108		)	(1.2	)	196.6	%	(112,776		)	(3.1	)	(7,116		)	(0.3	)	N/M
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	)%	588,824			42.5		403,425			51.9		46.0	%	1,482,554			41.3		1,129,100			47.7		31.3	%

Equities																									318,824			23.0		193,229			24.9		65.0	%	801,596			22.3		573,851			24.3		39.7	%
Fixed income																									336,347			24.3		148,334			19.1		126.7	%	1,077,673			30.0		518,346			21.9		107.9	%
Total capital markets																									655,171			47.3		341,563			44.0		91.8	%	1,879,269			52.3		1,092,197			46.2		72.1	%

Other	12,374			1.6		4,910			0.6		152.0	%	53,587			2.3		22,868			0.9		134.3	%	30,120			2.3		12,374			1.6		143.4	%	89,953			2.6		53,587			2.3		67.9	%

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	)%
Total Investment Banking and Capital Markets (1) (2)																									1,274,115			92.1		757,362			97.5		68.2	%	3,451,776			96.2		2,274,884			96.2		51.7	%

Asset management fees	3,340			0.4		5,184			0.7		(35.6	)%	14,559			0.6		16,130			0.7		(9.7	)%
Asset management fees and revenues																									6,772			0.5		4,220			0.5		60.5	%	23,068			0.6		16,350			0.7		41.1	%
Investment return (3) (4)	25,746			3.3		14,483			1.9		77.8	%	106,233			4.5		40,754			1.7		160.7	%	115,556			8.4		24,866			3.2		364.7	%	150,339			4.2		104,442			4.4		43.9	%
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	%	(12,999		)	(1.0	)	(9,289		)	(1.2	)	39.9	%	(36,676		)	(1.0	)	(30,948		)	(1.3	)	18.5	%
Total Asset Management	19,797			2.5		10,654			1.5		85.8	%	89,844			3.8		32,464			1.4		176.7	%	109,329			7.9		19,797			2.5		452.3	%	136,731			3.8		89,844			3.8		52.2	%

Net revenues	$	777,159		100.0	%	$	777,615		100.0	%	(0.1	)%	$	2,364,728		100.0	%	$	2,421,418		100.0	%	(2.3	)%	$	1,383,444		100.0	%	$	777,159		100.0	%	78.0	%	$	3,588,507		100.0	%	$	2,364,728		100.0	%	51.8	%


(1)	Includes net interest revenues ~~(expenses)~~ of $3.3 million and $5.4 million for the three and nine months ended August 31, 2020, respectively, and $30.4 million and $51.4 million for the 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,~~ respectively.


(2)	Allocated net interest is not separately disaggregated ~~in presenting our~~for Investment Banking and Capital ~~Markets reportable segment within our Net Revenues by Source.~~Markets. This presentation is aligned to our Investment Banking and Capital Markets internal performance measurement.

(3)

~~Beginning with the first quarter of 2019,~~ Net revenues attributed to the Investment return in ~~our~~ Asset Management ~~reportable segment~~ have been disaggregated to separately present Investment return and Allocated net interest (see footnote 45 below). This disaggregation is intended to increase transparency and to make clearer actual Investment return. ~~We offer third-party investors the opportunity to co-invest 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 amount that is unique to our credit spreads, debt maturity profile, capital structure, liquidity risks and allocation ~~methods, none of which are pertinent to the Investment returns generated by the performance of the portfolio.~~methods.


(4)	Includes net interest expenses of $6.0 million and $19.6 million for the three and nine months ended August 31, 2020, respectively, and $2.0 million and $3.7 million 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.


(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~~

Investment Banking Revenues

Investment banking is comprised of revenues from:

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

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

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
	2020			2019			% Change		2020			2019			% Change

Advisory	$	171,438		$	213,350		(19.6	)%	$	696,677		$	572,386		21.7	%

Equity underwriting	305,380			97,494			213.2	%	561,455			256,853			118.6	%
Debt underwriting	139,019			101,689			36.7	%	337,198			306,977			9.8	%
Total underwriting	444,399			199,183			123.1	%	898,653			563,830			59.4	%
Other investment banking	(27,013		)	(9,108		)	196.6	%	(112,776		)	(7,116		)	1,484.8	%
Total investment banking	$	588,824		$	403,425		46.0	%	$	1,482,554		$	1,129,100		31.3	%

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



	Deals Completed				Aggregate Value
	Three Months Ended August 31,		Nine Months Ended August 31,		Three Months Ended August 31,				Nine Months Ended August 31,
	2020	2019	2020	2019	2020		2019		2020		2019
Advisory transactions (1)	48	51	149	147	$	29.3	$	110.2	$	110.3	$	211.3
Public and private debt financings	213	292	449	565	72.2		43.7		185.4		124.7
Public and private equity and convertible offerings (2)	99	45	205	115	34.5		14.2		71.7		34.6

(1)

The number of ~~our sources of liquidity, refer to~~advisory deals completed includes nine and 19 restructuring and recapitalization transactions during the ~~“Liquidity, Financial Condition~~three and ~~Capital Resources” section herein.~~nine months ended August 31, 2020, respectively, and three and 12 restructuring and recapitalization transactions during the three and nine months ended August 31, 2019, respectively.


(2)	We acted as sole or joint bookrunner on 99 and 199 offerings during the three and nine months ended August 31, 2020, respectively, and 44 and 112 offerings during the three and nine and August 31, 2019, respectively.

Three Months Ended August 31, 2020

Investment banking revenues were a record for the three months ended August 31, 2020 of $588.8 million, compared with $403.4 million for the three months ended August 31, 2019, reflecting record revenues in equity underwriting and solid performance in debt underwriting, partially offset by lower revenues in mergers and acquisitions.

Our underwriting revenues for the three months ended August 31, 2020 were $444.4 million, an increase of 123.1% from $199.2 million in the prior year quarter, due to record results in equity underwriting and solid performance in debt underwriting as clients took advantage of both a strong rebound in equity valuations, and in loan and bond prices to raise capital. Our advisory revenues were $171.4 million, or 19.6% lower than the prior year quarter, primarily due to the impact of the uncertainty created by COVID-19 on initiating and completing merger and acquisition transactions. From equity and debt underwriting activities, we generated $305.4 million and $139.0 million in revenues, respectively, for the three months ended August 31, 2020, compared with $97.5 million and $101.7 million in revenues, respectively, in the prior year quarter.

Other investment banking revenues were a loss of $27.0 million for the three months ended August 31, 2020, compared with a loss of $9.1 million for the three months ended August 31, 2019. Other investment banking revenues during the three months ended August 31, 2020 include a net loss of $11.8 million from our share of the net earnings of our Jefferies Finance joint venture, reflecting losses related to reserves recorded on the loan portfolio during the current year quarter, primarily due to the impact of COVID-19 on the markets and economy. This compares with a net loss of $8.2 million from our share of the net results from our Jefferies Finance joint venture in the prior year quarter, which included $12.5 million in costs from refinancing its debt. The results in both quarters also include the amortization of costs and allocated interest expense related to our investment in the Jefferies Finance business.

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Nine Months Ended August 31, 2020

Investment banking revenues were a record of $1,482.6 million for the nine months ended August 31, 2020, compared with $1,129.1 million in the prior year period, reflecting record performance in mergers and acquisitions, record results in equity underwriting and solid performance in debt underwriting. The prior year period results were impacted by the significant industry-wide decline in equity and leverage finance activity across the U.S. and Europe during the period.

Our advisory revenues were a record $696.7 million, up $124.3 million, or 21.7% higher than the prior year period, reflecting record performance in our mergers and acquisitions business. Our underwriting revenues for the nine months ended August 31, 2020 were $898.7 million, an increase of $334.8 million, or 59.4%, from the same period last year, due to record results in equity underwriting and solid performance in debt underwriting, with broad contribution across sectors. From equity and debt underwriting activities, we generated $561.5 million and $337.2 million in revenues, respectively, for the nine months ended August 31, 2020, compared with $256.9 million and $307.0 million in revenues, respectively, in the prior year period.

Other investment banking revenues were a loss of $112.8 million for the nine months ended August 31, 2020, compared with revenues of $7.1 million for the nine months ended August 31, 2019. Other investment banking revenues during the nine months ended August 31, 2020 include a net loss of $51.1 million from our share of the net earnings of our Jefferies Finance joint venture, reflecting unrealized losses related to the write-down of commitments and loans held-for-sale, as well as reserves recorded on the loan portfolio during the current year period, primarily due to the impact of COVID-19 on the markets and the economy. This compares with net revenues of $15.7 million in the prior year period from our share of the net earnings from our Jefferies Finance joint venture and $12.5 million in costs from refinancing its debt. Other investment banking results during the nine months ended August 31, 2020 also include a $28.5 million write-down of a private equity investment. The results in both periods also include the amortization of costs and allocated interest expense related to our investment in the Jefferies Finance business.

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, outsourced trading and other prime brokerage services offered to clients; and

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

Three Months Ended August 31, ~~2019~~2020

Total record equities net revenues were ~~$193.2~~$318.8 million for the three months ended August 31, ~~2019, compared with $170.6 million for the three months ended August 31, 2018,~~2020, an increase of ~~13.3%.~~

~~Equities net revenues for the three months ended August 31, 2019 increased~~65.0%, compared with $193.2 million for the prior year quarter, ~~across most of~~driven by record results in our core equities ~~sales~~business. Our strong performance was a result of the continued expansion of our business both from a product and ~~trading businesses. The increase~~geographic perspective, as well as increased market volumes. We continued to see expansion across our client franchise as we believe we provided consistent and exceptional advisory and execution capabilities to our clients globally throughout this unprecedented period.

Our results include record net revenues in our ~~core global~~Asia cash equities ~~sales and trading business~~businesses, which was ~~primarily~~ driven by our recent expansion and investment across Asian markets, as well as in our domestic and international convertibles businesses, which continue to be market leading and part of our globalization strategy. The majority of our businesses had higher ~~revenues across all of~~results in the quarter as compared to the prior year period.

Results in our global cash equities businesses were driven by increased client activity, which is a result of higher market volumes and the continued globalization of our advisory and execution franchise. The growth in ~~the Americas, Europe,~~our record global convertibles business was driven by higher trading volumes and ~~Asia, as well as~~volatility, increased primary issuance, and increased client flow. The higher results in our global electronic trading ~~equity derivatives, international convertibles, securities finance and prime brokerage businesses. The continued revenue growth was~~business were driven by increased global market ~~share~~volumes and ~~client activity, as well as a continued focus on regional and product diversification.~~volatility. Our ~~prime brokerage and Americas securities finance businesses posted record quarterly revenues,~~exchange traded funds business had higher results driven by increased trading revenues and the market environment.

