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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended November 30, 2013

OR

¨ 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

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

    Title of each class:    

        Name of each exchange on which registered:        

5.125% Senior Notes Due 2023 New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: Limited Liability Company Interests

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.      Yes    x          No    ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.     Yes     ¨          No     x

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     x          No     ¨

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K.       ¨

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

Large accelerated filer    ¨

Accelerated filer    ¨

Non-accelerated filer    x

Smaller Reporting company    ¨

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. $0 as of May 31, 2013.

The Registrant is a wholly-owned subsidiary of Leucadia National Corporation and meets the conditions set forth in General Instructions I(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with a reduced disclosure format as permitted by Instruction I (2).

Table of Contents

JEFFERIES GROUP LLC

2013 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

PART I
 Item 1.

Business.

2

 Item 1A.

Risk Factors.

7

 Item 1B.

Unresolved Staff Comments.

12

 Item 2.

Properties.

12

 Item 3.

Legal Proceedings.

12

 Item 4.

Mine Safety Disclosures.

13

PART II
 Item 5.      Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 14

 Item 6.

Selected Financial Data.

14

 Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

14

 Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

63

 Item 8.

Financial Statements and Supplementary Data.

64

 Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

158

 Item 9A.

Controls and Procedures.

158

 Item 9B.

Other Information.

158

PART III
 Item 10.

Directors, Executive Officers and Corporate Governance.

159

 Item 11.

Executive Compensation.

159

 Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

159

 Item 13.

Certain Relationships and Related Transactions, and Director Independence.

159

 Item 14.

Principal Accountant Fees and Services.

159

PART IV
 Item 15.

Exhibits and Financial Statement Schedules.

161

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JEFFERIES GROUP LLC AND SUBSIDIARIES

PART I

Item 1.  Business.

Introduction

Jefferies Group LLC and its subsidiaries operate as a global full service, integrated securities and investment banking firm. Our principal operating subsidiary, Jefferies LLC ("Jefferies"), was founded in the U.S. in 1962 and our first international operating subsidiary, Jefferies International Limited ("Jefferies Europe"), was established in the U.K. in 1986. On March 1, 2013, Jefferies Group, Inc. converted into a limited liability company (renamed Jefferies Group LLC) and became an indirect wholly owned subsidiary of Leucadia National Corporation ("Leucadia") pursuant to a merger agreement with Leucadia (the "Merger"). Each outstanding share of Jefferies Group LLC was converted into 0.81 of a common share of Leucadia (the "Exchange Ratio"). Jefferies Group LLC continues to operate as a full-service investment banking firm and as the holding company to its various regulated and unregulated operating subsidiaries. Richard Handler, our Chief Executive Officer and Chairman, was also appointed the Chief Executive Officer of Leucadia, as well as a Director of Leucadia. Brian Friedman, our Chairman of the Executive Committee, was also appointed Leucadia's President and a Director of Leucadia. Following the merger, Jefferies Group LLC retains a credit rating separate from Leucadia and remains an SEC reporting company, filing annual, quarterly and periodic financial reports.

Since 2000, we have grown considerably and become increasingly diversified, increasing our market share and the breadth and depth of our business. Our growth has been achieved through the addition of talented personnel in targeted areas, as well as the acquisition of complementary businesses. As of November 30, 2013, we had 3,797 employees in the Americas, Europe, Asia and the Middle East. Our global headquarters and executive offices are located at 520 Madison Avenue, New York, New York 10022. We also have regional headquarters offices in London and Hong Kong. Our primary telephone number is (212) 284-2550 and our Internet address is jefferies.com.

The following documents and reports are available on our public website:

•      Annual and interim reports on Form 10-K;

•      Quarterly reports on Form 10-Q;

•      Current reports on Form 8-K;

•      Code of Ethics

•      Reportable waivers, if any, from our Code of Ethics by our executive officers;

•      Board of Directors Corporate Governance Guidelines;

•      Charter of the Corporate Governance and Nominating Committee of the Board of Directors;

•      Charter of the Compensation Committee of the Board of Directors;

•      Any amendments to the above-mentioned documents and reports.

 Interested persons may also obtain a printed copy of any of these documents or reports by sending a request to Investor Relations, Jefferies Group LLC, 520 Madison Avenue, New York, NY 10022, by calling 203-708-5975 or by sending an email to [email protected]

Business Segments

We currently operate in two business segments, Capital Markets and Asset Management. Our Capital Markets reportable segment, which represents principally our entire business, consists of our securities and commodities trading activities and our investment banking activities. The Capital Markets reportable segment provides the sales, trading and/or origination and execution effort for various equity, fixed income, commodities, futures, foreign exchange and advisory products and services. The Asset Management segment includes asset management activities and related services. Our parent, Leucadia, is establishing an asset management business and we expect to transition our limited asset management business to Leucadia during 2014.

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Financial information regarding our reportable business segments as of November 30, 2013, November 30, 2012 and November 30, 2011 is set forth in Note 24, Segment Reporting, in our consolidated financial statements and is incorporated herein by reference.

Our Businesses

Capital Markets

Our Capital Markets segment focuses on Equities, Fixed Income (including futures, foreign exchange and commodities activities) and Investment Banking. We primarily serve institutional investors, corporations and government entities.

Equities

Equities Research, Sales & Trading

We provide our clients full-service equities research, sales and trading capabilities across global securities markets. We earn commissions or spread revenue by executing transactions for clients across these markets in equity and equity-related products, including common stock, American depository receipts, global depository receipts, exchange-traded funds, exchange-traded equity options, convertible and other equity-linked products and closed-end funds. Our primary competitors are U.S. and non-U.S. bank holding companies. We act as agent or principal (including as a market-maker) when executing client transactions via traditional "high-touch" and electronic "low-touch" channels. In order to facilitate client transactions, we may act as principal to provide liquidity which requires the commitment of our capital and maintenance of dealer inventory.

Our equity research, sales and trading efforts are organized across three geographical regions: the Americas; Europe, the Middle East, and Africa (EMEA); and Asia Pacific. Our main product lines within the regions are cash equities, electronic trading, derivatives and convertibles. Our clients are primarily institutional market participants such as mutual funds, hedge funds, investment advisors, pension and profit sharing plans, and insurance companies. Through our global research team and sales force, we maintain relationships with our clients, distribute investment research and strategy, trading ideas, market information and analyses across a range of industries and receive and execute client orders. Our research covers over 1,700 companies around the world and approximately a further 300 companies are covered by five firms in Asia with whom we maintain alliances.

Equity Finance

Our Equity Finance business provides financing, securities lending and other prime brokerage services.

We offer prime brokerage services in the U.S. that provide hedge funds, money managers and registered investment advisors with execution, financing, clearing, reporting and administrative services. We finance our clients' securities positions through margin loans that are collateralized by securities, cash or other acceptable liquid collateral. We earn an interest spread equal to the difference between the amount we pay for funds and the amount we receive from our clients. We also operate a matched book in equity and corporate bond securities, whereby we borrow and lend securities versus cash or liquid collateral and earn a net interest spread.

Customer assets (securities and funds) held by us are segregated in accordance with regulatorily mandated customer protection rules. We offer selected prime brokerage clients with the option of custodying their assets at an unaffiliated U.S. broker-dealer that is a subsidiary of a bank holding company. Under this arrangement, we provide our clients directly all customary prime brokerage services other than custody.

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Wealth Management

We provide tailored wealth management services designed to meet the needs of high net worth individuals, their families and their businesses, private equity and venture funds and small institutions. Our advisors provide access to all of our institutional execution capabilities and deliver other financial services. Our open architecture platform affords clients with access to products and services from both our firm and from a variety of other major financial services institutions.

Fixed Income

Fixed Income Sales and Trading

We provide our clients sales and trading of investment grade and high yield corporate bonds, U.S. and European government and agency securities, municipal bonds, mortgage- and asset-backed securities, whole loans, leveraged loans, distressed securities and emerging markets debt. Jefferies is designated as a Primary Dealer by the Federal Reserve Bank of New York and Jefferies Europe is designated in similar capacities for several government bond issuers in Europe, and trades a broad spectrum of other European government bonds. Additionally, through the use of repurchase agreements, we act as an intermediary between borrowers and lenders of short-term funds and obtain funding for various of our inventory positions.

Our strategists and economists provide ongoing commentary and analysis of the global fixed income markets. In addition, our fixed income research professionals, including research and desk analysts, provide investment ideas and analysis across a variety of fixed income products.

Futures, Foreign Exchange and Commodities

Jefferies Bache provides our clients 24-hour global coverage, with direct access to major commodity and financial futures exchanges including the CME, CBOT, NYMEX, ICE, NYSE Euronext, LME and Eurex and provides 24-hour global coverage, execution, clearing and market making in futures, options and derivatives on industrial metals including aluminum, copper, nickel, zinc, tin and lead. Products provided to clients include LME and CME futures and over-the-counter metals swaps and options.

We operate a full-service trading desk in all precious metals, cash, futures and exchange-for-physicals markets, and are a market maker providing execution and clearing services as well as market analysis. Jefferies Bache also provides prime brokerage services and is an authorized coin distributor of the U.S. Mint.

In addition, Jefferies Bache is a market-maker in foreign exchange spot, forward, swap and option contracts across major currencies and emerging markets globally.

Investment Banking

We provide our clients around the world with a full range of equity capital markets, debt capital markets and financial advisory services. Our services are enhanced by our industry sector expertise, our global distribution capabilities and our Company's senior level commitment to our clients.

Over 650 investment banking professionals operate in the Americas, Europe and Asia, and are organized into industry, product and geographic coverage groups. Our sector coverage groups include consumer and retail, energy, financial institutions, financial sponsors, general industrials, healthcare, media and telecommunications, public finance, REGAL (real estate, gaming, lodging) and technology. Our product coverage groups include equity capital markets, debt capital markets and financial advisory, which includes both mergers and acquisitions and restructuring and recapitalization. Our geographic coverage groups include coverage teams based in major cities in the United States, Canada, Brazil, United Kingdom, (including our UK Corporate Broking team), Germany, Russia, India and China.

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Equity Capital Markets

We provide a broad range of equity financing capabilities to companies and financial sponsors. These capabilities include private equity placements, initial public offerings, follow-on offerings, block trades and equity-linked convertible securities.

Debt Capital Markets

We provide a wide range of debt financing capabilities for companies, financial sponsors and governmental entities. We focus on structuring, underwriting and distributing public and private debt, including investment grade and non-investment grade corporate debt, leveraged loans, mortgage and other asset-backed securities, and liability management solutions.

Advisory Services

We provide mergers and acquisition and restructuring and recapitalization services to companies, financial sponsors and governmental entities. In the mergers and acquisition area, we advise sellers and buyers on corporate sales and divestitures, acquisitions, mergers, tender offers, spinoffs, joint ventures, strategic alliances and takeover and proxy fight defense. We also provide a broad range of acquisition financing capabilities to assist our clients. In the restructuring and recapitalization area, we provide to companies, bondholders and lenders with a full range of restructuring advisory capabilities as well as expertise in the structuring, valuation and placement of securities issued in recapitalizations.

Asset Management

We provide investment management services to pension funds, insurance companies and other institutional investors. Our primary asset management programs are strategic investment and convertible bond strategies.

Our strategic investment programs, including our Structured Alpha Program, are provided through the Strategic Investments Division of Jefferies Investment Advisers, LLC, which is registered as an investment adviser with the SEC. These programs are systematic, multi-strategy, multi-asset class programs with the objective of generating a steady stream of absolute returns irrespective of the direction of major market indices or phase of the economic cycle. These strategies are provided through both long-short equity private funds and separately managed accounts.

We offer convertible bond strategies through Jefferies (Switzerland) Limited, which is licensed by the Swiss Financial Market Supervisory Authority. These strategies are long only investment solutions in global convertible bonds offered to pension funds, insurance companies and private banking clients.

Competition

All aspects of our business are intensely competitive. We compete primarily with the large global bank holding companies that engage in capital markets activities, but also with firms listed in the AMEX Securities Broker/Dealer Index, other brokers and dealers, and boutique investment banking firms. The large global bank holding companies have substantially greater capital and resources than we do. We believe that the principal factors affecting our competitive standing include the quality, experience and skills of our professionals, the depth of our relationships, the breadth of our service offerings, our ability to deliver consistently the integrated capabilities of Jefferies and our tenacity and commitment to serve our clients.

Regulation

Regulation in the United States.         The financial services industry in which we operate is subject to extensive regulation. In the U.S., the Securities and Exchange Commission ("SEC") is the federal agency responsible for the administration of federal securities laws, and the Commodity Futures Trading Commission ("CFTC") is the federal agency responsible for the administration of laws relating to commodity interests (including futures and swaps). In addition, self-regulatory organizations, principally Financial Industry Regulatory Authority ("FINRA") and the National Futures Association ("NFA"), are actively involved in the regulation of financial service businesses. The

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SEC, CFTC and self-regulatory organizations conduct periodic examinations of broker-dealers investment advisers, futures commission merchants ("FCMs") and swap dealers. Financial service businesses are also subject to regulation by state securities commissions and attorneys general in those states in which they do business.