Our equity options business had lower revenues as compared to the prior year quarter, driven by a decline in trading results and client ~~activity~~activity. Results in our prime services business were lower as a result of the market environment, partially offset by the expansion and ~~outsourced trading. Several~~momentum of our ~~international businesses, including European electronic~~outsourced trading ~~Asian electronic trading, and Asian securities finance, also had record quarters reflecting our continued strength and growth across global markets.~~franchise.

The increase in our ~~core~~ global equities net revenues also included gains on certain block positions, as compared with ~~the prior year quarter was partially offset by higher~~ losses inon 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 businesses.~~quarter.

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Nine Months Ended August 31, ~~2019~~2020

In May 2020, Greenwich Associates named us as the top firm in helping clients navigate the markets as COVID-19 significantly impacted equity markets in mid-March, causing volatility and increased trading volumes. These results were based on a survey they had recently conducted of more than 75 buy-side institutions evaluating brokers’ performances in providing clients with liquidity, hedging solutions, market color and insights.

Total equities net revenues were ~~$573.9~~a record $801.6 million for the nine months ended August 31, ~~2019,~~2020, an increase of ~~$72.4~~39.7%, compared with $573.9 million ~~from net revenues of $501.5 million~~ for ~~the nine months ended August 31, 2018.~~

~~Equities net revenues for the nine months ended August 31, 2019 increased compared with~~ the prior year period, ondriven by strong results across most businesses. Our strong performance ~~across several~~was a result of the continued expansion of our ~~sales~~business both from a product and ~~trading businesses, which continue~~geographic perspective, increased market volumes and strong client activity and the continued momentum across our client franchise. We increased our market share globally in the first half of this year and remain positioned to be ~~well-positioned with~~able to respond to our clients’ dynamic needs.

Our overall results included record net revenues across each region including the Americas, Europe, and Asia. Our regional businesses are continuing to benefit from our expansion as well as our globalization strategy across advisory and execution capabilities.

On a product basis, our overall results included record net revenues in our Europe and Asia-Pacific cash equities businesses and across most of our individual global businesses including electronic trading and convertibles. Our electronic trading and convertibles franchises continued to maintain several market-leading positions, while our cash equities franchise continued to improve 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~~positioning across the Americas, Europe, and ~~Europe, global electronic trading, international convertibles, securities finance and prime brokerage.~~ Asia.

Results in our ~~Americas and European~~global cash equities businesses were driven by increased client activity, market volumes and improved trading. While global market volumes and higher volatility drove an increase in commissions, our results in Asia-Pacific were also driven by our expansion and investment in the region across advisory and execution capabilities. The record growth in our global convertibles business was driven by strong primary and secondary trading ~~results.~~activity and higher volatility. Our global electronic trading business ~~was~~achieved record results, which were driven by increased global market volumes, volatility, and the continued ~~growth in market share and~~strength of the global platform. Our exchange traded funds business had higher results driven by increased trading ~~volumes. Our~~revenues and the market environment.

The increase and record results in our global ~~convertibles~~equities business ~~benefited from significant growth due to the expansion of the business with a market-leading team.~~was partially offset by lower revenues in our prime services and equity options businesses. Results in our prime services business ~~which reflects prime brokerage and securities finance,~~ was driven by ~~increased customer trading activity and outsourced trading.~~

~~The increase in our core global equities sales and trading business was~~the overall market environment, partially offset by ~~a decrease~~the growth of our outsourced trading franchise. Results in our equity ~~derivatives~~options business were driven by ~~a challenging~~lower client volumes and trading ~~environment and a decline in client activity, and lower results in our U.S. convertibles businesses.~~results.

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;~~

loans, as well as foreign exchange execution on behalf of clients; ~~and~~

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

financing services offered to clients.

Three Months Ended August 31, ~~2019~~2020

Fixed income net revenues totaled $336.3 million for the three months ended August 31, 2020, an increase of 126.7% from net revenues of $148.3 million for the three months ended August 31, 2019, ~~an increase of $8.5 million from net~~driven by continued strong client activity across products and geographies.

Net revenues ~~of $139.8 million~~ for the three months ended August 31, ~~2018, primarily~~2020 were higher in our U.S. and international securitized markets groups due to ~~strong~~increased demand in the securitization markets for most of these product classes, as compared with the prior year quarter which included trading ~~volumes during June and July, which were partially offset by muted trading volumes in August as investors were sidelined across most asset classes by increased volatility in risk assets~~losses due to declining yields and a ~~further inversion of the~~flattening and inverted U.S. Treasury yield curve. ~~The following highlights the main components of the results:~~


◦	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 were higher due to 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~~Strong performance across our credit businesses, including our leveraged credit, European and Asian credit and investment grade corporates businesses reflected healthy global capital markets activity and tightening credit spreads. Our global emerging markets business similarly benefited in ~~our 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 securitized markets groups were lower due to declining yields and a flattening and inverted U.S. Treasury yield curve compared with stronger performance in our origination businesses in the prior year quarter.

~~Nine Months Ended August 31, 2019~~

Fixed income net revenues totaled $518.3 million for the nine months ended August 31, 2019, an increase of $45.4 million from net revenues of $472.9 million in the nine months ended August 31, 2018, primarily due to more active markets throughout most of the current year ~~period. The increase was partially offset by increased volatility in U.S. Rates markets and increased volatility in risk assets. The following highlights the main components~~quarter, with government support of the ~~results:~~


◦	Revenues improved in our global investment grade corporates business due to increased trading activity and increased investor demand and compares to muted client activity and demand in the prior year period.


◦	Revenues in our leveraged credit business were higher due to improved results from secondary trading of par loans and bonds, as well as benefiting from various trading hires. Similarly, our Asia credit business was also well positioned to benefit from new hires and extended client reach and activity throughout most of the current year period.


◦	The current year period also included higher revenues from our structured notes trading and issuance business that benefited from a more established trading desk, as compared with the prior year period.


◦	Global rates revenues in the current year period declined as concerns over Brexit continued and economic challenges in other European countries limited trading opportunities, compared with higher levels of trading around volatility in global interest rates, primarily in Europe, in the prior year period.


◦	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 period contributed to declines in revenues for our municipal securities businesses.~~

~~Investment Banking Revenues~~credit markets driving increased client trading activity and opportunities.

~~Investment banking is comprised~~The current year quarter results also included improved revenues in our municipal securities business, which benefited from the return of ~~revenues from:~~

~~capital markets services, which include underwriting and placement services related~~investors 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.~~the municipals market as spreads tightened.

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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
2019 2018 2019 2018
Equity $ 97,494
$ 139,220
(30.0 )% $ 256,853
$ 326,613
(21.4 )%
Debt 101,689
138,515
(26.6 )% 306,977
483,271
(36.5 )%
Capital markets 199,183
277,735
(28.3 )% 563,830
809,884
(30.4 )%
Advisory 213,350
187,591
13.7 % 572,386
595,730
(3.9 )%
Other investment banking (9,108 ) (13,732 ) (33.7 )% (7,116 ) (13,885 ) (48.8 )%
Total investment banking $ 403,425
$ 451,594
(10.7 )% $ 1,129,100
$ 1,391,729
(18.9 )%

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

Deals Completed Aggregate Value
Three Months Ended August 31, Nine Months Ended August 31, Three Months Ended August 31, Nine Months Ended August 31,
2019 2018 2019 2018 2019 2018 2019 2018
Public and private debt financings 292
286
565
749
$ 43.7
$ 61.1
$ 124.7
$ 197.7
Public and private equity and convertible offerings (1) 45
57
115
142
14.2
11.5
34.6
31.8
Advisory transactions (2) 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.


~~(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.

~~Three Months Ended August 31, 2019~~

Total investment banking revenues were $403.4 million for the three months ended August 31, 2019, 10.7% lower than for the three months ended August 31, 2018, due to 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 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 $97.5 million and $101.7 million in revenues, respectively, for the three months ended August 31, 2019, compared with $139.2 million and $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, 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 $19.0 million in the prior year quarter. The results in both quarters also included the amortization of costs and allocated interest expense related to our investment in the Jefferies Finance business.

Nine Months Ended August 31, ~~2019~~2020

~~Total investment banking~~Fixed income net revenues ~~were $1,129.1~~totaled a record $1,077.7 million for the nine months ended August 31, 2020, an increase of 107.9% from net revenues of $518.3 million for the nine months ended August 31, 2019, ~~18.9% lower than for the nine months ended August 31, 2018,~~primarily due to ~~a significant industry-wide decline in equity~~strong trading volumes, as clients continued to navigate through uncertainty, and ~~leverage finance activity across~~ the ~~U.S. and Europe~~businesses having successfully managed through the markets’ high level of volatility during the ~~current period as compared to the prior year~~ period.

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~~During~~Our U.S. rates business had record net revenues in the current year period, ~~industry-wide U.S. equity~~benefiting from increased volatility and ~~leverage finance capital~~bid-offer spreads. Similarly, our international rates business performed strongly in comparable market activity declined significantly. Our capital markets revenues for the 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 resultsconditions, but also underperformed in the prior year ~~period.~~period, as concerns over Brexit and economic challenges in other European countries limited trading opportunities.

~~From equity~~Our leveraged credit, European and ~~debt capital raising activities, we~~Asian credit and investment grade corporates businesses generated ~~$256.9 million~~robust revenues across regions due to increased client activity and ~~$307.0 million~~higher levels of volatility during the current year period. Similarly, revenues from our global emerging markets business benefited from more favorable market conditions driving strong investor demand, as well as an increase in ~~revenues, respectively, for the nine months ended August 31, 2019, compared with $326.6 million and $483.3 million~~new issuance.

Revenues in ~~revenues, respectively,~~our U.S. securitized markets group were higher due to an increase in demand in the ~~prior~~securitization markets, as client interest improved for structured products in the latter part of the current year period.

~~Other investment banking revenues~~The current year period results were ~~a loss of $7.1 million for~~partially offset by trading losses in our municipal securities business, which was impacted by the ~~nine months ended August 31, 2019, compared with a loss of $13.9 million for~~significant sell-off in the ~~nine months ended August 31, 2018. Other investment banking revenues during the nine months ended August 31, 2019 include revenues of $15.7 million from our share~~second quarter of the ~~net results~~current year period before experiencing a return in investor demand in the third quarter 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~~current year ~~which resulted in lower transaction volume. This compares with net revenues of $70.3 million in the prior year~~ period. ~~The results in both periods were offset by the amortization of costs and allocated interest expense related to our investment in the Jefferies Finance business.~~

Other

Other is comprised of revenues from:

Berkadia and other ~~strategic~~ investments (other than Jefferies ~~Finance)~~Finance, which is included in Other investment banking);

principal investments in private equity and hedge funds managed by third parties or related ~~parties;~~parties and are not part of our Leucadia Asset Management platform; and

investments held as part of employee benefit plans, including deferred compensation plans (for which we incur equal and offsetting compensation expenses).