Broker-dealers are subject to regulations that cover all aspects of the securities business, including sales and trading methods, trade practices among broker-dealers, use and safekeeping of customers' funds and securities, capital structure of securities firms, anti-money laundering efforts, recordkeeping and the conduct of directors, officers and employees. Registered advisors are subject to, among other requirements, regulations concerning marketing, transactions with affiliates, disclosure to clients, and recordkeeping; and advisors that are also registered as commodity trading advisors or commodity pool operators are also subject to regulation by the CFTC and the NFA. FCMs, introducing brokers and swap dealers that engage in commodities, futures or swap transactions are subject to regulation by the CFTC and the NFA. Additional legislation, changes in rules promulgated by the SEC, CFTC and self-regulatory organizations, or changes in the interpretation or enforcement of existing laws and rules may directly affect the operations and profitability of broker-dealers, investment advisers, FCMs and swap dealers. The SEC, CFTC and self-regulatory organizations, state securities commissions and state attorneys general may conduct administrative proceedings or initiate civil litigation that can result in censure, fine, suspension, expulsion of a firm, its officers or employees, or revocation of a firm's licenses.

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") was enacted in the United States. The Dodd-Frank Act is being implemented through extensive rulemaking by the SEC, CFTC and other governmental agencies. The Dodd-Frank Act also mandates the preparation of studies on a wide range of issues. These studies could lead to additional regulatory changes. For additional information see Item 1A. Risk Factors – "Recent legislation and new and pending regulation may significantly affect our business."

Net Capital Requirements.       U.S. registered broker-dealers are subject to the SEC's Uniform Net Capital Rule (the "Net Capital Rule"), which specifies minimum net capital requirements. Jefferies Group LLC is not a registered broker-dealer and is therefore not subject to the Net Capital Rule; however, its U.S. broker-dealer subsidiaries, Jefferies and Jefferies Execution Services, Inc. ("Jefferies Execution"), are registered broker-dealers and are subject to the Net Capital Rule. Jefferies and Jefferies Execution have elected to compute their minimum net capital requirement in accordance with the "Alternative Net Capital Requirement" as permitted by the Net Capital Rule, which provides that a broker-dealer shall not permit its net capital, as defined, to be less than the greater of 2% of its aggregate debit balances (primarily customer-related receivables) or $250,000 ($1.5 million for prime brokers). Furthermore, Jefferies is a registered Introducing Broker with the CFTC and is subject to the CFTC's minimum financial requirements. Under the CFTC's minimum financial requirements, an Introducing Broker must maintain adjusted net capital equal to or in excess of the greater of (A) $45,000 or (B) since Jefferies is also a registered broker-dealer, the amount of net capital required by the Net Capital Rule. Compliance with the Net Capital Rule could limit operations of our broker-dealers, such as underwriting and trading activities, that require the use of significant amounts of capital, and may also restrict their ability to make loans, advances, dividends and other payments. In addition, Jefferies is subject to the rules and regulations of various exchanges, clearing organizations and other regulatory agencies applicable to Introducing Brokers, which may affect its ability as an Introducing Broker to make capital and certain other distributions.

U.S. registered FCMs are subject to the CFTC's minimum financial requirements for futures commission merchants and introducing brokers. Jefferies Group LLC is not a registered FCM nor a registered Introducing Broker, and is therefore not subject to the CFTC's minimum financial requirements; however, Jefferies Bache, LLC, a U.S. FCM subsidiary, is registered and subject to the minimum financial requirements. Under the minimum financial requirements, an FCM must maintain adjusted net capital equal to or in excess of the greater of (A) $1,000,000 or (B) the FCM's risk-based capital requirements totaling (1) eight percent of the total risk margin requirement for positions carried by the FCM in customer accounts, plus (2) eight percent of the total risk margin requirement for positions carried by the FCM in noncustomer accounts. An FCM's ability to make capital and certain other distributions is subject to the rules and regulations of various exchanges, clearing organizations and other regulatory agencies which may have capital requirements that are greater than the CFTC's.

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Our subsidiaries that are registered swap dealers will become subject to capital requirements under the Dodd-Frank Act once they become final. For additional information see Item 1A. Risk Factors – "Recent legislation and new and pending regulation may significantly affect our business."

See Net Capital within Item 7. Management's Discussion and Analysis and Note 23, Net Capital Requirements in this Annual Report on Form 10-K for additional discussion of net capital calculations.

Regulation outside the United States.       We are an active participant in the international capital markets, engage in commodity futures brokerage and provide investment banking services throughout the world, but primarily in Europe and Asia. As is true in the U.S., our subsidiaries are subject to extensive regulations promulgated and enforced by, among other regulatory bodies, the U.K. Financial Conduct Authority, the Hong Kong Securities and Futures Commission, the Japan Financial Services Agency and the Monetary Authority of Singapore. Every country in which we do business imposes upon us laws, rules and regulations similar to those in the U.S., including with respect to some form of capital adequacy rules, customer protection rules, anti-money laundering and anti-bribery rules, compliance with other applicable trading and investment banking regulations and similar regulatory reform packages in response to the credit and liquidity crisis of 2007 and 2008. For additional information see Item 1A. Risk Factors – "Extensive international regulation of our business limits our activities, and, if we violate these regulations, we may be subject to significant penalties."

Item 1A. Risk Factors.

Factors Affecting Our Business

The following 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 to the specific factors mentioned in this report, we may also be affected by other factors that affect businesses generally such as global or regional changes in economic or business conditions, acts of war, terrorism and natural disasters.

Recent legislation and new and pending regulation may significantly affect our business.

In the last five years, there has been significant legislation and increased regulation affecting the financial services industry. These legislative and regulatory initiatives affect not only us, but also our competitors and certain of our clients. These changes could have an effect on our revenue and profitability, limit our ability to pursue certain business opportunities, impact the value of assets that we hold, require us to change certain business practices, impose additional costs on us and otherwise adversely affect our business. Accordingly, we cannot provide assurance that legislation and regulation will not eventually have an adverse effect on our business, results of operations, cash flows and financial condition.

The Dodd-Frank Act was signed into law on July 21, 2010. Title VII of the Dodd-Frank Act and the rules and regulations adopted and to be adopted by the SEC and CFTC introduce a comprehensive regulatory regime for swaps and security-based swaps (both of which are defined terms) and parties that deal in derivatives. We have registered two of our subsidiaries as swap dealers with the CFTC and the NFA and may register one or more subsidiaries as security-based swap dealers with the SEC. The new laws and regulations will subject certain swaps and security-based swaps to clearing and exchange trading requirements and will subject swap dealers and security-based swap dealers to significant new burdens, including (i) capital and margin requirements, (ii) reporting, recordkeeping and internal business conduct requirements, (iii) external business conduct requirements in dealings with swap counterparties (which are particularly onerous when the counterparty is a special entity such as a federal, state, or municipal entity, an ERISA plan, a government employee benefit plan or an endowment), and (iv) large trader position reporting and certain position limit requirements. The final rules under Title VII, including those rules that have already been adopted, for both cleared and uncleared swap transactions will impose increased capital and margin requirements on our registered entities and require additional operational and compliance costs and resources that will likely affect our business.

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Section 619 of the Dodd-Frank Act (Volcker Rule) and section 716 of the Dodd-Frank Act (swaps push-out rule) limit proprietary trading of certain securities and swaps by banking entities such as banks, bank holding companies and similar institutions. Although we are not a banking entity and are not otherwise subject to these rules, some of our clients and many of our counterparties are banks or entities affiliated with banks and will be subject to these restrictions. These sections of the Dodd-Frank Act and the regulations that are adopted to implement them could negatively affect the swaps and securities markets by reducing their depth and liquidity and thereby affect pricing in these markets. Other negative effects could result from an expansive extraterritorial application of the Dodd-Frank Act in general or the Volcker Rule in particular and/or insufficient international coordination with respect to adoption of rules for derivatives and other financial reforms in other jurisdictions. We will not know the exact impact that these changes in the markets will have on our business until after the final rules are implemented.

The Dodd-Frank Act, in addressing systemic risks to the financial system, charges the Federal Reserve with drafting enhanced regulatory requirements for systemically important bank holding companies and certain other nonbank financial companies designated as systemically important by the Financial Stability Oversight Council. The enhanced requirements proposed by the Federal Reserve include capital requirements, liquidity requirements, limits on credit exposure concentrations and risk management requirements. We do not believe that we will be deemed to be a systemically important nonbank financial company under the new legislation and therefore will not be directly impacted. However, there will be an indirect impact to us to the extent that the new regulations apply to our competitors, counterparties and certain of our clients.

Extensive international regulation of our business limits our activities, and, if we violate these regulations, we may be subject to significant penalties.

The financial services industry is subject to extensive laws, rules and regulations in every country in which we operate. Firms that engage in securities and derivatives trading, commodity futures brokerage, wealth and asset management and investment banking must comply with the laws, rules and regulations imposed by national and state governments and regulatory and self-regulatory bodies with jurisdiction over such activities. Such laws, rules and regulations cover all aspects of the financial services business, including, but not limited to, sales and trading methods, trade practices, use and safekeeping of customers' funds and securities, capital structure, anti-money laundering and anti-bribery and corruption efforts, recordkeeping and the conduct of directors, officers and employees.

Each of our regulators supervises our business activities to monitor compliance with such laws, rules and regulations in the relevant jurisdiction. In addition, if there are instances in which our regulators question our compliance with laws, rules, and regulations, they may investigate the facts and circumstances to determine whether we have complied. At any moment in time, we may be subject to one or more such investigation or similar reviews. At this time, all such investigations and similar reviews are insignificant in scope and immaterial to us. However, there can be no assurance that, in the future, the operations of our businesses will not violate such laws, rules, and regulations and that related investigations and similar reviews could result in adverse regulatory requirements, regulatory enforcement actions and/or fines.

Additional legislation, changes in rules, changes in the interpretation or enforcement of existing laws and rules, or the entering into businesses that subject us to new rules and regulations may directly affect our business, results of operations and financial condition.

We continue to monitor the impact that the Basel Accords will have on our UK regulated entities. The update issued by the Basel Committee on Banking Supervision in December 2010, known as Basel III, recommended strengthening capital and liquidity rules. In response, the European Commission is in the process of implementing amendments to its Capital Requirements Directive ("CRD") putting into law CRD IV and the Capital Requirements Regulation ("CRR"). Changes under CRD IV and CRR became effective January 1, 2014. Our UK subsidiaries impacted by these changes are in compliance with the new regulations.

The European Market Infrastructure Regulation ("EMIR") was enacted in August 2012 and, in common with the Dodd-Frank Act in the US, is intended, among other things, to reduce counterparty risk by requiring standardized over-the-counter derivatives be cleared through a central counterparty and reported to regulator appointed trade repositories. EMIR is being introduced in phases in the UK and, based on current published dates, will be substantively implemented by the end of 2014.

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We are also reviewing the draft texts of the amendments to the Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation to assess the impact both pieces of legislation are likely to have on our business when they come into force in 2015 or 2016.

Changing conditions in financial markets and the economy could result in decreased revenues, losses or other adverse consequences.

As a global securities and investment banking firm, global or regional changes in the financial markets or economic conditions could adversely affect our business in many ways, including the following:

A market downturn could lead to a decline in the volume of transactions executed for customers and, therefore, to a decline in the revenues we receive from commissions and spreads.

Unfavorable financial or economic conditions could reduce the number and size of transactions in which we provide underwriting, financial advisory and other services. Our investment banking revenues, in the form of financial advisory and underwriting or placement fees, are directly related to the number and size of the transactions in which we participate and could therefore be adversely affected by unfavorable financial or economic conditions.

Adverse changes in the market could lead to losses from principal transactions on our inventory positions.

Adverse changes in the market could also lead to a reduction in revenues from asset management fees and investment income from managed funds and losses on our own capital invested in managed funds. Even in the absence of a market downturn, below-market investment performance by our funds and portfolio managers could reduce asset management revenues and assets under management and result in reputational damage that might make it more difficult to attract new investors.

Limitations on the availability of credit, such as occurred during 2008, can affect our ability to borrow on a secured or unsecured basis, which may adversely affect our liquidity and results of operations.

New or increased taxes on compensation payments such as bonuses or on balance sheet items may adversely affect our profits.

Should one of our competitors fail, our securities prices and our revenue could be negatively impacted based upon negative market sentiment causing customers to cease doing business with us and our lenders to cease loaning us money, which could adversely affect our business, funding and liquidity.

Unfounded allegations about us could result in extreme price volatility and price declines in our securities and loss of revenue, clients, and employees.

In November 2011, we became the subject of unfounded allegations and false rumors, including among others those relating to our exposure to European sovereign debt. Despite the fact that we were able to dispel such rumors, both our stock and bond prices were significantly impacted. Our common stock suffered a 20% sell-off in minutes and, consequently, its trading was temporarily suspended, and our debt-securities prices suffered not only extreme volatility but also record high yields. In addition, our operations were impacted as some clients either ceased doing business or temporarily slowed down the level of business they do, thereby decreasing our revenue stream. Although we were able to reverse the negative impact of such unfounded allegations and false rumors, there is no assurance that we will be able to do so successfully in the future and our potential failure to do so could have a material adverse effect on our business, financial condition and liquidity.

The downgrade of the U.S. credit rating and Europe's debt crisis could have a material adverse effect on our business, financial condition and liquidity.

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Standard & Poor's lowered its long term sovereign credit rating on the United States of America from AAA to AA+ on August 5, 2011. A further downgrade or a downgrade by other rating agencies, including a Nationally Recognized Statistical Rating Organization, could have a material adverse impact on financial markets and economic conditions in the United States and worldwide. Any such adverse impact could have a material adverse effect on our business, financial condition and liquidity.

In addition, during 2011 and 2012, the possibility that certain European Union ("EU") member states could have defaulted on their debt obligations negatively impacted economic conditions and global markets. The continued uncertainty over the outcome of international and the European Union's financial support programs and the possibility that EU member states may experience similar financial troubles could disrupt global markets. The negative impact on economic conditions and global markets could also have a material adverse effect on our business, financial condition and liquidity.

A credit-rating agency downgrade could significantly impact our business.

Maintaining an investment grade credit rating is important to our business and financial condition. We intend to access the capital markets and issue debt securities from time to time; and a decrease in our credit rating would not only increase our borrowing costs, but could also decrease demand for our debt securities and make a successful financing more difficult. In addition, 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. Such a downgrade could also negatively impact our stock and bond prices. There can be no assurance that our credit ratings will not be further downgraded by Moody's or downgraded by other rating agencies.

Our principal trading and investments expose us to risk of loss.

A considerable portion of our revenues is derived from trading in which we act as principal. We may incur trading losses relating to the purchase, sale or short sale of fixed income, high yield, international, convertible, and equity securities and futures and commodities for our own account. In any period, we may experience losses on our inventory positions as a result of price fluctuations, lack of trading volume, and illiquidity. From time to time, we may engage in a large block trade in a single security or maintain large position concentrations in a single security, securities of a single issuer, securities of issuers engaged in a specific industry, or securities from issuers located in a particular country or region. In general, because our inventory is marked to market on a daily basis, any adverse price movement in these securities could result in a reduction of our revenues and profits. In addition, we may engage in hedging transactions that if not successful, could result in losses.

Increased competition may adversely affect our revenues, profitability and staffing.

All aspects of our business are intensely competitive. We compete directly with a number of bank holding companies and commercial banks, other brokers and dealers, investment banking firms and other financial institutions. In addition to competition from firms currently in the securities business, there has been increasing competition from others offering financial services, including automated trading and other services based on technological innovations. We believe that the principal factors affecting competition involve market focus, reputation, the abilities of professional personnel, the ability to execute the transaction, relative price of the service and products being offered, bundling of products and services and the quality of service. Increased competition or an adverse change in our competitive position could lead to a reduction of business and therefore a reduction of revenues and profits.

Competition also extends to the hiring and retention of highly skilled employees. A competitor may be successful in hiring away an employee or group of employees, which may result in our losing business formerly serviced by such employee or employees. Competition can also raise our costs of hiring and retaining the employees we need to effectively operate our business.

Operational risks may disrupt our business, result in regulatory action against us or limit our growth.

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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, and the transactions we process have become increasingly complex. If any of 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. 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.

We face numerous risks and uncertainties as we expand our business.

We expect the growth of our business to come primarily from internal expansion and through acquisitions and strategic partnering. As we expand our business, there can be no assurance that our financial controls, the level and knowledge of our personnel, our operational abilities, our legal and compliance controls and our other corporate support systems will be adequate to manage our business and our growth. The ineffectiveness of any of these controls or systems could adversely affect our business and prospects. In addition, as we acquire new businesses and introduce new products, we face numerous risks and uncertainties integrating their controls and systems into ours, including financial controls, accounting and data processing systems, management controls and other operations. A failure to integrate these systems and controls, and even an inefficient integration of these systems and controls, could adversely affect our business and prospects.

Our international operations subject us to numerous risks which could adversely impact our business in many ways.

Our business and operations are expanding globally. Wherever we operate, we are subject to legal, regulatory, political, economic and other inherent risks. The laws and regulations applicable to the securities and investment banking industries differ in each country. Our inability to remain in compliance with applicable laws and regulations in a particular country could have a significant and negative effect on our business and prospects in that country as well as in other countries. A political, economic or financial disruption in a country or region could adversely impact our business and increase volatility in financial markets generally.

Legal liability may harm our business.

Many aspects of our business involve substantial risks of liability, and in the normal course of business, we have been named as a defendant or codefendant in lawsuits involving primarily claims for damages. The risks associated

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with potential legal liabilities often may be difficult to assess or quantify and their existence and magnitude often remain unknown for substantial periods of time. The expansion of our business, including increases in the number and size of investment banking transactions and our expansion into new areas impose greater risks of liability. In addition, unauthorized or illegal acts of our employees could result in substantial liability to us. Substantial legal liability could have a material adverse financial effect or cause us significant reputational harm, which in turn could seriously harm our business and our prospects.

Our business is subject to significant credit risk.

In the normal course of our businesses, we are involved in the execution, settlement and financing of various customer and principal securities and derivative transactions. These activities are transacted on a cash, margin or delivery-versus-payment basis and are subject to the risk of counterparty or customer nonperformance. Although transactions are generally collateralized by the underlying security or other securities, we still face the risks associated with changes in the market value of the collateral through settlement date or during the time when margin is extended and the risk of counterparty nonperformance to the extent collateral has not been secured or the counterparty defaults before collateral or margin can be adjusted. We may also incur credit risk in our derivative transactions to the extent such transactions result in uncollateralized credit exposure to our counterparties.

We seek to control the risk associated with these transactions by establishing and monitoring credit limits and by monitoring collateral and transaction levels daily. We may require counterparties to deposit additional collateral or return collateral pledged. In the case of aged securities failed to receive, we may, under industry regulations, purchase the underlying securities in the market and seek reimbursement for any losses from the counterparty. However, there can be no assurances that our risk controls will be successful.

Derivative transactions may expose us to unexpected risk and potential losses.

We are party to a number of derivative transactions that require us to deliver to the counterparty the underlying security, loan or other obligation in order to receive payment. In a number of cases, we do not hold the underlying security, loan or other obligation and may have difficulty obtaining, or be unable to obtain, the underlying security, loan or other obligation through the physical settlement of other transactions. As a result, we are subject to the risk that we may not be able to obtain the security, loan or other obligation within the required contractual time frame for delivery. This could cause us to forfeit the payments due to us under these contracts or result in settlement delays with the attendant credit and operational risk as well as increased costs to the firm.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our global executive offices and principal administrative offices are located at 520 Madison Avenue, New York, New York under an operating lease arrangement. We maintain additional offices in over 30 cities throughout the world including, in the United States, Charlotte, Chicago, Boston, Houston, Los Angeles, San Francisco, Stamford, and Jersey City, and internationally, London, Frankfurt, Zurich, Hong Kong, Singapore, Tokyo and Mumbai. In addition, we maintain backup data center facilities with redundant technologies for each of our three main data center hubs in Jersey City, London and Hong Kong. We lease all of our office space, or contract via service arrangement, which management believes is adequate for our business. For information concerning leasehold improvements and rental expense, see Note 2, Summary of Significant Accounting Policies and Note 22, Commitments, Contingencies and Guarantees, in our consolidated financial statements.

Item 3. 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 codefendants in lawsuits involving primarily claims for damages.

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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 financial condition.

Seven putative class action lawsuits have been filed in New York and Delaware concerning the Merger. The class actions, filed on behalf of our shareholders prior to the Merger, name as defendants Jefferies Group, Inc., the members of our board of directors of Jefferies Group, Inc., Leucadia and, in certain of the actions, certain merger-related subsidiaries. The actions allege that the directors breached their fiduciary duties in connection with the Merger by engaging in a flawed process and agreeing to sell Jefferies Group, Inc. for inadequate consideration pursuant to an agreement that contains improper deal protection terms. The actions allege that Jefferies Group, Inc. and Leucadia aided and abetted the directors' breach of fiduciary duties. The actions filed in New York have been stayed, the actions filed in Delaware are proceeding and the claims against certain of the directors have been dismissed. We are unable to predict the outcome of this litigation.

We reached a non-prosecution agreement in principle with the United States Attorney for the District of Connecticut and a settlement agreement in principle with the SEC, which remains subject to review and approval by the SEC Commissioners, relating to an investigation of the purchases and sales of mortgage-backed securities. That investigation arose from a matter that came to light in late 2011, at which time we terminated a mortgage-backed-securities trader who was then indicted by the United States Attorney for the District of Connecticut in January 2013 and separately charged in a civil complaint by the SEC. Those agreements in principle include an aggregate $25.0 million payment, of which approximately $11.0 million are payments to trading counterparties impacted by those activities, approximately $10 million of which is a fine payable to the U.S. Attorney's Office, and approximately $4.0 million of which is a fine payable to the SEC. All such amounts are reflected in our year-end 2013 financial statements, with $23.2 million recognized during the fourth quarter of 2013 and $2.7 million recognized across prior 2012 and 2013 periods.

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Prior to the Merger, our common stock was traded on the NYSE under the symbol JEF. On March 1, 2013, all of our outstanding common shares were exchanged for shares of Leucadia, our common stock was delisted and there is no longer a public trading market for our common stock. Our ability to pay distributions to Leucadia is subject to the restrictions set forth in certain financial covenants associated with our $950.0 million Credit Facility described in Note 15, Long-Term Debt and the governing provisions of the Delaware Limited Liability Company Act. We do not anticipate making distributions in the future.

Dividends per Common Share (declared) for the first quarter of 2013 and the two most recent fiscal years:

1 st  Quarter 

2 nd  Quarter

3 rd  Quarter

4 th  Quarter

2013

 $0.075       N/a     N/a     N/a

2012

 $0.075       $0.075     $0.075     $0.075

2011

 $0.075       $0.075     $0.075     $0.075

Item 6. Selected Financial Data.

Omitted pursuant to general instruction I(2)(a) to Form 10-K.

Item 7.  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 contained in this report under the caption "Business";

the risk factors contained in this report under the caption "Risk Factors";

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";

the discussion of our risk management policies, procedures and methodologies contained in this report under the caption "Risk Management" included within Management's Discussion and Analysis of Financial Condition and Results of Operations;

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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.

Consolidated Results of Operations

On March 1, 2013, Jefferies Group, Inc. converted into a limited liability company (renamed Jefferies Group LLC) and became an indirect wholly owned subsidiary of Leucadia National Corporation ("Leucadia") pursuant to a merger agreement with Leucadia (the "Merger"). Each outstanding share of Jefferies Group LLC was converted into 0.81 of a common share of Leucadia (the "Exchange Ratio"). Jefferies Group LLC continues to operate as a full-service investment banking firm and as the holding company to its various regulated and unregulated operating subsidiaries. Richard Handler, our Chief Executive Officer and Chairman, was also appointed the Chief Executive Officer of Leucadia, as well as a Director of Leucadia. Brian Friedman, our Chairman of the Executive Committee, was also appointed Leucadia's President and a Director of Leucadia. Following the Merger, Jefferies Group LLC retains a credit rating separate from Leucadia and remains an SEC reporting company, filing annual, quarterly and periodic financial reports. For further information, see Note 1, Organization and Basis of Presentation in our consolidated financial statements.

In Management's Discussion and Analysis of Financial Condition and Results of Operations, we have presented the historical financial results in the tables that follow for the periods before and after the Merger. Periods prior to March 1, 2013 are referred to as Predecessor periods, while periods after March 1, 2013 are referred to as Successor periods to reflect the fact that under U.S. generally accepted accounting principles ("U.S. GAAP") Leucadia's cost of acquiring Jefferies Group LLC has been pushed down to create a new accounting basis for Jefferies Group LLC. The Predecessor and Successor periods have been separated by a vertical line to highlight the fact that the financial information for such periods has been prepared under two different cost bases of accounting. Our financial results of operations are discussed separately for the periods (i) nine months ended November 30, 2013 (the "Successor fiscal 2013 period") and (ii) the three months ended February 28, 2013 and the years ended November 30, 2012 and 2011 (the "Predecessor fiscal periods"). The following table provides an overview of our consolidated results of operations (in thousands):

Successor Predecessor

  Nine Months Ended  
November 30, 2013
  Three Months Ended  
February 28, 2013
Year Ended
  November 30, 2012  
Year Ended
  November 30, 2011  

Net revenues, less mandatorily redeemable preferred interests

  $ 2,137,313     $ 807,583     $ 3,018,769     $ 2,573,323  

Non-interest expenses

1,873,018   668,096   2,526,974   2,153,989  

Earnings before income taxes

264,295   139,487   491,795   419,334  

Income tax expense

94,686   48,645   168,646   132,966  

Net earnings

169,609   90,842   323,149   286,368  

Net earnings to noncontrolling interests

8,418   10,704   40,740   1,750  

Net earnings attributable to Jefferies Group LLC

161,191   80,138   282,409   284,618  

Effective tax rate

35.8%  34.9%  34.3%  31.7% 

As discussed further below, we are making certain adjustments to our historical financial statements for the quarters of 2013 and 2012 and for the year ended November 30, 2011. We do not believe these discrete adjustments are material individually or in the aggregate to our financial condition or to our financial results for any reported period.

The first adjustment relates to a revised estimate of our litigation reserve resulting in an additional $17.0 million on a pre-tax basis recognized in Other expenses in the fourth quarter of 2013. We have adjusted our estimate of the reserve relating to an investigation of the purchases and sales of mortgage-backed securities based on an agreement

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reached in principle subsequent to our report on Form 8-K, dated December 17, 2013 in which we announced our financial results for our fiscal fourth quarter of 2013. Additionally, we have reduced our estimate for bad debt provision on certain investment banking receivables on a pre-tax basis by $1.3 million in the fourth quarter of 2013 resulting in a reduction in Other expenses by such amount in this Annual Report on Form 10-K for the year ended November 30, 2013. The impact of these adjustments is a reduction in Income tax expense of $1.2 million and a reduction in Net earnings of $14.5 million during the fourth quarter of 2013.