Three Months Ended August 31, ~~2019~~2020

Net revenues from our other business category ~~totaled~~were $30.1 million for the three months ended August 31, 2020, an increase of $17.7 million compared with net revenues of $12.4 million for the three months ended August 31, ~~2019, an increase of $7.5 million compared with net revenues of $4.9 million for the three months ended August 31, 2018.~~2019.

Results in the current year quarter include net revenues of ~~$24.3~~$18.5 million due to our share of the net income ~~from~~of Berkadia ~~which was transferred~~compared with $24.3 million in the prior year quarter.

The results in the current year quarter also include unrealized net mark-to-market gains related to ~~us on October 1, 2018 from Jefferies, partially offset by costs and~~certain investments, compared with mark-to-market ~~decreases~~losses in ~~other strategic investments.~~the prior year quarter.

Nine Months Ended August 31, ~~2019~~2020

Net revenues from our other business category totaled $90.0 million for the nine months ended August 31, 2020, an increase of $36.4 million compared with net revenues of $53.6 million for the nine months ended August 31, ~~2019, an increase of $30.7 million compared with net revenues of $22.9 million for the nine months ended August 31, 2018.~~2019.

Results in the current year period include gains of $61.5 million from hedges that were bought and sold in the first quarter as we took a more cautious market risk position due to the onset of the COVID-19 pandemic.

Results in the current year period also include net revenues of ~~$72.2~~$40.4 million due to our share of the net income ~~from~~of 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~~net revenues of $72.2 million in the prior year period. The lower net revenues in the current year period are due to the impairment of mortgage servicing rights as a result of lower interest rates, higher loan loss provisions and a decline in loan originations due to the impact of COVID-19 in the second quarter of the current year period.

Asset Management

Asset management revenue includes the following:

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

revenue from strategic partners pursuant to agreements which entitle us to portions of our partner’ revenues and/or profits; and

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

~~In the fourth quarter~~

Table 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.Contents

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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.

~~Table~~ Performance fees are generally recognized once a year, typically in December, at the end of ~~Contents~~

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the relevant performance period, to the extent that the benchmark return has been met.

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		Three Months Ended August 31,						% Change			Nine Months Ended August 31,						% Change
	2019			2018					2019				2018				2020				2019				2020				2019						% Change
Asset management fees:							% Change											% Change
Equities	$	633		$	310		104.2	%		$	3,344			$	1,633			104.8	%	$	1,215		$	633		% Change	91.9	%		$	5,162		$	3,344		54.4	%
Multi-asset	2,707			4,874			(44.5	)%		11,215				14,497				(22.6	)%	398			2,707			(85.3	)%		3,092			11,215			(72.4	)%
Total asset management fees	3,340			5,184			(35.6	)%		14,559				16,130				(9.7	)%	1,613			3,340			(51.7	)%		8,254			14,559			(43.3	)%
Revenue from arrangements with strategic partners (1)																				5,159			880			486.3	%		14,814			1,791			727.1	%
Total asset management fees and revenues																				6,772			4,220			60.5	%		23,068			16,350			41.1	%
Investment return	25,746			14,483			77.8	%		106,233				40,754				160.7	%	115,556			24,866			364.7	%		150,339			104,442			43.9	%
Allocated net interest	(9,289		)	(9,013		)	3.1	%		(30,948		)		(24,420		)		26.7	%	(12,999		)	(9,289		)	39.9	%		(36,676		)	(30,948		)	18.5	%
Total Asset Management	$	19,797		$	10,654		85.8	%		$	89,844			$	32,464			176.7	%	$	109,329		$	19,797		452.3	%		$	136,731		$	89,844		52.2	%


(1)	These amounts include our share of revenues received by third party asset management companies with which we have revenue and profit share arrangements.

Three Months Ended August 31, ~~2019~~2020

Asset management net revenues in the three months ended August 31, ~~2019~~2020 were a record $109.3 million, meaningfully higher than the $19.8 million ~~compared with $10.7 million~~recorded in the prior year ~~quarter. The increase was~~quarter, primarily ~~due to higher investment returns,~~ as a result of ~~an increase in our~~higher investment returns. Since the prior year quarter, we made capital investments in ~~certain~~several new separately managed accounts and ~~funds and~~funds. In addition, our results reflect improved performance ~~in certain~~across most of ~~these investments, partially offset by lower asset management fees.~~our historical platforms.

Nine Months Ended August 31, ~~2019~~2020

~~Net~~Asset management net revenues in the nine months ended August 31, ~~2019 included asset management revenues of $89.8~~2020 were a record $136.7 million, compared with ~~$32.5~~$89.8 million in the prior year ~~period. The increase was~~period, primarily ~~due to higher investment returns,~~ as a result of ~~an increase~~higher investment returns. Since the prior year period, we made capital investments in ~~our investment in certain~~several new separately managed accounts and ~~funds and~~funds. In addition, our results reflect improved performance ~~in certain~~across most of ~~these investments, partially offset~~our historical platforms. The current year period also included higher revenues from our share of fees received by ~~an increase in allocated net interest expense.~~third party asset management companies with which we have revenue and profit share arrangements.

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Assets under Management

Assets under management by predominant asset class were as follows (in millions):


	August 31, 2019		November 30, 2018		August 31, 2020		November 30, 2019
Assets under management (1):
Equities	$	111	$	130	$	444	$	110
Multi-asset(2)	711		1,180		—		730
Total	$	822	$	1,310	$	444	$	840

(1)

Assets under management include third-party net assets actively managed by us, including hedge funds and certain managed accounts. ~~Assets~~The amount at November 30, 2019 also includes $150 million of assets under management in a strategy, which represents a net asset value equivalent of an asset management strategy where we earn performance fees. We may consolidate certain funds and for such consolidated funds, assets under management includes the pro-rata portion of third-party net assets in consolidated funds based on the percentage ownership of third-party investors in the consolidated fund. The above amounts do not include assets under management at non-consolidated strategic partners or investments or Jefferies Financial Group Inc. (“Jefferies”).


(2)	During the three months ended August 31, 2020, the assets ofunder management in this asset class were liquidated and the funds ~~that are consolidated due~~were returned to the ~~level or nature of our investment in such funds.~~third-party investors.

Change in assets under management were as follows (in millions):



	Three Months Ended August 31,						Nine Months Ended August 31,
	2020			2019			2020			2019
Asset under management:
Balance, beginning of period	$	879		$	952		$	840		$	1,463
Net cash flow in (out)	(424		)	(155		)	(304		)	(680		)
Net market appreciation (depreciation)	(11		)	89			(92		)	103
Balance, end of period	$	444		$	886		$	444		$	886

The change in assets under management during the three months ended August 31, 2020 is primarily due to the liquidation and redemptions from certain funds. The change in assets under management during the nine months ended August 31, 2020 is primarily due to the liquidation and redemptions from certain funds and market depreciation during the period. The change in assets under management during the three and nine months ended August 31, 2019 is primarily due to redemptions from certain funds and separately managed accounts, partially offset by market appreciation.

Our definition of assets under management is not based on any definition contained in any of our investment management agreements and differs from the manner in which “Regulatory Assets Under Management” is reported to the SEC on Form ADV.

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Asset Management Investments

~~We invest in our~~Our asset management business ~~through direct investments~~invests directly 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		August 31, 2020		November 30, 2019
Jefferies Group LLC; as manager:
Fund investments (1)	$	21,210	$	45,696	$	267	$	22,695
Separately managed accounts (2)	298,255		213,023		224,049		344,549
Total	$	319,465	$	258,719	$	224,316	$	367,244

Jefferies Financial Group Inc.; as manager:
Fund investments	$	216,702	$	213,456	$	231,720	$	218,109
Separately managed accounts (2)	66,730		277,538		—		43,153
Total	$	283,432	$	490,994	$	231,720	$	261,262

Third-party as asset manager:
Fund investments(3)	$	290,174	$	10,093	$	634,107	$	289,930
Separately managed accounts (2)	292,428		261,790		271,689		266,484
Investments in asset managers	30,546		32,360
Total	$	613,148	$	304,243	$	905,796	$	556,414

Total asset management investments (3)	$	1,216,045	$	1,053,956
Total asset management investments (4)					$	1,361,832	$	1,184,920

(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~~2020 and November 30, ~~2018, $21.1~~2019, $0.1 million and ~~$19.9~~$22.6 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 onin our ~~balance sheet~~consolidated financial statements within each respective line item.


(3)	The increase for the nine months ended August 31, 2020 was primarily due to an investment in a new fund in the current year period.

(4)

Of the ~~$1,216.0~~$1,361.8 million total invested in the funds at August 31, ~~2019, $1,081.0~~2020, $915.8 million was sourced from the proceeds of long-term and permanent ~~capital, which attracted an internally calculated interest charge of $30.9 million.~~capital. At August 31, 2020 and November 30, 2019, we have borrowed $446.0 million and $135.0 million, respectively, under a credit facility ~~agreement (“Credit Facility”) with JPMorgan Chase Bank, N.A.,~~agreements, which isare secured by a combination of our investment in a fund managed by Jefferies, ~~Financial Group Inc.,~~ with a carrying value of ~~$216.7 million. Interest expense associated~~$231.7 million and $218.1 million at August 31, 2020 and November 30, 2019, respectively, and our investment in certain funds managed by third-parties with ~~the Credit Facility is included in Investment return (see “Net Revenues by Source” herein).~~a carrying value of $623.4 million at August 31, 2020.

Our asset management investments generated an investment return of ~~$25.7~~$115.6 million and ~~$106.2~~$150.3 million for the three and nine months ended August 31, 2020, respectively, and $24.9 million and $104.4 million for the three and nine months ended August 31, 2019, ~~respectively, and $14.5 million and $40.8 million for the three and nine months ended August 31, 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		Three Months Ended August 31,								% Change		Nine Months Ended August 31,					% Change
	2019		2018				2019				2018				2020				2019					2020				2019					% Change
Compensation and benefits	$	411,936	$	428,033	% Change	(3.8	)%		$	1,261,506			$	1,327,760		% Change			(5.0	)%	$	725,555			$	% Change	411,936		76.1	%	$	1,932,332	$	1,261,506	53.2	%
Non-compensation expenses:
Floor brokerage and clearing fees	54,247		45,745		18.6	%		168,698				135,808				24.2	%	66,744				54,247				23.0	%	204,943			168,698		21.5	%
Technology and communications	86,649		76,877		12.7	%		247,464				222,335				11.3	%	102,635				86,649				18.4	%	287,413			247,464		16.1	%
Occupancy and equipment rental	29,300		25,559		14.6	%		87,587				75,143				16.6	%	27,053				29,300				(7.7	)%	78,951			87,587		(9.9	)%
Business development	36,526		39,733		(8.1	)%		103,430				124,233				(16.7	)%	7,637				36,526				(79.1	)%	45,953			103,430		(55.6	)%
Professional services	42,379		35,316		20.0	%		117,372				101,715				15.4	%	41,173				42,379				(2.8	)%	127,832			117,372		8.9	%
Underwriting costs	14,647		20,528		(28.6	)%		36,045				47,832				(24.6	)%	29,071				14,647				98.5	%	59,085			36,045		63.9	%
Other	18,400		18,723		(1.7	)%		41,828				54,888				(23.8	)%	20,175				18,400				9.6	%	80,351			41,828		92.1	%
Total non-compensation expenses	282,148		262,481		7.5	%		802,424				761,954				5.3	%	294,488				282,148				4.4	%	884,528			802,424		10.2	%
Total non-interest expenses	$	694,084	$	690,514	0.5	%		$	2,063,930			$	2,089,714			(1.2	)%	$	1,020,043			$	694,084			47.0	%	$	2,816,860		$	2,063,930	36.5	%

Compensation and Benefits

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

Cash and 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. Compensation and benefits expense includes amortization expense associated with these awards to the extent there are respective future service periods. In addition, the senior executive awards contain market and performance conditions.

Compensation and benefits expense was $725.6 million and $1,932.3 million for the three and nine months ended August 31, 2020, respectively, compared with $411.9 million and $1,261.5 million for the three and nine months ended August 31, 2019, respectively, ~~compared~~increasing in line with ~~$428.0 million and $1,327.8 million for the three and nine months ended August 31, 2018, respectively.~~our significant increase in net revenues. A significant portion of our compensation expense remains highly variable.

Compensation and benefits expense as a percentage of Net revenues was 52.4% and 53.8% for the three and nine months ended August 31, 2020, respectively, compared with 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.

Compensation expense related to the amortization of share- and cash-based awards amounted to $73.0 million and $241.5 million for the three and nine months ended August 31, 2020, respectively, compared with $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.

Employee headcount was 3,893 at August 31, 2020 and 3,776 at August 31, ~~2019 and 3,526 at August 31, 2018.~~2019. Since August 31, ~~2018,~~2019, our headcount increased, primarily as a result of ~~continued hiring~~our expansion in ~~investment banking, asset management~~equities and ~~equities, as well as~~research in Asia and Australia. We also had continued additions in corporate ~~services.~~services to support business growth. The increase was partially offset by reductions in our asset management business due to the wind down of an asset management platform.

Refer to Note ~~14,~~15, 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

Three Months Ended August 31, ~~2019~~2020

Non-compensation expenses were ~~$282.1~~$294.5 million for the three months ended August 31, ~~2019,~~2020, an increase of ~~$19.6~~$12.4 million, or ~~7.5%~~4.4%, compared with ~~$262.5~~$282.1 million in the three months ended August 31, ~~2018.~~2019. The increase in non-compensation expenses was primarily due to higher Underwriting costs primarily due to an increase in the number of transactions and higher Floor brokerage and ~~clearings~~clearing 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 was also ~~included~~due to higher Technology and communication expenses primarily related to ~~the~~increased market data and connectivity usage and costs associated with the development of various trading systems and ~~increased market data usage and an~~continued costs associated with a largely remote working environment. The increase in ~~Professional services~~non-compensation expenses ~~due to an increase in legal and consulting fees. The increases were~~was partially offset by lower Business development expenses as business travel and ~~Underwriting costs~~hosted events were curtailed due to ~~a decline in investment banking engagements and activity related to our Jefferies Finance joint venture during the current period.~~COVID-19.

Non-compensation expenses as a percentage of Net revenues was ~~36.3%~~21.3% and ~~33.8%~~36.3% for the three months ended August 31, 2020 and August 31, 2019, ~~and 2018, respectively.~~respectively, demonstrating the operating leverage inherent in our business.

Nine Months Ended August 31, ~~2019~~2020

Non-compensation expenses were ~~$802.4~~$884.5 million for the nine months ended August 31, ~~2019,~~2020, an increase of ~~$40.4~~$82.1 million, or ~~5.3%~~10.2%, compared with ~~$762.0~~$802.4 million in the nine months ended August 31, ~~2018.~~2019. The increase in non-compensation expenses was primarily due to higher Floor brokerage and ~~clearings~~clearing fees due to an increase in trading volumes primarily across our equities businesses, as well as in the fixed income businesses, as well as growth in certain asset management funds and resultant trading activity ~~as well as~~and higher Underwriting costs primarily due to an increase in ~~trading volumes across~~ the ~~equities and fixed income businesses.~~number of transactions. The ~~higher expenses~~increase was also ~~included an increase in~~due to higher Technology and communication expenses primarily related to costs associated with the development of various trading systems, ~~and our efforts to provide our professionals with leading digital tools to manage workflow and help us better serve our clients, as well as~~ increased market data and connectivity usage ~~costs. Professional services expenses~~and costs associated with our move to a largely remote working environment. Non-compensation expense also increased due to anhigher Other expenses, which included our charitable donations of $8.6 million, in memory of Peg Broadbent, our longstanding, esteemed CFO who tragically died from complications of COVID-19 in March and our donation made to various charities in support of the Australian wildfire relief effort. The increase in ~~legal~~Other expenses also included a write-off of goodwill and ~~consulting fees.~~intangible assets related to the wind down of an asset management platform. The ~~increases were~~increase in non-compensation expenses was partially offset by lower Business development expenses as business travel and ~~Underwriting costs~~hosted events were curtailed due to ~~a decline in investment banking engagements and activity related to our Jefferies Finance joint venture during the current period.~~COVID-19.

Non-compensation expenses as a percentage of Net revenues was ~~33.9%~~24.6% and ~~31.5%~~33.9% for the nine months ended August 31, 2020 and August 31, 2019, ~~and 2018, respectively.~~respectively, demonstrating the operating leverage inherent in our business.

Income Taxes

~~The following provides a discussion of our~~For the three and nine months ended August 31, 2020, the provision for income ~~taxes:~~

taxes was $95.9 million and $203.9 million, respectively, equating to an effective tax rate of 26.4% in both periods. 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~~

•

The increase in the effective tax rate for the three months ended August 31, 2020, as compared to the prior year quarter, is primarily due to a larger net tax benefit recorded during the prior year quarter resulting from the settlement of various state and local exams and expiring statutes of limitation.The effective tax rate for the nine months ended August 31, 2020, as compared to the prior year period, is largely unchanged.

Refer to Note 16, Income Taxes, in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on income ~~taxes was $26.9 million and $234.3 million, respectively, equating to an effective tax rate of 30.9% and 70.6%, respectively.~~taxes.

The decrease in the effective tax rate for the three months ended August 31, 2019, as compared to the prior year quarter, is primarily due to a net tax benefit recorded during the current quarter resulting from the settlement of various state and local exams and expiring statutes of limitation.

The decrease in the effective tax rate during the nine months ended August 31, 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 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 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 quarter ended February 28, 2019 and we have completed our accounting as it relates to the Tax Act.

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. 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, ~~2018~~2019 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 transactions revenues in our Consolidated Statements of Earnings.

For information on the composition of our Financial instruments owned and 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 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, ~~2018~~2019 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.

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Goodwill

At August 31, ~~2019,~~2020, Goodwill recorded in our Consolidated Statement of Financial Condition is ~~$1,638.6~~$1,644.0 million ~~(3.8%~~(3.5% 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, ~~2018~~2019 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, ~~2019.~~2020.

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, ~~2019~~2020 are as follows: ~~$562.3~~$565.2 million in Investment Banking, ~~$159.7~~$160.5 million in Equities and Wealth Management, ~~$913.2~~$917.9 million in Fixed Income and ~~$3.4~~$0.4 million in Asset Management.

The results of our assessment on August 1, ~~2019~~2020 indicated that all our reporting units had a fair value in excess of their carrying amounts based on current ~~projections and the fair values of our Investment Banking and Equities and Wealth Management reporting units exceeded their carrying values by 20% or higher.~~projections. The valuation methodology for our reporting units are sensitive to management’s forecasts of future profitability, which are a significant component of the valuation and come with a level of uncertainty regarding trading volumes and capital market transaction ~~levels~~levels. Refer to Note 10, Goodwill and Intangible Assets, in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for details on the ~~expected growth prospects for~~write-off of certain ~~business lines. At August 31, 2019, our Fixed Income reporting unit is the most sensitive~~goodwill and intangible assets related to the ~~forecast assumptions used in our market approach valuation. Reductions in trading volumes and/or declines from our expected level~~wind down 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 Fixed Income reporting units and a resulting impairment of a portion of our goodwill.an asset management platform.

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”)~~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 isare 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 items (dollars in millions):


	August 31, 2019		November 30, 2018		% Change		August 31, 2020		November 30, 2019		% Change
Total assets	$	43,093.6	$	41,168.8	4.7	%	$	46,660.4	$	43,516.1	7.2	%
Cash and cash equivalents	4,665.5		5,145.9		(9.3	)%	6,749.7		5,567.9		21.2	%
Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations	658.3		708.0		(7.0	)%	986.1		796.8		23.8	%
Financial instruments owned	16,370.9		16,399.5		(0.2	)%	17,555.7		16,363.4		7.3	%
Financial instruments sold, not yet purchased	10,296.3		9,478.9		8.6	%	10,994.4		10,532.5		4.4	%
Total Level 3 assets	388.1		336.7		15.3	%	432.9		332.2		30.3	%

Securities borrowed	$	7,895.1	$	6,538.2	20.8	%	$	7,268.4	$	7,624.6	(4.7	)%
Securities purchased under agreements to resell	4,500.0		2,785.8		61.5	%	5,327.4		4,299.6		23.9	%
Total securities borrowed and securities purchased under agreements to resell	$	12,395.1	$	9,324.0	32.9	%	$	12,595.8	$	11,924.2	5.6	%

Securities loaned	$	2,182.9	$	1,838.7	18.7	%	$	1,929.7	$	1,525.1	26.5	%
Securities sold under agreements to repurchase	8,237.0		8,643.1		(4.7	)%	7,259.0		7,504.7		(3.3	)%
Total securities loaned and securities sold under agreements to repurchase	$	10,419.9	$	10,481.8	(0.6	)%	$	9,188.7	$	9,029.8	1.8	%

Total assets at August 31, ~~2019~~2020 and November 30, ~~2018~~2019 were ~~$43.1~~$46.7 billion and ~~$41.2~~$43.5 billion, respectively, an increase of ~~4.7%~~7.2%. During the three and nine months ended August 31, ~~2019,~~2020, average total assets were approximately ~~23.2%~~17.1% and ~~23.5%~~18.9% higher, respectively, than total assets at August 31, ~~2019.~~2020.