In addition to and unrelated to the adjustments described above, we have reduced Income tax expense by $4.4 million to correct for income tax expense recognized during the fourth quarter of 2013. It was determined that such income tax expense properly related to each of the years from fiscal 2009 to fiscal 2012. This had the effect of understating goodwill in the purchase price allocation by $4.4 million as the additional income tax liability in existence at the merger date reduces the fair value of the net assets acquired. We have evaluated the effects of this correction and concluded that it is not material to the previously issued Annual Reports on Form 10-K for the previously reported periods or to the previously issued Quarterly Reports on Form 10-Q for the three months ended May 31, 2013 and August 31, 2013. Nevertheless, we have revised our consolidated net earnings for the nine months ended November 30, 2013 as reflected in this Form 10-K for the year ended November 30, 2013 to correct for the effect of this item and appropriately reflected the increase of $4.4 million in goodwill within our Consolidated Statement of Financial Condition.

Finally, we are adjusting Commissions revenues and Floor brokerage and clearing fees in the respective financial statement line items to reflect certain exchange fees charged to customers in our futures business on a gross rather than net basis by $60.6 million, $62.9 million and $28.1 million in 2013, 2012 and 2011, respectively. Although floor brokerage and clearing fees previously had been recorded on a net basis to Commissions revenue, thereby resulting in an understatement in Commissions revenues, Total revenues, Net revenues, Floor brokerage and clearing fees and Total non-interest expenses for various periods, there was no impact on Net earnings. We do not believe these adjustments are material to our financial statements for any reported period.

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The following tables set forth the effects of the adjustments on Net earnings, on an after tax basis, for the years ended November 30, 2013 and 2012 and 2011 and for the quarterly periods in 2013. Although the year ended November 30, 2013 and the quarterly periods in 2013 are not adjusted, this information was previously provided in our current report on Form 8-K filed on December 17, 2013, and therefore is included as part of this information.

Successor Predecessor
Decrease in Net earnings to Jefferies Group LLC Nine Months
Ended
     November 30,     
    Three Months    
Ended
February 28,
    Year Ended November 30,    
(in thousands) 2013 2013 2012 2011

Previously reported Net earnings to Jefferies Group LLC

  $ 171,302     $ 80,138     $    282,409     $ 284,618  

Netting of Floor brokerage clearing fees to Commissions revenue

-    -   -   -  

Net litigation and bad debt provisions

(14,505)  -   -   -  

Income taxes

4,394   -   -   -  

Total adjustments

(10,111)  -   -   -  

Adjusted Net earnings to Jefferies Group LLC

  $      161,191     $  80,138     $     282,409     $          284,618  

Decrease in earnings to Jefferies Group LLC Successor Predecessor
(in thousands) Three Months Ended
     November 30,     
2013
       August 31,       
2013
     May 31,     
2013
    February 28,    
2013

Previously reported Net earnings to Jefferies Group LLC

  $ 120,054     $ 11,740     $ 39,508     $ 80,138  

Netting of Floor brokerage clearing fees to Commissions revenue

-    -   -   -  

Net litigation and bad debt provisions

(14,505)  -   -   -  

Income taxes

4,394   -   -   -  

Total adjustments

(10,111)  -   -   -  

Adjusted Net earnings to Jefferies Group LLC

  $ 109,943     $ 11,740     $ 39,508     $ 80,138  

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The following tables set forth the effects of the adjustments on affected line items within our previously reported Consolidated Statements of Earnings for years ended November 30, 2013, 2012 and 2011. Although our year ended November 30, 2013 is not adjusted, this information was previously provided in our current report on Form 8-K filed on December 17, 2013, and therefore is included as part of this information.

Consolidated Statement of Earnings

  Nine Months Ended November 30,     Three Months Ended February 28,   Year Ended November 30,
2013 2012 2011
(in thousands) As
Previously
Reported
Adjusted As
Previously
Reported
Adjusted As
Previously
Reported
Adjusted As
Previously
Reported
Adjusted

Commissions revenues

  $ 427,178     $ 472,596     $ 131,083     $ 146,240     $ 485,569     $ 548,437     $ 534,726     $ 562,858  

Total revenues

    2,674,322     2,719,740     1,006,803     1,021,960     3,871,205     3,934,073     3,529,638     3,557,770  

Net revenues

2,095,263   2,140,681   803,387   818,544   2,998,784   3,061,652   2,548,813   2,576,945  

Net revenues, less mandatorily redeemable preferred interest

2,091,895   2,137,313   792,426   807,583   2,955,901   3,018,769   2,545,191   2,573,323  

Floor brokerage and clearing fees

105,357   150,774   30,998   46,155   120,145   183,013   126,313   154,445  

Other expenses

76,325   92,035   14,475   14,475   62,498   62,498   56,099   56,099  

Total non-compensation expenses

597,982   659,110   178,722   193,879   693,308   756,176   643,253   671,385  

Total non-interest expenses

1,811,890   1,873,018   652,939   668,096   2,464,106   2,526,974   2,125,857   2,153,989  

Earnings before income taxes

280,005   264,295   139,487   139,487   491,795   491,795   419,334   419,334  

Income tax expense

100,285   94,686   48,645   48,645   168,646   168,646   132,966   132,966  

Net earnings

179,720   169,609   90,842   90,842   323,149   323,149   286,368   286,368  

Net earnings attributable to Jefferies Group LLC

171,302   161,191   80,138   80,138   282,409   282,409   284,618   284,618  

The impact of the adjustments were as follows:

To increase Commissions revenue by $45.4 million, $15.2 million, $62.9 million and $28.1 million for the nine months ended November 30, 2013, the three months ended February 28, 2013 and the years ended November 30, 2012 and 2011, respectively.

To increase Floor brokerage and clearing fees by $45.4 million, $15.2 million, $62.9 million and $28.1 million for the nine months ended November 30, 2013, the three months ended February 28, 2013 and the years ended November 30, 2012 and 2011, respectively

To increase Other expenses by $15.7 million for the nine months ended November 30, 2013 for the change in estimates associated with litigation reserves and bad debt provisions. To reduce Income tax expense for the associated tax effect of these items by $1.2 million for the nine months ended November 30, 2013.

To reduce Income tax expense by $4.4 million for the nine months ended November 30, 2013 to correct for the effect of income tax provisions determined to be related to periods prior to December 1, 2012.

There is no effect on our Consolidated Statements of Financial Condition as of November 30, 2012, Consolidated Statements of Changes in Stockholders' Equity for the years 2012 and 2011 and Consolidated Statements of Cash Flows for the years 2012 and 2011.

Executive Summary

Nine Months Ended November 30, 2013

Net revenues, less mandatorily redeemable preferred interests, for the nine months ended November 30, 2013 were $2,137.3 million reflecting a challenging environment for our fixed income businesses during portions of the period partially offset by strong results in equities and investment banking, which both achieved record net revenues for the fourth quarter of fiscal 2013. The results for the nine month period reflect within Net revenues positive income of $73.8 million, representing the amortization of premiums arising from recognizing our long-term debt at fair value as part of the pushdown accounting for the Merger, and gains of $89.3 million in aggregate from our investments in KCG Holdings, Inc. ("Knight Capital") and Harbinger Group Inc.

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Non-interest expenses were $1,873.0 million for the nine months ended November 30, 2013 and include Compensation and benefits expense of $1,213.9 million recognized commensurate with the level of net revenues for the nine month period. Compensation and benefits expenses as a percentage of Net revenues was 56.7% for the nine months ended November 30, 2013. Non-interest expense also includes approximately $50.0 million in merger related costs associated with the closing of the Merger. These costs are comprised of $11.6 million in merger-related investment banking, legal and filing fees, $6.3 million in additional lease expense related to recognizing existing leases at their current market value, incremental amortization expense of $21.1 million associated with intangible assets and internally developed software recognized at the merger date, and $11.0 million of additional amortization expense related to the write-up of the cost of outstanding share-based awards which had future service requirements at the merger date. In addition, occupancy and equipment includes a $8.7 million charge associated with our relocating certain staff and abandoning certain London office space recognized during the nine month period.

At November 30, 2013, we had 3,797 employees globally, slightly below our headcount at November 30, 2012.

Three Months Ended February 28, 2013

Net revenues, less mandatorily redeemable preferred interests, for the three months ended February 28, 2013 were $807.6 million, which include strong investment banking revenues, particularly in debt and equity capital markets, and a gain of $26.5 million on our share ownership in Knight Capital. Non-interest expenses of $668.1 million for the three months ended February 28, 2013, reflect compensation expense consistent with the level of net revenues and professional service costs associated with the Merger. Compensation costs as a percentage of Net revenues for the three months ended February 28, 2013 were 57.9%.

Year Ended November 30, 2012

Net revenues, less mandatorily redeemable preferred interests, for the year ended November 30, 2012 were a record $3,018.8 million. During 2012 we structured and invested in a convertible preferred stock offering of Knight Capital. Net revenues for the year ended November 30, 2012 include a mark-to-market gain of $151.9 million on our share ownership in Knight Capital and an advisory fee of $20.0 million for services in respect of the transaction. Net revenues for the year ended November 30, 2012 also include within Other revenues a bargain purchase gain of $3.4 million on the acquisition of the corporate broking business of Hoare Govett from The Royal Bank of Scotland plc, a gain on debt extinguishment of $9.9 million and a gain of $23.8 million on the sale of certain mortgage servicing right assets by our Fixed Income business. Fixed income revenues for the year ended November 30, 2012 include a full twelve months of the Global Commodities Group business (also referred to as "Jefferies Bache").

Non-interest expenses totaled $2,527.0 million for the year ended November 30, 2012 and included compensation expense of $1,770.8 million, consistent with higher net revenues. Compensation expense as a percentage of Net revenues was 57.8%. Within non-interest expenses, Technology and communications costs increased as the expansion of our personnel and business platforms has increased the demand for market data, technology connections and applications. Occupancy costs increased as we strengthened our presence in Europe and Asia and Business development expenses increased commensurate with furthering the expansion of our market share. Increased professional service costs are primarily associated with our announced merger with Leucadia and efforts associated with Dodd-Frank compliance. Floor brokerage and clearing fees for the 2012 year are reflective of lower equity trading volumes. Non-interest expenses include within Other expenses donations to Hurricane Sandy relief of $4.1 million. Non-interest expenses also include a full twelve months of costs from our Jefferies Bache operations. Our effective tax rate was 34.3% for the year ended November 30, 2012.

At November 30, 2012, we had 3,804 employees globally. We added an additional 51 employees with the acquisition of Hoare Govett in February 2012 and expanded our headcount during 2012 in our metal and energy futures business. These increases were offset by headcount reductions since the start of 2012 aimed at better resource allocation and improved productivity.

Year Ended November 30, 2011

Net revenues, less mandatorily redeemable preferred interests, for the year ended November 30, 2011 were $2,573.3 million. Net revenues include results of Jefferies Bache for five months, as a result of the acquisition of the Global

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Commodities Group from Prudential Financial, Inc. on July 1, 2011. The results for 2011 include within Other revenues a bargain purchase gain of $52.5 million arising on the acquisition of Jefferies Bache and a gain on debt extinguishment of $21.1 million. Non-interest expenses of $2,154.0 million for the year ended November 30, 2011 include compensation expenses of $1,482.6 million, equivalent to 57.5% of Net revenues. Non-interest expenses include within Other expenses a $4.6 million charitable contribution for Japanese earthquake relief. Our effective tax rate was 31.7%, primarily attributable to the fact that the 2011 results include a bargain purchase gain of $52.5 million arising on the acquisition of the Global Commodities Group, which was non-taxable.

At November 30, 2011, we had 3,898 employees globally. On July 1, 2011, we added approximately 400 employees from the Jefferies Bache acquisition.

Our business, by its nature, does not produce predictable or necessarily recurring earnings. Our results in any given period can be materially affected by conditions in global financial markets, economic conditions generally and our own activities and positions. For a further discussion of the factors that may affect our future operating results, see "Risk Factors" in Part I, Item IA of this Annual Report on Form 10-K for the year ended November 30, 2013.

Revenues by Source

The Capital Markets reportable segment includes our securities and commodities trading activities, and our investment banking activities. The Capital Markets reportable segment provides the sales, trading and origination and advisory effort for various equity, fixed income, commodities, futures, foreign exchange and advisory products and services. The Capital Markets segment comprises many business units, with many interactions and much integration among them. In addition, we separately discuss our Asset Management business.

For presentation purposes, the remainder of "Results of Operations" is presented on a detailed product and expense basis, rather than on a business segment basis. Net revenues presented for our equity and fixed income 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 sales and trading 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 "Revenues by Source" for the Successor period nine months ended November 30, 2013 and the Predecessor periods three months ended February 28, 2013 and the years ended November 30, 2012 and 2011 (amounts in thousands):

Successor Predecessor
Nine Months Ended Three Months Ended Year Ended Year Ended
November 30, 2013 February 28, 2013 November 30, 2012 November 30, 2011
Amount  % of Net 
 Revenue 
Amount  % of Net 
 Revenue 
Amount  % of Net 
 Revenue 
Amount  % of Net 
 Revenue 

Equities

  $

582,355  

27  

  $  167,354  

21  

  $

642,360  

21  

  $

593,589  

23  

Fixed income

504,092   24   352,029   43   1,253,268   41   743,088   29  

Total sales and trading

1,086,447   51   519,383   64   1,895,628   62   1,336,677   52  

Other

4,624     -     -     -     13,175   -     73,615   3  

Equity

228,394   11   61,380   7   193,797   6   187,288   7  

Debt

415,932   19   140,672   17   455,790   15   384,921   15  

Capital markets

644,326   30   202,052   24   649,587   21   572,209   22  

Advisory

369,191   17   86,226   11   476,296   16   550,319   21  

Total investment banking

1,013,517   47   288,278   35   1,125,883   37   1,122,528   43  

Asset management fees and investment income (loss) from managed funds:

Asset management fees

26,473   2   11,083   1   38,130   1   33,425   1  

Investment income (loss) from managed funds

9,620   -     (200)  -     (11,164)  -     10,700   1  

Total

36,093   2   10,883   1   26,966   1   44,125   2  

Net revenues

2,140,681   100   818,544   100   3,061,652   100   2,576,945   100  

Interest on mandatorily redeemable preferred interests of consolidated subsidiaries

3,368   10,961   42,883   3,622  

Net revenues, less mandatorily redeemable preferred interests

  $   2,137,313     $    807,583     $   3,018,769     $   2,573,323  

Net Revenues

Net revenues for the nine months ended November 30, 2013 of $2,140.7 million reflect a solid performance in our equity sales and trading business and continued strength in our investment banking platform. Our fixed income businesses experienced difficult trading conditions for a portion of the period as a result of a change in expectations for interest rates surrounding the Federal Reserve's plans for tapering its asset purchase program; though fixed income performance significantly improved during the fourth quarter of 2013. The nine months results include gains of $89.3 million in aggregate within Equities Principal transaction revenues from our investments in Knight Capital and Harbinger Group Inc. ("Harbinger").