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Our total Financial instruments owned inventory was $17.6 billion at August 31, 2020, an increase of 7.3%, from $16.4 billion at ~~both August 31, 2019 and~~ November 30, ~~2018.~~2019, respectively. During the nine months ended August 31, ~~2019~~2020, our total Financial instruments owned inventory ~~was flat~~increased primarily due to ~~a decline primarily~~an increase 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~~ investments at fair ~~value.~~value, mortgage-backed and other asset-backed securities and corporate debt securities, partially offset by decreases in municipal securities and loans and other receivables. Financial instruments sold, not yet purchased inventory was ~~$10.3~~$11.0 billion at August 31, ~~2019,~~2020, an increase of ~~8.6%~~4.4% from ~~$9.5~~$10.5 billion at November 30, ~~2018,~~2019, with the increase primarily driven by increases in ~~corporate equity securities and~~ government and federal agency and sovereign obligations, partially offset by a decrease in ~~derivative contracts inventory.~~corporate equity securities. Our overall net inventory position was ~~$6.1~~$6.6 billion and ~~$6.9~~$5.8 billion at August 31, ~~2019~~2020 and November 30, ~~2018, respectively.~~2019, respectively, with the increase primarily due to an increase in corporate equity and corporate debt securities, investments at fair value and mortgage-backed and other asset-backed securities, partially offset by decreases in sovereign obligations and municipal securities. Our Level 3 Financial instruments owned as a percentage of total Financial instruments owned ~~increased to 2.2%~~was 2.5% and 1.9% at August 31, ~~2019 from 2.1% at~~2020 and November 30, ~~2018.~~2019, respectively. The increase in our total Level 3 Financial instruments owned at August 31, 2020 as compared to November 30, 2019 is reflective of the increased pricing subjectivity experienced for certain financial assets during the nine months ended August 31, 2020 given the disruptive market impact of COVID-19.

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 increased by ~~32.9%~~5.6% from November 30, ~~2018~~2019 to August 31, ~~2019,~~2020, due to increases in our ~~matched book activity and~~ firm financing of our inventory, partially offset by an increase in the netting benefit for our collateralized financing transactions and a decrease in our matched book transactions. The outstanding balance of our securities loaned and securities sold under agreement to repurchase ~~decreased~~increased by ~~0.6%~~1.8% from November 30, ~~2018~~2019 to August 31, ~~2019, primarily~~2020, due to an increase in firm financing of our inventory, partially offset by an increase in the netting benefit for our collateralized financing transactions and a decrease in ~~firm financing of our inventory, partially offset by an increase in~~ our matched book ~~activity.~~transactions. Our average month end ~~balances~~balance of total reverse repos and stock borrows during the three and nine months ended August 31, ~~2019~~2020 were ~~36.9%~~30.2% and ~~34.6%~~33.3% higher, respectively, than the August 31, ~~2019~~2020 balance. Our average month end ~~balances~~balance of total repos and stock loans during the three and nine months ended August 31, ~~2019~~2020 were ~~62.0%~~62.2% and ~~65.5%~~74.8% higher, respectively, than the August 31, ~~2019~~2020 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, 2019		Year Ended November 30, 2018		Nine Months Ended August 31, 2020		Year Ended November 30, 2019
Securities Purchased Under Agreements to Resell:
Period end	$	4,500	$	2,786	$	5,327	$	4,300
Month end average	7,432		5,232		8,282		7,762
Maximum month end	11,589		7,593		12,061		11,589
Securities Sold Under Agreements to Repurchase:
Period end	$	8,237	$	8,643	$	7,259	$	7,505
Month end average	14,855		12,704		13,941		14,686
Maximum month end	19,654		15,579		18,979		19,654

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 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, 2019			November 30, 2018				August 31, 2020			November 30, 2019
Total assets	Total assets	$	43,093,588		$	41,168,773		Total assets	$	46,660,448		$	43,516,115

Total equity	Total equity	$	6,189,530		$	6,182,404		Total equity	$	6,504,454		$	6,129,747

Total Jefferies Group LLC member’s equity	Total Jefferies Group LLC member’s equity	$	6,183,360		$	6,180,493		Total Jefferies Group LLC member’s equity	$	6,487,890		$	6,125,472
Deduct:	Goodwill and intangible assets	(1,810,976		)	(1,824,638		)	Goodwill and intangible assets	(1,805,511		)	(1,814,141		)
Tangible Jefferies Group LLC member’s equity	Tangible Jefferies Group LLC member’s equity	$	4,372,384		$	4,355,855		Tangible Jefferies Group LLC member’s equity	$	4,682,379		$	4,311,331

Leverage ratio (1)	Leverage ratio (1)	7.0			6.7			Leverage ratio (1)	7.2			7.1
Tangible gross leverage ratio (2)	Tangible gross leverage ratio (2)	9.4			9.0			Tangible gross leverage ratio (2)	9.6			9.7


(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.

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.~~Outflow (“MLO”).

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

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 ~~$12.2~~$12.5 billion at August 31, ~~2019~~2020 exceeded our cash capital requirements.

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~~Maximum Liquidity Outflow~~MLO.. 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~~an MLO that could be experienced in a liquidity crisis. ~~Maximum Liquidity Outflow~~MLO 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:~~MLO:

Liquidity needs over a 30-day scenario.

A two-notch downgrade of our long-term senior unsecured credit ratings.

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.

No diversification benefit across liquidity risks. We assume that liquidity risks are additive.

The calculation of our ~~Maximum Liquidity Outflow~~MLO 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.

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~~MLO 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, ~~2019,~~2020, we had sufficient excess liquidity to meet all contingent cash outflows detailed in the ~~Maximum Liquidity Outflow.~~MLO. 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, 2019			Average Balance Quarter ended August 31, 2019 (1)		November 30, 2018			August 31, 2020			Average Balance Three Months ended August 31, 2020 (1)		November 30, 2019
Cash and cash equivalents:
Cash in banks	$	1,356,120		$	2,170,372	$	2,333,476		$	1,431,834		$	2,290,893	$	983,816
Money market investments (2)	3,309,370			1,401,166		2,812,410			5,317,872			3,304,669		4,584,087
Total cash and cash equivalents	4,665,490			3,571,538		5,145,886			6,749,706			5,595,562		5,567,903
Other sources of liquidity:
Debt securities owned and securities purchased under agreements to resell (3)	1,063,118			1,018,739		958,539			1,122,768			988,506		972,624
Other (4)	345,039			562,316		499,576			216,088			282,436		377,296
Total other sources	1,408,157			1,581,055		1,458,115			1,338,856			1,270,942		1,349,920
Total cash and cash equivalents and other liquidity sources	$	6,073,647		$	5,152,593	$	6,604,001		$	8,088,562		$	6,866,504	$	6,917,823
Total cash and cash equivalents and other liquidity sources as % of Total assets	14.1		%			16.0		%	17.3		%			15.9		%
Total cash and cash equivalents and other liquidity sources as % of Total assets less goodwill and intangible assets	14.7		%			16.8		%	18.0		%			16.6		%


(1)	Average balances are calculated based on weekly balances.

(2)

At August 31, ~~2019~~2020 and November 30, ~~2018, $3,247.0~~2019, $4,987.0 million and ~~$2,250.0~~$4,496.7 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~~$330.9 million and ~~$562.4~~$87.4 million at August 31, ~~2019~~2020 and November 30, ~~2018,~~2019, respectively, are invested in ~~Triple A~~AAA rated prime money funds. The average balance of U.S. government money funds for the ~~quarter~~three months ended August 31, ~~2019~~2020 was ~~$1,023.3~~$3,240.4 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 U.S.; and securities issued by a designated multilateral development bank and reverse repurchase agreements with underlying collateral comprised of these securities.


(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 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, ~~2019,~~2020, we had the ability to readily obtain repurchase financing for ~~73.7%~~74.4% 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~~marketplace 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, ~~2019~~2020 and November 30, ~~2018~~2019 (in thousands):

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	August 31, 2019				November 30, 2018				August 31, 2020				November 30, 2019
	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	$	2,334,267	$	212,378	$	1,907,064	$	317,189	$	2,356,376	$	215,732	$	2,403,589	$	256,624
Corporate debt securities	2,299,621		14,365		1,775,721		104,685		2,075,043		18,327		1,893,605		29,412
U.S. government, agency and municipal securities	2,946,757		150,406		2,648,843		294,030		3,587,929		140,474		2,894,264		151,414
Other sovereign obligations	2,550,571		981,913		2,626,212		840,578		2,545,333		998,904		2,633,636		969,800
Agency mortgage-backed securities (1)	1,715,564		—		2,972,638		—		1,922,293		—		1,757,077		—
Loans and other receivables	215,269		—		272,201		—		569,620		—		655,120		—
Total	$	12,062,049	$	1,359,062	$	12,202,679	$	1,556,482	$	13,056,594	$	1,373,437	$	12,237,291	$	1,407,250


(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, 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 $16.1 billion and ~~$16.7~~$16.4 billion for the three and nine months ended August 31, ~~2019,~~2020, respectively, and ~~$18.5~~$15.2 billion and ~~$13.0~~$16.3 billion for the three and twelve months ended November 30, ~~2018,~~2019, respectively. Average unencumbered liquid financial instruments were ~~$1.6~~$1.3 billion and ~~$1.7~~$1.4 billion for the three and nine months ended August 31, ~~2019,~~2020, respectively, and $1.5 billion and $1.6 billion for the three and twelve months ended November 30, ~~2018,~~2019, 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, 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 ~~71.2%~~68.8% of our cash and 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 noncash repurchase agreements for non-clearing corporation eligible funded inventory is approximately ~~five~~six months at August 31, ~~2019.~~2020.

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, ~~2019,~~2020, short-term borrowings, which must be repaid within one year or less and include bank loans and overdrafts, borrowings under revolving credit facilities, floating rate puttable notes and ~~structured~~equity-linked notes totaled ~~$518.9~~$805.4 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 ~~$496.5~~$643.5 million and ~~$580.8~~$592.3 million for the three and nine months ended August 31, ~~2019,~~2020, respectively.

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Our short-term borrowings include the following facilities:

•

Credit Facility. ~~On December 27, 2018, one~~One of our subsidiaries ~~entered into~~has a credit facility agreement (“Credit ~~Facility~~Facility”) with JPMorgan Chase Bank, N.A. ~~for a committed amount of $135.0 million.~~under which we have borrowed $246.0 million at August 31, 2020. 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~~At August 31, ~~2019,~~2020, we were in compliance with all debt covenants under the Credit Facility.

•

Royal Bank of Canada (“RBC”) Credit Facility. One of our subsidiaries has a credit facility agreement with the Royal Bank of Canada (“RBC Credit Facility”) for a committed amount of $200.0 million. Interest is based on a rate per annum equal to LIBOR plus an applicable margin of 2.05%. The RBC 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 impose certain restrictions on the borrower’s future indebtedness. At August 31, 2020, we were in compliance with all debt covenants under the RBC 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 is structured so that advances are generally repaid before the end of each business day. However, if an advance is not repaid by the end of any business day, the advance is converted to an overnight loan. Intraday loans accrue interest at a rate of 0.12%. Interest is charged based on the number of minutes in a day the advance is outstanding. Overnight loans are charged interest at the base rate plus 3% on a daily basis. The base rate is the higher of the federal funds rate plus 0.50% or the prime rate in effect at that time. 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~~At August 31, ~~2019,~~2020, 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 Note 9, Investments, in our consolidated financial statements included in this Quarterly Report on 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, ~~2019,~~2020, the outstanding notes were ~~$1.8~~$2.8 billion, bear interest at a spread over LIBOR and mature from September ~~2019~~2020 to ~~July 2021.~~May 2022.

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, ~~2019~~2020 and November 30, ~~2018,~~2019, we had total long-term capital of ~~$12.2~~$12.5 billion and ~~$11.8~~$12.3 billion, respectively, resulting in a long-term debt to equity capital ratio of ~~0.97:~~0.92:1 and ~~0.92:~~1.01:1, respectively. See “Equity Capital” herein for further information on our change in total equity. Our total long-term capital base at August 31, ~~2019~~2020 and November 30, ~~2018~~2019 was as follows (in thousands):


	August 31, 2019		November 30, 2018		August 31, 2020		November 30, 2019
Long-Term Debt (1)	$	6,029,670	$	5,657,420	$	5,987,433	$	6,213,648
Total Equity	6,189,530		6,182,404		6,504,454		6,129,747
Total Long-Term Capital	$	12,219,200	$	11,839,824	$	12,491,887	$	12,343,395

(1)

Long-term debt at August 31, ~~2019~~2020 excludes ~~$548.6~~$761.4 million of our ~~2.375% Euro Medium Term~~6.875% Senior Notes, as these notes mature on ~~May 20, 2020 and $188.9~~April 15, 2021, $189.6 million of our outstanding borrowings under our senior secured revolving credit facility (“Revolving Credit Facility”). and $50.0 million of our secured bank loan. Long-term debt at November 30, ~~2018~~2019 excludes ~~$5.7~~$550.6 million of our ~~structured notes,~~2.375% Euro Medium Term Notes, as these notes matured on ~~February 26, 2019, $699.7 million of our 8.500% senior notes, as these notes mature on July 15, 2019 and $183.5~~May 20, 2020, $189.1 million of our outstanding borrowings under our Revolving Credit ~~Facility.~~Facility and $50.0 million of our secured bank loan.

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Long-Term Debt

During the nine months ended August 31, ~~2019,~~2020, long-term debt ~~increased $220.9 million. This increase is~~decreased $14.9 million, primarily due to the maturity and repayment of our 2.375% Euro Medium Term Notes, partially offset by approximately $244.4 million structured notes issuances, ~~with~~net of retirements, and a ~~total~~$150.0 million principal amount issuance 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,additional 5.125% Senior Notes 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.~~2023. At August 31, ~~2019,~~2020, 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 transactions revenues. The fair value of all of our structured notes at August 31, ~~2019~~2020 was ~~$1,014.5~~$1,522.1 million. Subsequent to quarter-end, on October 7, 2020, we issued 2.75% Senior Notes with a principal amount of $500.0 million, due 2032. For further information, see Note 12, Long-Term Debt, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

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We have a Revolving Credit Facility with a group of commercial banks for an aggregate principal amount of $190.0 million. At August 31, ~~2019,~~2020, borrowings under the Revolving Credit Facility amounted to ~~$188.9~~$189.6 million. Interest is based on an annual alternative base rate or an adjusted LIBOR, as defined in the Revolving Credit ~~Facility agreement.~~Facility. 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, ~~2019,~~2020, 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.

On September 27, 2019, one of our subsidiaries entered into a Loan and Security Agreement for a term loan with a principal amount of $50.0 million (“Secured Bank Loan”). This Secured Bank Loan matures on September 27, 2021 and is collateralized by certain trading securities. Interest on the Secured Bank Loan is 1.25% plus LIBOR. The agreement contains certain covenants that, among other things, restrict lien or encumbrance upon any of the pledged collateral. At August 31, ~~2019,~~2020, we were in compliance with all covenants under the Loan and Security Agreement.

At August 31, 2020, our long-term debt, excluding the Revolving Credit Facility and the Secured Bank Loan, has a weighted average maturity of approximately ~~9.0~~9.6 years.

Our long-term debt ratings at August 31, ~~2019~~2020 are as follows:



	Rating	Outlook
Moody’s ~~Investors Service~~(1)	Baa3	Stable
~~Standard and Poor’s (1)~~S&P (2)	~~BBB-~~BBB	~~Positive~~Negative
Fitch Ratings	BBB	Stable


(1)	On ~~July 11, 2019, Standard and Poor’s (“S&P”) reaffirmed~~April 15, 2020, Moody’s affirmed our ~~long-term debt~~ rating of ~~BBB-~~Baa3 and rating outlook of stable.


(2)	On April 14, 2020, S&P affirmed our rating of BBB and revised our rating outlook from stable to ~~positive.~~negative.

At August 31, ~~2019,~~2020, the long-term ratings on our principal operating broker-dealers, Jefferies LLC and Jefferies International Limited (a broker-dealer in the United Kingdom (“U.K. ~~broker-dealer)~~”)) are as follows:



	Jefferies LLC		Jefferies International Limited
	Rating	Outlook	Rating	Outlook
Moody’s ~~Investors Service~~(1)	Baa2	Stable	Baa2	Stable
S&P ~~(1)~~(2)	~~BBB~~BBB+	~~Positive~~Negative	~~BBB~~BBB+	~~Positive~~Negative

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(1)	On ~~July 11, 2019,~~April 15, 2020, Moody’s affirmed our rating of Baa2 and rating outlook of stable on Jefferies LLC and Jefferies International Limited.


(2)	On April 14, 2020, S&P ~~reaffirmed~~affirmed our ~~long-term debt~~ rating of ~~BBB~~BBB+ and revised our rating outlook from stable to ~~positive.~~negative on Jefferies LLC and Jefferies International Limited.

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, ~~2019,~~2020, 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 ~~$96.5~~$76.0 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 a credit rating downgrade. The impact of additional collateral requirements is considered in our Contingency Funding Plan and calculation of ~~Maximum Liquidity Outflow,~~MLO, as described above.

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Equity Capital

As compared to November 30, ~~2018,~~2019, the $362.4 million increase to total Jefferies Group LLC member’s equity at August 31, ~~2019~~2020 is primarily attributed to net earnings, ~~and changes in instruments specific credit risk,~~ partially offset by distributions to ~~Jefferies and foreign currency translation adjustments during the nine months ended August 31, 2019.~~Jefferies. During the three and nine months ended August 31, ~~2019,~~2020, we recognized ~~losses~~gains due to foreign currency translation adjustments, net of ~~$28.0~~tax, of $74.9 million and ~~$34.3~~$37.3 million, respectively, the majority of which is due to our ~~£716.4~~£865.2 million investment in our London subsidiaries at August 31, ~~2019.~~2020. 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.~~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, ~~2019,~~2020, 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	$	1,612,465	$	1,531,871

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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.~~U.K. 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~~The CFTC has finalized rules establishing capital requirements and financial reporting requirements for CFTC-registered swap dealers not subject to ~~regulatory capital requirements, these regulatory capital requirements have not yet been finalized.~~regulation by a banking regulator. 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. We may also be required in the future to register one or more additional subsidiaries as security-based swap dealers with the SEC. Compliance with these rules is required by October 6, 2021.

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~~The U.K. formally withdrew from the European Union (“~~Brexit”~~EU”)~~. While, there~~ on January 31, 2020 and entered a transition period that is ~~ongoing uncertainty as~~scheduled to expire on December 31, 2020. During the ~~terms~~transition period, existing arrangements between the U.K. and ~~any potential transition periods related~~EU will remain in place while the U.K. and EU seek to ~~Brexit, we~~negotiate a free trade agreement that will govern their future trading relationship. 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 UKU.K. broker-dealer in Germany, which has been approved as an authorized ~~MiFID~~Market in Financial Instruments Directive 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~~The new entity started trading in 2019 with EU clients with further clients migrating throughout 2020, and 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, ~~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~~2019 and Note 4, Fair Value 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, ~~2019,~~2020, 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,~~16, 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,~~17, Commitments, Contingencies and Guarantees, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

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Contractual Obligations

The table below provides information about our contractual obligations at August 31, ~~2019.~~2020. The table presents principal cash flows with expected maturity dates (in millions):


	Expected Maturity Date												Expected Maturity Date
	2019		2020		2021 and 2022		2023 and 2024		2025 and Later		Total		2020		2021		2022 and 2023		2024 and 2025		2026 and Later		Total
Debt obligations:
Unsecured long-term debt (contractual principal payments net of unamortized discounts and premiums) (1)	$	—	$	548.6	$	811.3	$	1,160.6	$	4,057.8	$	6,578.3	$	—	$	761.4	$	768.6	$	617.7	$	4,601.1	$	6,748.8
Revolving credit facility (1)	—		—		188.9		—		—		188.9		—		189.6		—		—		—		189.6
Secured bank loan (1)													—		50.0		—		—		—		50.0
Interest payment obligations on long-term debt (2)	83.4		313.4		517.8		409.5		1,623.4		2,947.5		98.2		289.3		491.3		431.7		1,685.0		2,995.5
Total	$	83.4	$	862.0	$	1,518.0	$	1,570.1	$	5,681.2	$	9,714.7	$	98.2	$	1,290.3	$	1,259.9	$	1,049.4	$	6,286.1	$	9,983.9


(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, ~~2019.~~2020.