Net revenues for the three months ended February 28, 2013 of $818.5 million were the second highest quarter on record (after the fourth quarter of fiscal 2013) as a result of improved overall market activity, with all of our business lines demonstrating strong results. Within Equity revenues, Net revenues include Principal transaction revenues of $26.5 million from gains related to our investment in Knight Capital during the quarter.

Net revenues for the year ended November 30, 2012 were a record $3,061.7 million. Our 2012 results include Principal transaction revenues of $151.9 million from our investment in Knight Capital. Fixed income revenues were supported by investor demand for higher-yielding assets translating into reasonably robust trading volumes while muted secondary trading volume affected equities revenues (excluding revenues from our ownership of Knight Capital). Investment banking revenue of $1,125.9 million reflects the building strength of our franchise. Asset management fee results were offset by write-downs on certain of our investments in unconsolidated funds. In addition, Net revenues for the year included within Other revenues a bargain purchase gain of $3.4 million recognized in connection with our acquisition of Hoare Govett in February 2012 and a gain on extinguishment of debt of $9.9 million related to transactions in our own debt by our broker-dealer's market-making desk in December 2011.

Net revenues before mandatorily redeemable preferred interests for the year ended November 30, 2011 were $2,576.9 million, including robust revenues of $1,122.5 million from our investment banking division. Equity sales and trading results for the 2011 year were impacted by overall lower stock market volumes. Fixed income net revenues included five months of operating results of Jefferies Bache, having acquired the business in July 2011. Net revenues for the year ended November 30, 2011 also included within Other revenues a bargain purchase gain of $52.5 million recognized in connection with our Jefferies Bache acquisition and a gain on debt extinguishment of $21.1 million.

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Interest on mandatorily redeemable preferred interests of consolidated subsidiaries represents primarily the allocation of earnings and losses from our high yield business to third party noncontrolling interest holders that were invested in that business through mandatorily redeemable preferred securities. Net revenues for the nine months ended November 30, 2013 reflect the allocation of earnings and losses only for the month of March 2013, as we redeemed the mandatorily redeemable preferred interests on April 1, 2013 and now own 100% of this business. As of April 1, 2013, all results in our high yield business are wholly allocated to us.

Equities Revenue

Equities revenue is comprised of equity commissions, principal transactions and net interest revenue relating to cash equities, electronic trading, equity derivatives, convertible securities, prime brokerage, securities finance and alternative investment strategies. Equities revenue also includes our share of the net earnings from our joint venture investments in Jefferies Finance, LLC ("Jefferies Finance") and Jefferies LoanCore, LLC ("LoanCore"), which are accounted for under the equity method, as well changes in the value of our investments in Knight Capital and Harbinger. Equities revenue is heavily dependent on the overall level of trading activity of our clients.

Nine Months Ended November 30, 2013

Total equities revenue was $582.4 million for the nine months ended November 30, 2013. Equities revenue includes within Principal transaction revenues a gain of $19.5 million on our investment in Knight Capital, a gain of $69.8 million from our investment in Harbinger and an unrealized gain of $6.9 million from marking to market the option on Leucadia shares embedded in our 3.875% Senior Convertible Debentures. In addition, included within Interest expense is positive income of $33.7 million from the allocation to our equities business of a portion of the amortization of premiums arising from the adjustment of our long-term debt to fair value as part of accounting for the Merger.

U.S. equity market conditions during the period were characterized by continually increasing stock prices as the U.S. government maintained its monetary stimulus program. In the equity markets, the NASDAQ Composite Index, the S&P 500 Index and the Dow Jones Industrial Average increased by 28%, 19% and 14%, respectively, over the nine month period ended November 30, 2013, with the S&P Index registering a series of record closing highs. However, during the nine months ended November 30, 2013, economic data in the U.S. continued to indicate a slow recovery and geopolitical concerns regarding the Middle East and a U.S. federal government shutdown added volatility in the U.S. and international markets. Despite the rally in the equity markets in 2013, overall market volumes were subdued moderating customer flow in our U.S. cash equity business, although we benefited from certain block trading opportunities during the period.

In Europe, liquidity returned to the market as the European Central Bank convinced investors that it would not allow the Eurozone to breakup aiding results to both our cash and option desks, although the results are still impacted by relatively low trading volumes given the region's fragile economy. Additionally, Asian equity commissions are stronger, particularly in Japan with new monetary policies increasing trading volumes on the Nikkei Exchange.

Our Securities Finance desk also contributed solidly to Equities revenue for the period and the performance of certain strategic investment strategies were strong. Revenue from our sales and trading of convertible securities for the nine months are reflective of increased market share as we have expanded our team in this business. Net earnings from our Jefferies Finance and LoanCore joint ventures reflect a solid level of securitization deals and loan closings during the 2013 nine month period.

Three Months Ended February 28, 2013

Total equities revenue was $167.4 million for the three months ended February 28, 2013 and includes within Principal transaction revenues an unrealized gain of $26.5 million recognized on our investment in Knight Capital. While U.S. equity markets posted gains during our first quarter, with the S&P index up 7%, investors remained cautious as evidenced by declining volumes. Although market volumes declined, our equity trading desks experienced ample client trading volumes. For the three months ended February 28, 2013, performance from certain strategic investments benefited from the increase in the overall stock markets and other positioning.

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Year Ended November 30, 2012

For the year ended November 30, 2012, total equities revenue was $642.4 million, including a gain of $151.9 million earned on our investment in Knight Capital and recognized within Principal transaction revenues. While U.S. equity markets posted gains during the year with the S&P index up over 13%, investor caution, due to less favourable economic data in the U.S. and concerns of a slowdown in the global economy, was evidenced through declining volumes which contributed to reduced commissions. Similarly, European equity revenues were affected by lower overall volumes across the broader markets, compounded by fears over Eurozone uncertainty. Partially offsetting these lower revenues was an increase in our Asian equity commissions as our client base increased. Trading revenue from our equity derivatives business improved on a change in our strategy regarding client activity. LoanCore closed it first securitization in May 2012, which contributed to alternative equity investment revenues as did reflecting a full year of LoanCore's results in fiscal 2012 having entered into the joint venture in February 2011.

Year Ended November 30, 2011

Total equities revenue was $593.6 million for the year ended November 30, 2011. Equity market conditions during the first half of 2011 were mainly characterized by lower stock market volumes and a reduction in equity market volatility. Volumes picked up significantly in August 2011 with increased volatility, as investors' concern over the U.S. economy, the Standard & Poor's downgrade of the U.S. long-term credit rating and the continued sovereign debt crisis within the European region caused investors to be reluctant to take risk and transact in the remaining months of 2011. Further, client transaction flows were reduced notably in November 2011 due to the attention focused on our firm following the bankruptcy of MF Global Holdings, Ltd.

Declines in client stock volumes negatively impacted our U.S. cash equities trading revenue, while revenue from U.S. derivatives grew slightly. Prime brokerage and securities finance revenues benefited from new clients and higher balances, as well as transaction volumes with existing clients. International equities revenue benefited from the development of our Asia cash equities business, expansion of our Europe sales force and improved international electronic product capabilities. A gain was also recognized related to our ownership of LME shares consistent with recent sales of shares of the exchange. Equities revenue from these businesses was partially offset by reduced net revenues from our equity joint ventures as increased interest expense was incurred in supporting these ventures. In November 2010, the Company entered into an agreement to sell certain correspondent broker accounts and assign the related clearing arrangements. The purchase price was dependent on the number and amount of client accounts that convert to the purchaser's platform. During fiscal 2011, proceeds amounted to $11.0 million were received, of which revenues of $9.1 million was recognized and included within Other revenues for the year ended November 30, 2011.

Fixed Income Revenue

Fixed income revenue includes commissions, principal transactions and net interest revenue from investment grade corporate bonds, mortgage- and asset-backed securities, government and agency securities, municipal bonds, emerging markets debt, high yield and distressed securities, bank loans, foreign exchange and commodities trading activities.

Nine Months Ended November 30, 2013

Fixed income revenue was $504.1 million for the nine months ended November 30, 2013. Included within Interest expense for the period is positive income of $40.1 million from the allocation to our fixed income business of a portion of the amortization of premiums arising from adjusting our long-term debt to fair value as part of acquisition accounting.

The second quarter of fiscal 2013 was characterized by improving U.S. macroeconomic conditions, and, through the first half of May 2013, the U.S. Federal Reserve's policies resulted in historically low yields for fixed income securities motivating investors to take on more risk in search for yield. In May 2013, however, the Treasury market experienced a steep sell-off and credit spreads widened across the U.S. fixed income markets in reaction to an anticipated decrease in Federal Reserve treasury issuances and mortgage debt security purchases in

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future periods. These market conditions negatively impacted our U.S. rates, corporates and U.S. mortgages revenues through August as the volatility made it difficult to realize net revenue from our customer flow. In the latter part of the 2013 year, the fixed income markets stabilized with lower volatility and tightening spreads increasing overall customer flows across the various fixed income product classes.

While revenues rebounded towards the end of the fiscal year for our mortgage-backed securities business, the mid-year sell-off in U.S. Treasuries and the widening of credit spreads for mortgage products negatively impacted the overall results for the nine months ended November 30, 2013 by reducing trading volumes and increasing market volatility. Corporate bond revenues were also negatively impacted by the widening of credit spreads in the third quarter though there was significant improvement during the fourth quarter of 2013 with more robust trading volumes and narrowing credit spreads. Municipal securities underperformed as an asset class for a large part of the period as investors discounted greater risk than they had previously although investors began to return to the municipal market at the end of the period increasing our trading volumes. Components of our futures business experienced varying degrees of fluctuations in customer trading volume but trading volume was relatively constant when considered overall and across the full nine month period ended November 30, 2013.

While our U.S. rates, corporates and U.S. mortgages desks underpeformed, our leveraged credit business produced solid results as investors sought investment yields in this fixed income class and issuers of bank debt were active with the supply level creating a positive effect on liquidity in the secondary market. Further, the low interest rate environment in the U.S. caused investors to seek higher yields in emerging market debt. In addition, suppressed long-term interest rates in the U.S. encouraged investment in international mortgage-backed securities resulting in increased trading volumes, improved market liquidity and ultimately increased revenues on our international mortgage desk, despite experiencing reduced market liquidity and consequently lower levels of secondary market activity during the summer months of 2013.

During the second quarter of 2013, we redeemed the third party interests in our high yield joint venture, Jefferies High Yield Holdings, LLC. As a result of this redemption, effective April 1, 2013, results of this business are allocated to us in full.

Three Months Ended February 28, 2013

For the three months ended February 28, 2013, fixed income revenue was $352.0 million. Credit spreads narrowed through the first quarter of 2013. In January 2013, global macroeconomic conditions appeared to be improving, with the U.S. economy expanding and the U.S. Federal reserve continuing quantitative easing. U.S. rates revenues were robust, with strong treasury issuance and strong demand and yields at historic lows. Revenues from our leveraged finance and emerging markets sales and trading businesses were sound as investor confidence returned in 2013 and investors were attracted to the relatively higher yield on these products. Revenue in our emerging markets business is reflective of our efforts to strengthen our position in this business and revenues for the period include significant gains generated by certain high yield positions. Revenues from our international mortgage desk were positively impacted by the demand for European mortgage bonds and foreign exchange revenues demonstrated a successful navigation of volatile currency markets. Revenues also benefited from new client activity associated with our expansion of our global metals desk and the establishment of our London Mercantile Exchange floor desk in the latter part of 2012. However, international rates sales and trading revenues were negatively impacted by investor concerns over the European markets resulting in restrained trading volumes and a high level of market volatility.

Of the net earnings recognized in Jefferies High Yield Holdings, LLC (our high yield and distressed securities and bank loan trading and investment business) for the three months ended February 28, 2013, approximately 65% is allocated to minority investors and are presented within interest on mandatorily redeemable preferred interests and net earnings to noncontrolling interests in our Consolidated Statements of Earnings.