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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. 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 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, ~~2018.~~2019.

Risk 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 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, exposure concentrations, aged inventory, amount of Level 3 assets, counterparty exposure, leverage and cash capital.

Market Risk

Market risk is defined as the risk of loss due to fluctuations in the market value of financial assets and liabilities attributable to changes in market variables.

Our market risk principally arises from interest rate risk, from exposure to changes in the yield curve, the volatility of interest rates, and credit spreads, and from equity price risks from exposure to changes in prices and volatilities of individual equities, equity baskets and equity indices. In addition, commodity price risk results from exposure to the changes in prices and volatilities of individual commodities, commodity baskets and commodity indices, and foreign exchange risk results from changes in foreign currency rates.

Market risk is present in our market making, proprietary trading, underwriting, specialist and investing 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 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 VaR using a model that simulates revenue and loss distributions on our trading portfolios by applying historical market changes to the current portfolio. 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 future market movements. While we believe the assumptions and inputs in our risk model are reasonable, we could incur losses greater than the reported VaR. Consequently, this VaR estimate is only one of a number of tools we use in our daily risk management activities.

Our average daily VaR increased to ~~$9.71~~$10.46 million for the three months ended August 31, ~~2019~~2020 from ~~$8.70~~$9.16 million for the three months ended May 31, ~~2019~~2020. The increase was primarily ~~due~~driven by continued market volatility early in the current quarter, as well as increased equity exposure as we continue to ~~higher~~build out our Asset Management business, partially offset by a decrease in interest rate risk ~~volatility~~ and ~~a lower~~an increase in the diversification benefit ~~partially offset by lower equity price risk mainly due to the liquidation of certain separately managed accounts within our Asset Management businesses.~~across asset classes and business divisions.

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, 2019										VaR at May 31, 2019												VaR at August 31, 2020					Daily VaR (1) Value-at-Risk in Trading Portfolios											VaR at May 31, 2020
				Daily VaR (1) Value-at-Risk in Trading Portfolios	Daily VaR for the Three Months Ended August 31, 2019										Daily VaR for the Three Months Ended May 31, 2019												Daily VaR for the Three Months Ended August 31, 2020															Daily VaR for the Three Months Ended May 31, 2020
Risk Categories				Average			High		Low						Average			High			Low						Average				High				Low							Average				High				Low
Interest Rates	$	5.49		$	4.64		$	5.87	$	3.40			$	4.41		$	3.41		$	4.41		$		2.58		$	8.92			$	8.65			$	11.06			$		7.19			$	10.34			$	9.31			$	12.50			$	5.96
Equity Prices	5.94			7.70			13.17		4.96			12.66			9.99			12.66			7.51				9.95				8.16				13.07				4.79					8.69				5.89				9.30				3.68
Currency Rates	0.38			0.27			0.52		0.07			0.09			0.25			1.41			0.06			0.26				0.21				2.17				0.12				0.21				0.20				0.39				0.10
Commodity Prices	0.87			0.94			1.18		0.75			1.08			1.00			1.26			0.70			0.37				0.91				1.56				0.24				1.18				0.64				1.18				0.28
Diversification Effect (2)	(4.04		)	(3.84		)	N/A		N/A			(7.41		)	(5.95		)	N/A			N/A			(5.03		)		(7.47		)		N/A				N/A				(10.25		)		(6.88		)		N/A				N/A
Firmwide	$	8.64		$	9.71		$	14.83	$	6.59		$	10.83		$	8.70		$	10.83		$	6.48		$	14.47			$	10.46			$	14.47			$	7.62			$	10.17			$	9.16			$	10.81			$	6.81


(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 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 overall level down to specific business lines. For the VaR model, trading related revenue is defined as principal 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, ~~2019,~~2020, results of the evaluation at the aggregate level demonstrated one day when the net trading loss exceeded the 95% one day ~~VaR, due to an equity block position.~~VaR.

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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~~2020 due to ~~an equity block position. In addition, our daily VaR increased in~~continued market volatility and as certain businesses took advantage of 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.market rebound.

Daily Net Trading Revenue

There were 10eight days with trading losses out of a total of 6465 trading days in the three months ended August 31, ~~2019.~~2020. 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~~2020 (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, ~~2019~~2020 (in thousands):


	10% Sensitivity		10% Sensitivity
Investments in funds (1)	$	57,346
Investment in funds (1)			$	92,033
Private investments	27,451		20,249
Corporate debt securities in default	6,275		6,770
Trade claims	4,269		4,052


(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.

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The impact of changes in our own credit spreads on our structured notes for which the fair value option was 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 ~~$1.12~~$1.2 million at August 31, ~~2019,~~2020, which is included in other comprehensive income.

Stress Tests and Scenario Analysis

Stress tests are used to analyze the potential impact of specific events or extreme market moves on the current portfolio both 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 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.

Unlike our VaR, which measures potential losses within a given confidence interval, stress scenarios do not have an associated implied 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 at least weekly as part of our risk management 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 the impact of any relevant idiosyncratic stress events as 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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~~JEFFERIES GROUP LLC AND SUBSIDIARIES~~

Loans and lending arising in connection with our investment banking and 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 with us and Massachusetts Mutual Life Insurance Company, to be funded equally, to support loan underwritings by Jefferies Finance. For further information on this facility, refer to Note 9, Investments, in our 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,~~20, 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 as a whole to limit exposure to loss related to credit risk. Credit risk is managed according to the Credit Risk Policy, which sets out the process for identifying

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counterparty credit risk, establishing counterparty limits, and managing and monitoring credit limits. The policy includes our approach for:

Client on-boarding and approving counterparty credit limits;

Negotiating, approving and monitoring credit terms in legal and master documentation;

Determining the analytical standards and risk parameters for ongoing management and monitoring credit risk books;

Actively managing daily exposure, exceptions and breaches; and

Monitoring daily margin call activity and counterparty performance.

Counterparty credit exposure limits are granted within our credit ratings framework, as detailed in the 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.

Our Secured Revolving Credit Facility, which supports loan underwritings by Jefferies Finance, is governed under separate policies other than the Credit Risk Policy and is approved by our Board of Directors. The loans outstanding to certain of our officers and employees are extended pursuant to a review by our most senior management.

Current counterparty credit exposures at August 31, ~~2019~~2020 and November 30, ~~2018~~2019 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.

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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, 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		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019
AAA Range	$	—	$	—	$	12.8	$	3.2	$	—	$	—	$	12.8	$	3.2	$	3,309.4	$	2,981.2	$	3,322.2	$	2,984.4	$	—	$	—	$	0.3	$	1.5	$	0.1	$	—	$	0.4	$	1.5	$	5,317.9	$	4,584.1	$	5,318.3	$	4,585.6
AA Range	45.0		45.1		34.6		45.3		3.2		4.2		82.8		94.6		3.9		111.6		86.7		206.2		45.1		45.2		100.3		43.0		21.5		3.7		166.9		91.9		3.9		5.3		170.8		97.2
A Range	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		0.2		1.1		466.2		531.9		133.7		152.4		600.1		685.4		1,425.1		976.3		2,025.2		1,661.7
BBB Range	250.1		250.1		153.3		206.6		31.6		15.5		435.0		472.2		3.6		2.3		438.6		474.5		250.0		250.2		122.5		140.9		24.9		48.3		397.4		439.4		1.5		1.6		398.9		441.0
BB or Lower	13.5		—		22.9		5.5		189.6		15.7		226.0		21.2		—		107.5		226.0		128.7		40.0		15.0		17.8		6.6		239.7		154.1		297.5		175.7		0.1		—		297.6		175.7
Unrated	75.5		119.3		—		—		8.5		—		84.0		119.3		0.6		77.4		84.6		196.7		98.9		94.2		—		—		0.2		6.8		99.1		101.0		1.2		0.6		100.3		101.6
Total	$	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	$	434.2	$	405.7	$	707.1	$	723.9	$	420.1	$	365.3	$	1,561.4	$	1,494.9	$	6,749.7	$	5,567.9	$	8,311.1	$	7,062.8
																																	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, 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		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019
Asia/Latin America/Other	$	13.5	$	—	$	55.3	$	30.2	$	1.7	$	0.1	$	70.5	$	30.3	$	90.8	$	304.0	$	161.3	$	334.3	$	15.0	$	15.0	$	51.0	$	50.5	$	7.1	$	0.3	$	73.1	$	65.8	$	226.0	$	100.4	$	299.1	$	166.2
Europe	0.1		0.3		363.8		427.0		81.8		27.3		445.7		454.6		263.5		170.8		709.2		625.4		0.1		—		282.0		324.1		62.5		101.1		344.6		425.2		92.1		74.1		436.7		499.3
North America	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		419.1		390.7		374.1		349.3		350.5		263.9		1,143.7		1,003.9		6,431.6		5,393.4		7,575.3		6,397.3
Total	$	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	$	434.2	$	405.7	$	707.1	$	723.9	$	420.1	$	365.3	$	1,561.4	$	1,494.9	$	6,749.7	$	5,567.9	$	8,311.1	$	7,062.8
																																	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, 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		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019		August 31, 2020		November 30, 2019
Asset Managers	$	—	$	—	$	2.1	$	0.6	$	—	$	—	$	2.1	$	0.6	$	3,309.4	$	2,812.4	$	3,311.5	$	2,813.0	$	0.1	$	—	$	—	$	1.7	$	—	$	—	$	0.1	$	1.7	$	5,317.9	$	4,584.1	$	5,318.0	$	4,585.8
Banks, Broker-dealers	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		250.2		250.7		513.4		526.7		182.7		206.8		946.3		984.2		1,431.8		983.8		2,378.1		1,968.0
Corporates	78.7		92.9		—		—		183.0		7.2		261.7		100.1		—		—		261.7		100.1		106.6		81.3		—		—		228.2		154.4		334.8		235.7		—		—		334.8		235.7
Other	55.7		71.5		205.3		213.7		11.4		7.2		272.4		292.4		—		—		272.4		292.4		77.3		73.7		193.7		195.5		9.2		4.1		280.2		273.3		—		—		280.2		273.3
Total	$	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	$	434.2	$	405.7	$	707.1	$	723.9	$	420.1	$	365.3	$	1,561.4	$	1,494.9	$	6,749.7	$	5,567.9	$	8,311.1	$	7,062.8

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 and monitor country risk resulting from both trading positions and counterparty ~~exposure.~~exposure, which may not include the offsetting benefit of any financial instruments utilized to manage market risk. The following tables reflect our top exposure at August 31, ~~2019~~2020 and November 30, ~~2018~~2019 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, 2019																						August 31, 2020
	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
Australia																							$	35.2	$	(19.6	)	$	1,514.3		$	—	$	14.3	$	—	$	13.4	$	1,544.2	$	1,557.6
Germany																							589.6		(507.8		)	894.9			—		68.6		11.5		16.4		1,056.8		1,073.2
United Kingdom	$	336.7	$	(192.8	)	$	(9.7	)	$	0.1	$	59.4	$	27.7	$	178.9		$	221.4		$	400.3	361.2		(140.5		)	(39.1		)	0.1		45.3		11.4		71.9		238.4		310.3
Spain	398.9		(267.8		)	—			—		0.1		—		—			131.2			131.2
Hong Kong																							46.8		(23.1		)	—			—		0.2		—		152.0		23.9		175.9
Italy																							1,458.4		(1,094.3		)	(212.1		)	—		—		0.4		—		152.4		152.4
Canada																							343.8		(294.9		)	(0.5		)	—		21.7		78.7		1.7		148.8		150.5
China																							498.1		(372.3		)	(22.8		)	—		—		—		—		103.0		103.0
Switzerland																							110.9		(84.1		)	1.1			—		28.1		2.5		3.5		58.5		62.0
Portugal																							202.0		(141.0		)	(0.4		)	—		—		—		—		60.6		60.6
France	347.4		(260.0		)	(124.9		)	—		139.4		26.6		—			128.5			128.5		501.2		(493.9		)	(107.2		)	—		124.6		23.6		—		48.3		48.3
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	299.1		(279.0		)	10.3			—		23.5		—		11.3			53.9			65.2
Switzerland	90.5		(74.2		)	2.1			—		30.6		1.9		4.9			50.9			55.8
Brazil	119.6		(62.8		)	(2.1		)	—		—		—		—			54.7			54.7
Total	$	3,243.1	$	(2,307.8	)	$	(341.6	)	$	0.1	$	253.9	$	130.9	$	242.7		$	978.6		$	1,221.3	$	4,147.2	$	(3,171.5	)	$	2,028.2		$	0.1	$	302.8	$	128.1	$	258.9	$	3,434.9	$	3,693.8

	November 30, 2018
	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
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	175.4		(384.8		)	129.4			—		89.7		1.3		93.3			11.0			104.3
Switzerland	100.5		(50.1		)	5.7			—		37.7		2.7		3.8			96.5			100.3
Hong Kong	13.8		(39.7		)	3.5			—		0.5		—		84.9			(21.9		)	63.0
Singapore	21.1		(1.4		)	1.0			—		0.1		—		31.2			20.8			52.0
Total	$	3,160.8	$	(2,367.1	)	$	(164.0	)	$	0.3	$	242.1	$	22.6	$	402.0		$	894.7		$	1,296.7



	November 30, 2019
	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
Netherlands	$	946.0	$	(329.7	)	$	(100.1	)	$	—	$	42.6	$	0.5	$	—	$	559.3	$	559.3
United Kingdom	416.1		(199.9		)	(124.4		)	—		60.7		37.6		54.1		190.1		244.2
Italy	1,262.3		(1,192.4		)	105.4			—		—		0.4		—		175.7		175.7
France	423.4		(296.2		)	(93.1		)	—		94.2		40.9		—		169.2		169.2
Canada	380.4		(362.2		)	7.4			—		0.3		81.2		1.9		107.1		109.0
Spain	249.2		(137.3		)	(25.7		)	—		3.3		—		—		89.5		89.5
Japan	76.0		(171.6		)	133.8			—		24.7		—		13.2		62.9		76.1
China	283.3		(236.9		)	25.6			—		—		—		—		72.0		72.0
Mexico	112.0		(68.3		)	13.0			—		—		—		—		56.7		56.7
Germany	238.2		(321.3		)	19.3			—		88.3		14.4		13.6		38.9		52.5
Total	$	4,386.9	$	(3,315.8	)	$	(38.8	)	$	—	$	314.1	$	175.0	$	82.8	$	1,521.4	$	1,604.2

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.

Our leadership is continuously monitoring circumstances around COVID-19, as well as economic and capital market conditions, and providing frequent communications to both our clients and our employees. We have adopted enhanced cleaning practices across our offices, have restricted business travel, and have monitored the health and welfare of our employees and worked actively with many individuals diagnosed with COVID-19. We implemented our Business Continuity Planning plan and have largely moved to a remote working environment across all functions without any significant disruptions to our business or control processes. Additionally, we are working continuously with all of our critical vendors regarding their own pandemic responses to ensure there is minimal impact on our business operations.

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.

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JEFFERIES GROUP LLC AND SUBSIDIARIES

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, ~~2019~~2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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JEFFERIES GROUP LLC AND SUBSIDIARIES

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, ~~2018~~2019 filed with the SEC on January 29, ~~2019.~~2020. 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. In addition, the following risk factors have occurred since previously reporting our risk factors in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended November 30, 2019.

The effects of the outbreak of the novel coronavirus (“COVID-19”) have negatively affected the global economy, the United States economy and the global financial markets, and may disrupt our operations and our clients’ operations, which could have an adverse effect on our business, financial condition and results of operations.

The ongoing COVID-19 global and national health emergency has caused significant disruption in the international and United States economies and financial markets. On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial market instability. The United States now has the world’s most reported COVID-19 cases, and all 50 states and the District of Columbia have reported cases of infected individuals. Several states, including New York, where we are headquartered, have declared states of emergency. Similar impacts have been experienced in every country in which we do business. Impacts to our business could be widespread and global, and material impacts may be possible, including the following:

Employees contracting COVID-19

Reductions in our operating effectiveness as our employees work from home or disaster-recovery locations

Unavailability of key personnel necessary to conduct our business activities

Unprecedented volatility in global financial markets

Reductions in revenue across our operating businesses

Delay in planned entry into, or expansion of, investments or projects in China and surrounding areas

Closure of our offices or the offices of our clients

De-globalization

We are taking precautions to protect the safety and well-being of our employees and customers. However, no assurance can be given that the steps being taken will be deemed to be adequate or appropriate, nor can we predict the level of disruption which will occur to our employee’s ability to provide customer support and service.

Although the onset of the COVID-19 pandemic resulted in meaningfully lower stock prices for many companies, as well as the trading prices for our own securities, the markets have not only stabilized but returned to near pre-COVID-19 levels. However, the further spread of the COVID-19 outbreak may materially negatively impact stock and other securities prices and materially disrupt banking and other financial activity generally and in the areas in which we operate. This would likely result in a decline in demand for our products and services, which would negatively impact our liquidity position and our growth strategy. Any one or more of these developments could have a material adverse effect on our and our consolidated subsidiaries’ business, operations, consolidated financial condition, and consolidated results of operations.

We may incur losses as a result of unforeseen or catastrophic events, including the emergence of a pandemic, terrorist attacks, extreme weather events or other natural disasters.

The occurrence of unforeseen or catastrophic events, including the emergence of a pandemic, such as COVID-19, or other widespread health emergency (or concerns over the possibility of such an emergency), terrorist attacks, extreme terrestrial or solar weather events or other natural disasters, could create economic and financial disruptions, and could lead to operational difficulties (including travel limitations) that could impair our ability to manage our businesses.

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Abrupt changes in market and general economic conditions have in the past adversely affected, and may in the future adversely affect, our business and profitability and cause volatility in our results of operations.

Economic and market conditions have had, and will continue to have, a direct and material impact on our results of operations and financial condition because performance in the financial services industry is heavily influenced by the overall strength of general economic conditions and financial market activity.

Our investment banking revenue, in the form of advisory services and underwriting, is directly related to general economic conditions and corresponding financial market activity. When the outlook for such economic conditions is uncertain or negative, financial market activity generally tends to decrease, which reduces our investment banking revenues. Reduced expectations of U.S. economic growth or a decline in the global economic outlook could cause financial market activity to decrease and negatively affect our investment banking revenues.

A sustained and continuing market downturn could lead to or exacerbate declines in the number of securities transactions executed for customers and, therefore, to a decline in the revenues we receive from commissions and spreads. Correspondingly, a reduction of prices of the securities we hold in inventory or as investments would lead to reduced revenues.

Revenues from our asset management businesses have been and may continue to be negatively impacted by declining securities prices, as well as widely fluctuating securities prices. Because our asset management businesses hold long and short positions in equity and debt securities, changes in the prices of these securities, as well as any decrease in the liquidity of these securities, may materially and adversely affect our revenues from asset management.

In addition, global economic conditions and global financial markets remain vulnerable to the potential risks posed by certain events, which could include, among other things, political and financial uncertainty in the United States and the European Union, renewed concern about China's economy, complications involving terrorism and armed conflicts around the world, or other challenges to global trade or travel, such as might occur in the event of a wider pandemic involving COVID-19. More generally, because our business is closely correlated to the general economic outlook, a significant deterioration in that outlook or realization of certain events would likely have an immediate and significant negative impact on our business and overall results of operations.

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.
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, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Statements of Financial Condition as of August 31, ~~2019~~2020 and November 30, ~~2018;~~2019; (ii) the Consolidated Statements of Earnings for the three and nine months ended August 31, ~~2019~~2020 and ~~2018;~~2019; (iii) the Consolidated Statements of Comprehensive Income for the three and nine months ended August 31, ~~2019~~2020 and ~~2018;~~2019; (iv) the Consolidated Statements of Changes in Equity for the three and nine months ended August 31, ~~2019~~2020 and ~~2018;~~2019; (v) the Consolidated Statements of Cash Flows for the nine months ended August 31, ~~2019~~2020 and ~~2018~~2019 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 ~~8, 2019~~9, 2020	By:	/s/ ~~Peregrine C. Broadbent~~Matt Larson
			~~Peregrine C. Broadbent~~Matt Larson 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	5963
Item 3. Quantitative and Qualitative Disclosures About Market Risk	9199
Item 4. Controls and Procedures	9199

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	92100
Item 1A. Risk Factors	92100
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	92101
Item 6. Exhibits	92101



	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		)



	Nine Months Ended August 31, 2018
	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:
																						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		$	—
Corporate debt securities	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		)	—
RMBS	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		)	—
Other ABS	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		)	—
Investments at fair value	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	)	$	—
Corporate debt securities	522		39			—			—			996			—		—			1,557		(39		)	—
Sovereign obligations	—		3			(598		)	629			—					21			55		(124		)	—
CMBS	105		(35		)	—			—			—			—		—			70		(70		)	—
Loans	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		)	—
Long-term debt	—		(25,078		)	—			—			—			81,284		107,424			163,630		13,235			11,843



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



	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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company