Year Ended November 30, 2012

Fixed income revenue was $1,253.3 million for the year ended November 30, 2012, and included a full twelve months of revenue from Jefferies Bache following the acquisition from Prudential in July 2011. In 2012, despite occasional investor concerns surrounding the European sovereign debt crisis and global economic growth, a Greek

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default was avoided, and coordinated austerity measures taken by European governments and the European Central Bank proved successful in allaying fears of a Eurozone breakup and disbanding of the Euro currency. In the U.S., Treasuries benefited from their perception of safety and a third round of quantitative easing by the U.S. Federal Reserve. Investors continued to seek higher yields in a low interest rate environment. Narrowing credit spreads and improved credit and emerging market conditions contributed to strong performances and customer flow across a broad number of fixed income products.

Revenues from our leveraged finance sales and trading business for the year ended November 30, 2012 reflected investor confidence and tightened credit spreads. Additionally, certain of our high yield positions generated significant gains. Similarly, mortgage revenues benefited from a market rally on tighter interest and mortgage index spreads. Municipal trading activities also benefited from spreads tightening over the period as well as investors seeking higher yields in a low interest rate environment. Additionally, revenues from our investment grade corporates business profited on improved credit market conditions, tightening spreads and stronger trading volumes.

In 2012, Jefferies Bache recognized gains on its investment in shares of the London Metal Exchange and benefited from new client activity with the global metals desk introduced in the latter part of 2012. Fixed income revenues for the year ended November 30, 2012 also include a gain of $23.8 million on the sale of mortgage servicing rights for military housing assets.

Year Ended November 30, 2011

The first half of the 2011 fiscal year was characterized by reasonable customer flow, tighter bid-offer spreads, ample liquidity and rising commodity prices. Beginning in the third quarter of 2011, concerns about European sovereign debt risk, the deteriorating global economy, the uncertainty created by the U.S. deficit negotiations and continuing high unemployment in the U.S. led to challenging trading conditions. Market volatility in certain fixed income sectors suppressed customer activity. Trading conditions were particularly difficult in August 2011. While the fixed income markets improved slightly in the fourth quarter of 2011, our customer volumes were negatively impacted during November 2011 due to external stresses concentrated on our business following the bankruptcy of MF Global Holdings Ltd. Customer volumes returned to more normal levels subsequent to 2011.

Fixed income revenue was $743.1 million for the twelve months ended November 30, 2011. The drop in prices in the second half of 2011 led to significant mark downs in high yield and corporate bonds and mortgage-backed securities. In addition, a flight to quality beginning in the third quarter of 2011 led to U.S. Treasury yields trading at the lowest levels on record, resulting in losses on short treasury positions used as inventory hedges in our corporates and mortgage-backed securities businesses. The results for 2011 also include losses on certain U.S. dollar denominated interest rate swap futures contracts (which fully closed out in August 2011) cleared through International Derivatives Clearing Group. The decrease in fixed income revenue from these businesses was partially offset by revenue increases from our government and agency sales and trading revenues in Europe and Asia. Fixed income revenue reflects a strong performance from our Euro rates platform and as well as contributions from our U.S. government and agency business due to increased customer flow from ample liquidity during the year. Stronger performance from our municipal trading activities benefited overall fixed income revenue as a result of recent strengthening of our trading effort and new products offered, partially offset by trading losses and widening credit spreads that impacted the municipal trading business in the latter part of 2011. Fixed income revenue for fiscal 2011 also includes revenue contributions from Jefferies Bache for a five month period as a result of the acquisition from Prudential on July 1, 2011.

Other Revenue

Other revenue for the nine months ended November 30, 2013 includes a gain of $4.6 million related to the below-discussed restructuring of our ownership interest in our commodity asset management business. For the year ended November 30, 2012, Other revenue of $13.2 million is comprised of gains on debt extinguishment of $9.9 million in connection with the accounting treatment for certain purchases of our long-term debt by our secondary market making corporates desk and a bargain purchase gain of $3.4 million arising in the accounting for the acquisition of Hoare Govett on February 1, 2012. Other revenue of $73.6 million for the year ended November 30, 2011 represents the bargain purchase gain of $52.5 million arising on the acquisition of

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the Global Commodities Group and total gains on debt extinguishment of $21.1 million in connection with the accounting treatment for certain purchases of our debt by our secondary market making corporates desk and the repurchase of $50.0 million of our senior notes due 2012 in November 2011. For additional information see Note 5, Acquisitions and Note 15, Long-term Debt, respectively, in our consolidated financial statements.

Investment Banking Revenue

We provide a full range of capital markets and financial advisory services to our clients across most industry sectors primarily in the U.S. and Europe and to a lesser extent in Asia, Latin America and Canada. Capital markets revenue includes underwriting and placement revenue related to corporate debt, municipal bonds, mortgage- and asset-backed securities and equity and equity-linked securities. Advisory revenue consists primarily of advisory and transaction fees generated in connection with merger, acquisition and restructuring transactions. The following table sets forth our investment banking revenue (in thousands):

Successor Predecessor
  Nine Months Ended   Three Months
Ended
Year Ended November 30,

November 30, 2013

  February 28, 2013   2012 2011

Equity

 $ 228,394   $ 61,380   $ 193,797   $ 187,288 

Debt

415,932  140,672  455,790  384,921 

Capital markets

644,326  202,052  649,587  572,209 

Advisory

369,191  86,226  476,296  550,319 

Total

 $  1,013,517   $  288,278   $                 1,125,883   $                 1,122,528 

Nine Months Ended November 30, 2013

During the nine month period, despite uneven U.S. economic growth and uncertainty surrounding the U.S. Federal Reserve's decision on quantitative easing, capital market conditions continued to improve due to the availability of low-priced credit and a general rise in the stock market. Mergers and acquisition activity gained momentum through the later part of the 2013 nine month period.

Investment banking revenue was $1,013.5 million for the nine months ended November 30, 2013, including record quarterly investment banking revenues in the fourth quarter. From equity and debt capital raising activities, we generated $228.4 million and $415.9 million in revenues, respectively. During the nine months ended November 30, 2013, we completed 412 public and private debt financings that raised $162.3 billion in aggregate, as companies took advantage of low borrowing costs and we completed 130 public equity financings that raised $32.9 billion (111 of which we acted as sole or joint bookrunner). During the nine month period, our financial advisory revenues totaled $369.2 million, including revenues from 108 merger and acquisition transactions where we served as financial advisor.

Three Months Ended February 28, 2013

For the three months ended February 28, 2013, investment banking revenue was $288.3 million, including advisory revenues of $86.2 million and $202.1 million in revenues from capital market activities, the third highest on record. Debt capital markets revenue were $140.7 million, driven by a high number of debt capital market transactions as companies took advantage of lower borrowing costs and more favorable economic and market conditions. During the three months ended February 28, 2013, we completed 121 public and private debt financings that raised a total of $42 billion. Equity capital markets revenue totaled $61.4 million, completing 30 public equity financings that raised $10.0 billion (25 of which we acted as sole or joint bookrunner). Reflective of a subdued mergers and acquisition deal environment, despite improving fundamentals, for the three months ended February 28, 2013, advisory revenue totaled $86.2 million. During the first quarter of 2013, we served as financial advisor on 31 merger and acquisition transactions and two restructuring transactions with an aggregate transaction value of approximately $21 billion.

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Year Ended November 30, 2012

Investment banking revenue was $1,125.9 million for the year ended November 30, 2012, with higher debt capital market revenues offset by lower advisory revenues. Revenue was driven by a higher number of debt capital market transactions as companies took advantage of lower borrowing costs and more favorable economic and market conditions. During 2012, we completed 482 public and private debt financings raising a total of $175 billion. Equity capital markets revenue totaled $193.8 million for the year ended November 30, 2012 and we completed 111 public equity financings raising $21 billion in capital (96 of which we acted as sole or joint bookrunner). For 2012, advisory revenue totaled $476 million, as we served as financial advisor on 111 merger and acquisition and 10 restructuring transactions having an aggregate transaction value of approximately $104 billion.

Year Ended November 30, 2011

Investment banking revenue was $1,122.5 million, principally driven by both sizeable advisory revenues and our increasing success in winning book runner roles in debt and equity financing. The first half of fiscal 2011 benefited from a particularly strong environment for capital markets issuance. The second half of the year exhibited significant periods of volatility due to economic uncertainty, unemployment and leverage concerns in Europe and the U.S., contributing to a dramatic reduction in capital-raising by corporate issuers. Restructuring activity also declined due to the slower pace in the number of corporate defaults. Capital markets revenue totaled $572.2 million for the year ended November 30, 2011, reflecting our market share and book runner roles in capital markets underwritings, the favorable market environment for debt and equity underwritings in the first half of fiscal 2011, and the contribution of our mortgage securities origination and municipal bond underwriting platforms. Revenue from our advisory business was $550.3 million for 2011 and is reflective of our increasing prominence in mergers and acquisition advisory work and a greater number of completed advisory engagements, including several larger-sized transactions. Investment banking revenue, overall, also benefited in the 2011 period from the expansion of our capabilities across sectors, products and geography.

Asset Management Fees and Investment Income (Loss) from Managed Funds

Asset management revenue includes management and performance fees from funds and accounts managed by us, management and performance fees from related party managed funds and accounts and investment income (loss) from our investments in these funds, accounts and related party managed funds. The key components of asset management revenue 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.

On September 11, 2013, we restructured our ownership interest in CoreCommodity Management, LLC ("CoreCommodity"), our commodity asset management business. Pursuant to the terms of that restructuring, we own Class B Units in what is now called CoreCommodity Capital, LLC. While we have no voting or management rights through our ownership of the Class B Units the Class B Units give us substantially similar economic interests to those we held prior to the restructuring. As a consequence of the restructuring, asset management revenues, assets under management and managed accounts attributed to the commodities asset class will no longer be reported in future periods, but rather changes in the fair value of the Class B units, through which we, obtain our share of the net earnings of CoreCommodity Capital, LLC, will be recognized in Principal transaction revenues.

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The following summarizes the results of our Asset Management businesses for the Successor period nine months ended November 30, 2013, and the Predecessor periods three months ended February 28, 2013 and the years ended November 30, 2012 and 2011 (in thousands):

Successor Predecessor
  Nine Months Ended     Three Months  
  Ended  
  Year Ended     Year Ended  
  November 30, 2013     February 28, 2013     November 30, 2012     November 30, 2011  

Asset management fees:

Fixed income

 $ 3,932    $ 1,154    $ 4,094    $ 3,725  

Equities

7,626   2,295   4,573   5,335  

Convertibles

2,890   1,376   10,387   13,703  

Commodities

12,025   6,258   19,076   10,662  

26,473   11,083   38,130   33,425  

Investment income (loss) from managed funds

9,620   (200)  (11,164)  10,700  

Total

$ 36,093   $ 10,883   $ 26,966   $ 44,125  

Fixed income asset management fees represent ongoing consideration we receive from the sale of contracts to manage certain collateralized loan obligations ("CLOs") to Babson Capital Management, LLC in January 2010. As sale consideration, we are entitled to a portion of the asset management fees earned under the contracts for their remaining lives. Net unrealized markups (markdowns) in private equity funds managed by a related party are the primary component of our investment income (loss) from managed funds.

Assets under Management

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

Successor Predecessor
  November 30, 2013     November 30, 2012  

Assets under management (1):

Equities

  $ 14   $ 75

Convertibles

492 1,092

Commodities

- 1,002

Total

  $ 506   $ 2,169

(1)

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

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Invested Capital in Managed Funds

The following table presents our invested capital in managed funds at November 30, 2013 and 2012 (in thousands):

  Successor     Predecessor  
  November 30, 2013     November 30, 2012  

Unconsolidated funds (1)

 $ 57,285  $ 57,763

Consolidated funds (2)

37,802 30,561

Total

 $ 95,087  $ 88,324

(1)

Our invested capital in unconsolidated funds is reported within Investments in managed funds on the Consolidated Statements of Financial Condition.

(2)

Our invested capital in consolidated funds represents our investment in the Structured Alpha program, which are funds actively managed by us. Due to the level or nature of our investment in such funds, the funds are consolidated and the assets and liabilities of these funds are reflected in our consolidated financial statements primarily within Financial instruments owned. We do not recognize asset management fees for funds and accounts that we have consolidated.

Non-interest Expenses

Non-interest expenses for the nine months ended November 30, 2013, three months ended February 28, 2013, and the years ended November 30, 2012 and 2011, were as follows (in thousands):

Successor Predecessor
  Nine Months Ended     Three Months Ended   Year Ended November 30,
  November 30, 2013     February 28, 2013   2012 2011

Compensation and benefits

  $ 1,213,908       $ 474,217     $ 1,770,798     $ 1,482,604  

Non-compensation expenses:

Floor brokerage and clearing fees

150,774     46,155   183,013   154,445  

Technology and communications

193,683     59,878   244,511   215,940  

Occupancy and equipment rental

86,701     24,309   97,397   84,951  

Business development

63,115     24,927   95,330   93,645  

Professional services

72,802     24,135   73,427   66,305  

Other

92,035     14,475   62,498   56,099  

Total non-compensation expenses

  $ 659,110       $ 193,879     $ 756,176     $ 671,385  

Total non-interest expenses

  $ 1,873,018       $ 668,096     $             2,526,974     $         2,153,989  

Compensation and Benefits

Compensation and benefits expense consists of salaries, benefits, cash bonuses, commissions, annual cash compensation awards, historical annual share-based compensation awards and the amortization of certain nonannual share-based and cash compensation awards to employees. Cash- and historical share-based 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 substantial portion of awards granted at year end as part of annual compensation is fully recorded in the year of the award.

Included within Compensation and benefits expense are share-based amortization expense for senior executive awards granted in January 2010 and September 2012, non-annual share-based and cash-based awards to other employees and certain year end awards that contain future service requirements for vesting. Such awards are being amortized over their respective future service periods and amounted to compensation expense of $197.1 million for the Successor period nine months ended November 30, 2013, and $67.1 million for the Predecessor periods three months ended February 28, 2013. In addition, compensation and benefits expense for the nine months ended November 30, 2013 includes $11.0 million of additional amortization expense related to the write-up of the cost of outstanding share-based awards which had future service requirements at the merger date.

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Compensation and benefits as a percentage of Net revenues was 56.7% for the Successor period nine months ended November 30, 2013, and 57.9% for the Predecessor period three months ended February 28, 2013. Employee headcount was 3,797 at November 30, 2013.

Year Ended November 30, 2012

Compensation and benefits expense for the year ended November 30, 2012 was of $1,770.8 million, equivalent to 57.8% of Net revenues, and includes a full year of compensation costs related to Jefferies Bache. In addition, compensation expense includes $22.9 million relating to the acquisition of Jefferies Bache on July 1, 2011 and Hoare Govett on February 1, 2012, comprised of the amortization of retention and stock replacement awards granted to Jefferies Bache employees as replacement awards for previous Prudential stock awards that were forfeited at acquisition and amortization of retention awards granted to Hoare Govett employees and bonus costs for employees as a result of the completion of the acquisition of Hoare Govett. When excluding these costs, together with the gain on debt extinguishment of $9.9 million relating to trading activities in our own debt, amortization of discounts recognized on our long-term debt purchased and re-issued in December 2011 and January 2012 and recognized in Interest expense of $4.8 million and the bargain purchase gain of $3.4 million on our Hoare Govett acquisition, our ratio of Compensation and benefits expense to Net revenues for the year ended November 30, 2012 was 57.2%. Compensation and benefits expense for the year ended November 30, 2012 also includes severance costs of approximately $30.6 million. Employee headcount was 3,804 at November 30, 2012.

Year Ended November 30, 2011.

For the year ended November 30, 2011, Compensation and benefits expense totaled $1,482.6 million, a ratio of compensation and benefits to Net revenues of 57.5%. Compensation and benefits expense for 2011 includes costs relating to the acquisition of Jefferies Bache on July 1, 2011, comprising severance costs for certain employees of the acquired group that were terminated subsequent to the acquisition, the amortization of stock awards granted to Jefferies Bache employees as replacement awards for previous Prudential stock awards that were forfeited as a result of the acquisition, bonus costs for employees as a result of the completion of the acquisition and the amortization of retention awards totaling $11.8 million. When excluding these expenses, together with the bargain purchase gain of $52.5 million and the gain on debt extinguishment of $21.1 million recognized in Other revenues, our ratio of compensation and benefits expense to Net revenues for the year ended November 30, 2011 was 58.8%. Increased Compensation and benefits expense was partially offset by reduced cash awards offered to employees in lieu of stock compensation. Employee headcount was 3,898 at November 30, 2011, including 400 employees added to our firm on July 1, 2011 in connection with the acquisition of Jefferies Bache.

Non-Compensation Expenses

Nine Months Ended November 30, 2013

Non-compensation expenses were $659.1 million for the nine months ended November 30, 2013, equating to 30.8% of Net revenues. Non-compensation expenses include approximately $21.1 million in incremental amortization expense associated with fair value adjustments to identifiable tangible and intangible assets recognized as part of acquisition accounting reported within Technology and communications expense and Other expense, $6.3 million in additional lease expense related to recognizing existing leases at their current market value in Occupancy and equipment rental expense and $11.6 million in merger-related investment banking filing fees recognized in Professional services expense. Additionally, during the nine month period a $8.7 million charge was recognized in Occupancy and equipment rental expense due to vacating certain office space in London. Other expenses for the nine months ended November 30, 2013 include $38.4 million in litigation expenses, which includes litigation costs related to the final judgment on our last outstanding auction rate securities legal matter and to agreements reached in principle with the relevant authorities pertaining to an investigation of purchases and sales of mortgage-backed securities. Excluding these expenses, our Non-compensation expenses as a percentage of Net revenues, after excluding from revenues $76.9 million of net interest income due to the amortization of premiums arising from the one-time fair value adjustment of our long term debt to fair value as of the date of the Merger and the concurrent assumption of our mandatorily redeemable convertible preferred stock by Leucadia, was 27.8%.

Floor brokerage and clearing expenses for the period are reflective of the trading volumes in our fixed income and equities trading businesses, including a meaningful volume of trading by our foreign exchange business. Technology and communications expense includes costs associated with development of the various trading systems and various projects associated with corporate support infrastructure, including technology initiatives to support Dodd-Frank reporting requirements. We continue to incur legal and consulting fees as part of implementing various regulatory requirements, which is recognized in Professional services expense.

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Three Months Ended February 28, 2013

Non-compensation expenses were $193.9 million for the three months ended February 28, 2013, or 23.7% of Net revenues. Floor brokerage and clearing expense for the 2013 first quarter is commensurate with equity, fixed income and futures trading volumes for the period. Occupancy and equipment expense for the period includes costs associated with taking on additional space at our global head office in New York offset by a reduction in integration costs for technology and communications as significant migrations for Jefferies Bache have been completed. Professional services expense includes legal and consulting fees of $2.1 million related to the merger with Leucadia and business and development expense contains costs incurred in connection with our efforts to build out our market share.

Year Ended November 30, 2012

Non-compensation expenses were $756.2 million for the year ended November 30, 2012, equating to 24.7% of Net revenues, and includes a full year of operating costs of Jefferies Bache. Floor brokerage and clearing expense of $183.0 million was commensurate with lower equity trading volumes, though includes a full twelve months of Jefferies Bache futures activity in 2012. Technology and communications expense was $244.5 million with increased costs associated with the continued build out of our Asian businesses offset by lower corporate support infrastructure project costs. Occupancy and equipment expense was $97.4 million for 2012, reflecting the cost for our office growth in Asia and Europe and additional space at our global head office in New York. Legal and consulting fees related to the announced merger with Leucadia and efforts associated with Dodd-Frank compliance contributed to Professional services expense of $73.4 million for the year ended November 30, 2012. Business development expense of $95.3 million is primarily driven by our continued efforts to build market share, specifically our futures business. Other expenses of $62.5 million for the 2012 year include a $2.9 million impairment charge recognized in the second quarter of 2012 on certain indefinite-lived intangible assets, donations to Hurricane Sandy relief of $4.1 million and fees associated with the announced merger with Leucadia.

Year Ended November 30, 2011

Non-compensation expenses were $671.4 million for the year ended November 30, 2011, and includes five months of operating costs Jefferies Bache and corresponding integration costs of $4.9 million. Continued expansion of our business platforms and support infrastructure, particularly in Europe and Asia, contributed to Technology and communications expense of $215.9 million for the year. Business development costs of $93.6 million reflect increased global travel in connection our continued efforts to build market share and further enhance the Jefferies brand. Occupancy and equipment expense increased to $85.0 million for 2011 primarily due to office growth in Asia. Professional services expense of $66.3 million for the year ended November 30, 2011 includes legal and consulting fees related to the acquisition of Jefferies Bache. Other expense includes a $4.6 million charitable contribution for Japanese earthquake relief. Non-compensation expenses as a percentage of Net revenues was 26.1% for the year ended November 30, 2011.

Income Taxes

For the nine month Successor period ending November 30, 2013, income tax expense was $94.7 million and the effective tax rate was 35.8%. For the Predecessor periods, income tax expense was $48.6 million, $168.6 million, and $133.0 million and the effective tax rate was 34.9%, 34.3%, and 31.7% for the three months ended February 28, 2013 and for the years ended November 30, 2012 and 2011, respectively. The effective tax rates differed from the U.S. federal statutory rate of 35% primarily because of the impact of state income taxes, the effect of which is partially offset by international earnings taxed at rates that are generally lower than the U.S. federal statutory rate.

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Earnings per Common Share

Diluted net earnings per common share was $0.35 for the three months ended February 28, 2013 on 217,844,000 shares. Earnings per share data is not provided for the nine months ended November 30, 2013 as we are now a limited liability company and wholly-owned subsidiary of Leucadia. Diluted net earnings per common share was $1.22 for the year ended November 30, 2012 on 220,101,000 shares, compared to diluted net earnings per common share of $1.28 for the year ended November 30, 2011 on 215,171,000 shares. See Note 20, Earnings per Share, in our consolidated financial statements for further information regarding the calculation of earnings per common share.

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.

Critical Accounting Policies

The consolidated financial statements are prepared in conformity with U.S. GAAP, which require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes. Actual results can and may differ from estimates. These differences could be material to the financial statements.

We believe our application of U.S. GAAP and the associated estimates are reasonable. Our accounting policies and estimates are constantly 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 financial instruments, assessment of goodwill and our use of estimates related to compensation and benefits during the year.

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 in our Consolidated Statements of Earnings.

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The following is a summary of the fair value of major categories of financial instruments owned and financial instruments sold, not yet purchased, as of November 30, 2013 and 2012 (in thousands):

Successor Predecessor
November 30, 2013 November 30, 2012
Financial
Instruments
Owned
Financial
Instruments
Sold,
Not Yet
Purchased
Financial
Instruments
Owned
Financial
Instruments
Sold,
Not Yet
Purchased

Corporate equity securities

  $ 2,098,597  1,823,299    $ 1,762,775    $ 1,539,332 

Corporate debt securities

2,982,768  1,346,078  3,038,146  1,389,312 

Government, federal agency and other sovereign obligations

5,346,152  3,155,683  5,153,750  3,666,112 

Mortgage- and asset-backed securities

4,473,135  34,691  5,398,078  228,251 

Loans and other receivables

1,349,128  695,300  678,311  207,227 

Derivatives

261,093  180,079  368,292  242,047 

Investments

101,282  -      127,023  -     

Physical commodities

37,888  36,483  144,016  183,142 

  $

      16,650,043 

  $         7,271,613    $       16,670,391    $         7,455,423 

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 and broker quotes that are considered less observable. Greater use of management judgment is required in determining fair value when inputs are less observable or unobservable in the marketplace, such as when the volume or level of trading activity for a financial instrument has decreased and when certain factors suggest that observed transactions may not be reflective of orderly market transactions. Judgment must be applied in determining the appropriateness of available prices, particularly in assessing whether available data reflects current prices and/or reflects the results of recent market transactions. Prices or quotes are weighed when estimating fair value with greater reliability placed on information from transactions that are considered to be representative of orderly market transactions.

Fair value is a market based measure; therefore, when market observable inputs are not available, our judgment is applied to reflect those judgments that a market participant would use in valuing the same asset or liability. The availability of observable inputs can vary for different products. We use prices and inputs that are current as of the measurement date even in periods of market disruption or illiquidity. The valuation of financial instruments classified in Level 3 of the fair value hierarchy involves the greatest amount of management judgment. For further information on the fair value definition, Level 1, Level 2, Level 3 and related valuation techniques, see Note 2, Summary of Significant Accounting Policies and Note 7, Fair Value Disclosures, in our consolidated financial statements.

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Level 3 Assets and Liabilities – The following table reflects the composition of our Level 3 assets and Level 3 liabilities by asset class at November 30, 2013 and 2012 (in thousands):

Financial Instruments Owned Financial Instruments Sold,
Not Yet Purchased
  November 30,  
2013
  November 30,  
2012
  November 30,  
2013
  November 30,  
2012

Loans and other receivables

  $ 145,890     $ 180,393     $ 22,462     $ 1,711  

Residential mortgage-backed securities

105,492   156,069   -   -      

Investments at fair value

101,242   83,897   -   -  

Collateralized debt obligations

37,216   31,255   -   -  

Commercial mortgage-backed securities

17,568   30,202   -   -  

Corporate equity securities

9,884   16,815   38   38  

Corporate debt securities

25,666   3,631   -   -  

Derivatives

1,493   328   8,398   9,516  

Other asset-backed securities

12,611   1,114   -   -  

Total Level 3 financial instruments

457,062   503,704     $ 30,898     $ 11,265  

Investments in managed funds

57,285   57,763  

Total Level 3 assets

  $ 514,347     $ 561,467  

Total Level 3 financial instruments as a percentage of total financial instruments

3% 3% 0.4% 0.2%

While our Financial instruments sold, not yet purchased, which are included within liabilities on our Consolidated Statements of Financial Condition, are accounted for at fair value, we do not account for any of our other liabilities at fair value, except for certain secured financings that arise in connection with our securitization activities included with Other secured financings of approximately $39.7 million and $2.3 million at November 30, 2013 and 2012, respectively and the conversion option to Leucadia shares embedded in our 3.875% Convertible Senior debenture of approximately $9.6 million reported within Long-term debt.

The following table reflects activity with respect to our Level 3 assets and liabilities (in millions):

  Successor   Predecessor
  Nine Months  
  Ended  
  Three Months  
  Ended  
  Year Ended     Year Ended  
  November 30, 2013       February 28, 2013       November 30, 2012     November 30, 2011  

Assets:

Transfers from Level 3 to Level 2

  $ 55.9     $ 112.7     $ 81.8     $ 105.5  

Transfers from Level 2 to Level 3

82.4   100.5   180.6   63.6  

Net gains (losses)

9.4   14.5   28.8   (14.3) 

Liabilities:

Transfers from Level 3 to Level 2

  $ 0.1     $ 0.7     $ 2.2     $ 0.04  

Transfers from Level 2 to Level 3

-     -       -   -     

Net gains (losses)

(5.8)  (2.7)  (2.5)  (6.6) 

See Note 7, Fair Value Disclosures, in our consolidated financial statements for additional discussion on transfers of assets and liabilities among the fair value hierarchy levels.

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

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with relevant expertise who are independent from the trading desks. In addition, recently executed comparable transactions and other observable market data are considered for purposes of validating assumptions underlying the model.

Goodwill

As of November 30, 2013, goodwill recorded on our Consolidated Statement of Financial Condition is $1.7 billion (4.3% of total assets). The nature and accounting for goodwill is discussed in Note 2, Summary of Significant Accounting Policies and Note 13, Goodwill and Other Intangible Assets, included within Part II, Item 8 to this Annual Report on Form 10-K. Goodwill must be allocated to reporting units and tested for impairment at least annually. Our annual goodwill impairment testing date is August 1. No goodwill impairment was indicated as a result of our annual testing.

Allocated equity plus goodwill and allocated intangible assets are used as a proxy for the carrying amount of each reporting unit. The amount of 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. Refer to the discussion of our Cash Capital Policy of the Liquidity, Financial Condition and Capital Resources section within Part II, Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations to this Annual Report on Form 10-K for further information. 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 were determined using a market valuation method that incorporate price-to-earnings and price-to-book multiples of comparable public companies and, for certain reporting units, a net asset value method. Under the market approach, the key assumptions are the selected multiples and our internally developed forecasts of future profitability, growth and returns 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 unit as compared to the comparable publicly-traded 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 as of August 1, 2013.

Our annual goodwill impairment testing as of August 1, 2013 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 for which the results of our assessment indicated that these reporting units had a fair value substantially in excess of their carrying amounts based on current projections. Goodwill allocated to these reporting units is $1,665.3 million of total goodwill of $1,722.3 million at November 30, 2013. For the remaining less significant reporting units, which contain approximately 3.3% of our total goodwill, we have used a net asset approach for valuation and the fair value of each of the reporting units is equal to its book value. Refer to Note 13, Goodwill and Other Intangible Assets, in our consolidated financial statements for further detail on our assessment of goodwill.

Compensation and Benefits

A portion of our compensation and benefits represents discretionary bonuses, which are finalized at year end. In addition to the level of net revenues, our overall compensation expense in any given year is influenced by prevailing labor markets, revenue mix, profitability, individual and business performance metrics, and our use of share-based compensation programs. We believe the most appropriate way to allocate estimated annual total compensation among interim periods is in proportion to projected net revenues earned. Consequently, during the year we accrue compensation and benefits based on annual targeted compensation ratios, taking into account the mix of our revenues and the timing of expense recognition.

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For further discussion of these and other significant accounting policies, see Note 2, Summary of Significant Accounting Policies, in our consolidated financial statements.

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Liquidity, Financial Condition and Capital Resources

Our Chief Financial Officer 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.

Analysis of Financial Condition

A business unit level balance sheet and cash capital analysis is prepared and reviewed with senior management on a weekly basis. As a part of this balance sheet review process, capital is allocated to all assets and gross and adjusted balance sheet limits are established. 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. Substantially all of our Financial instruments owned and Financial instruments sold, not yet purchased are valued on a daily basis and we monitor and employ balance sheet limits for our various businesses. In connection with our government and agency fixed income business and our role as a primary dealer in these markets, a sizable portion of our securities inventory is comprised of U.S. government and agency securities and other G-7 government securities.

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

  Successor     Predecessor  
  November 30,  
2013
  November 30,  
2012
  % Change  

Total assets

  $ 40,177.0       $ 36,293.5   11%

Cash and cash equivalents

3,561.1   2,692.6   32%

Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations

3,616.6   4,082.6   -11%

Financial instruments owned

16,650.0   16,670.4   0%

Financial instruments sold, not yet purchased

7,271.6   7,455.5   -2%

Total Level 3 assets

514.3   561.5   -8%

Securities borrowed

  $ 5,359.8       $ 5,094.7   5%

Securities purchased under agreements to resell

3,746.9   3,357.6   12%

Total securities borrowed and securities purchased under agreements to resell

  $ 9,106.7       $ 8,452.3   8%

Securities loaned

  $ 2,506.1       $ 1,934.4   30%

Securities sold under agreements to repurchase

10,779.8   8,181.3   32%

Total securities loaned and securities sold under agreements to repurchase

  $ 13,285.9       $ 10,115.7   31%

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Total assets at November 30, 2013 were $40.2 billion and $36.3 billion at November 30, 2012. Total assets at November 2013 include the impact of acquisition accounting that was pushed down to Jefferies Group LLC as a result of recognizing all of our assets, including intangible assets, and liabilities at fair value at the merger date. Accordingly, included in our November 30, 2013 Statement of Financial Condition are goodwill of $1.7 billion and intangible assets of $264.1 million at November 30, 2013. Cash and cash equivalents increased to $3.6 billion at November 30, 2013 from $2.7 billion at November 30, 2012 primarily due to proceeds from the issuance of $1.0 billion senior unsecured long-term debt in January 2013. During the year ended November 30, 2013, average total assets were approximately 27% higher than total assets at November 30, 2012.

Jefferies Bache, LLC (our U.S. futures commission merchant) and Jefferies Bache Limited (our U.K. commodities and financial futures broker-dealer), receive cash or securities as margin to secure customer futures trades. Jefferies LLC (a U.S. broker-dealer), under SEC Rule 15c3-3, and Jefferies Bache, LLC, under CFTC Regulation 1.25, are required to maintain customer cash or qualified securities in a segregated reserve account for the exclusive benefit of our clients. We are required to conduct customer segregation calculations to ensure the appropriate amounts of funds are segregated and that no customer funds are used to finance firm activity. Similar requirements exist with respect to our U.K.-based activities conducted through Jefferies Bache Limited and Jefferies International Limited (a U.K. broker-dealer). Customer funds received are separately segregated and "locked-up" apart from our funds. If we rehypothecate customer securities, that activity is conducted only to finance customer activity. Additionally, we do not lend customer cash to counterparties to conduct securities financing activity (i.e., we do not lend customer cash to reverse in securities). Further, we have no customer loan activity in Jefferies International Limited and we do not have any European prime brokerage operations. In Jefferies Bache Limited, any funds received from a customer are placed on deposit and not used as part of our operations. We do not transfer U.S. customer assets to our U.K. entities.

Our total Financial instruments owned inventory at November 30, 2013 was $16.7 billion, consistent with inventory at November 30, 2012. Long inventory positions of mortgage- and asset-backed securities, U.S. government and agency securities, sovereign obligations, corporate debt securities and physical commodities are reflective of management's view of appropriate inventory levels at November 30, 2013. Financial instruments sold, not yet purchased inventory was $7.3 billion and $7.5 billion at November 30, 2013 and 2012, respectively.

Our overall net inventory positions was $9.4 billion and $9.2 billion at November 30, 2013 and 2012, respectively. The change in our net inventory balance is primarily attributed to an increase in our inventory of U.S. government and agency securities and loans and other receivables, partially offset by a decline in mortgage- and asset-backed securities and sovereign obligations. We continually monitor our overall securities inventory, including the inventory turnover rate, which confirms the liquidity of our overall assets. As a Primary Dealer in the U.S. and with our similar role in several European jurisdictions, we carry inventory and make an active market for our clients in securities issued by the various governments. These inventory positions are substantially comprised of the most liquid securities in the asset class, with a significant portion in holdings of securities of G-7 countries. For further detail on our outstanding sovereign exposure to Greece, Ireland, Italy, Portugal and Spain as of November 30, 2013, refer to the Risk Management section within Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, within this Annual Report on Form 10-K.

Of our total Financial instruments owned, approximately 73% are readily and consistently financeable at haircuts of 10% or less. In addition, as a matter of our policy, a portion of these assets have internal capital assessed, which is in addition to the funding haircuts provided in the securities finance markets. Additionally, our Financial instruments owned primarily consisting of bank loans, investments and non-agency mortgage-backed securities 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 maximum levels.

At November 30, 2013 and 2012, our Level 3 financial instruments owned was 3% of our financial instruments owned.

Securities financing assets and liabilities include both financing for our financial instruments trading activity and matched book transactions. Matched book transactions accommodate customers, as well as obtain securities for the

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settlement and financing of inventory positions. The aggregate outstanding balance of our securities borrowed and securities purchased under agreements to resell increased by 8% from November 30, 2012 to November 30, 2013. The outstanding balance of our securities loaned and securities sold under agreement to repurchase increased by 31% from November 30, 2012 to November 30, 2013 due to an increase in firm financing of our inventory, less netting for our collateralized financing transactions and an increase in our match book activity. By executing repurchase agreements with central clearing corporations, we reduce the credit risk associated with these arrangements and decrease net outstanding balances. Our average month end balances of total reverse repos and stock borrows and total repos and stock loans during the nine months ended November 30, 2013, were 24% and 20% higher, respectively, than the November 30, 2013 balances. Compared to the prior year twelve months ended November 30, 2012, where our average month end balances of total reverse repos and stock borrows and total repos and stock loans were 25% and 33% higher, respectively, than the November 30, 2012 balances.

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 (in millions):

Successor Predecessor
 Nine Months Ended  Three Months
Ended
Year Ended
 November 30, 2013   February 28, 2013    November 30, 2012 

Securities Purchased Under Agreements to Resell

Period end

  $ 3,747     $ 3,578     $ 3,358  

Month end average

4,936   5,132   4,890  

Maximum month end

6,007   6,288   6,638  

Securities Sold Under Agreements to Repurchase

Period end

  $ 10,780     $ 7,976     $ 8,181  

Month end average

13,308   11,895   11,380  

Maximum month end

16,502   15,168   15,035  

Fluctuations in the balance of our repurchase agreements from period to period and intraperiod are dependent on business activity in those periods. Additionally, the fluctuations in the balances of our securities purchased under agreements to resell over the periods presented are influenced in any given period by our clients' balances and our clients' desires to execute collateralized financing arrangements via the repurchase market or via other financing products. Average balances and period end balances will fluctuate based on market and liquidity conditions and we consider the fluctuations intraperiod to be typical for the repurchase market.

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Leverage Ratios

The following table presents total assets, adjusted assets, total equity, total member's equity/common stockholders' equity, tangible equity and tangible member's/common stockholders' equity with the resulting leverage ratios as of November 30, 2013 and 2012 (in thousands):

      Successor             Predecessor      
November 30,
2013
November 30,
2012

Total assets

  $ 40,176,996     $ 36,293,541  

Deduct:  

Securities borrowed

(5,359,846)  (5,094,679) 

Securities purchased under agreements to resell

(3,746,920)  (3,357,602) 

Add:

Financial instruments sold, not yet purchased

7,271,613   7,455,463  

Less derivative liabilities

(180,079)  (242,087) 

Subtotal

7,091,534  7,213,376 

Deduct:

Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations

(3,616,602)  (4,082,595) 

Goodwill and intangible assets

(1,986,436)  (380,929) 

Adjusted assets

  $ 32,558,726    $ 30,591,112 

Total equity

  $ 5,421,674    $ 3,782,753 

Deduct:

Goodwill and intangible assets

(1,986,436)  (380,929) 

Tangible equity

  $ 3,435,238    $ 3,401,824 

Total members/ common stockholders' equity

  $ 5,304,520    $ 3,436,015 

Deduct:

  Goodwill and intangible assets

(1,986,436)  (380,929) 

Tangible members/ common stockholders' equity

  $ 3,318,084    $ 3,055,086 

Leverage ratio (1)

7.4  9.6 

Tangible leverage ratio (2)

11.5  11.8 

Leverage ratio - excluding merger impacts (3)

9.3  N/A 

Adjusted leverage ratio (4)

9.5  9.0 

1)

Leverage ratio equals total assets divided by total equity.

2)

Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets divided by tangible member's/common stockholders' equity. The tangible gross leverage ratio is used by Rating Agencies in assessing our leverage ratio.

3)

Leverage ratio - excluding merger impacts (a non-GAAP financial measure) equals total assets less the increase in goodwill and asset fair values in acquisition accounting of $1,957 million less amortization of $27 million during the period since the merger with Leucadia on assets recognized at fair value in acquisition accounting divided by the sum of total equity less $1,301 million, being the increase in equity arising from merger consideration of $1,426 million excluding the $125 million attributable to the assumption of our preferred stock by Leucadia, and less the impact on equity due to amortization of $25 million on assets and liabilities recognized at fair value in acquisition accounting.

4)

Adjusted leverage ratio (a non-GAAP financial measure) equals adjusted assets divided by tangible total equity.

Adjusted assets is a non-GAAP financial measure and excludes certain assets that are considered of lower risk as they are generally self-financed by customer liabilities through our securities lending activities. We view the resulting measure of adjusted leverage, also a non-GAAP financial measure, as a more relevant measure of financial risk when comparing financial services companies.

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.

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The principal elements of our liquidity management framework are our Contingency Funding Plan, our Cash Capital Policy and our assessment of Maximum Liquidity Outflow.

Contingency Funding Plan . Our Contingency Funding Plan is based on a model of a potential liquidity contraction over a one year time period. This incorporates potential cash outflows during a liquidity stress event, including, but not limited to, the following: (a) repayment of all unsecured debt maturing within one year and no incremental unsecured debt issuance; (b) maturity rolloff of outstanding letters of credit with no further issuance and replacement with cash collateral; (c) higher margin requirements than currently exist on assets on securities financing activity, including repurchase agreements; (d) liquidity outflows related to possible credit downgrade; (e) lower availability of secured funding; (f) client cash withdrawals; (g) the anticipated funding of outstanding investment and loan commitments; and (h) 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, preferred stock and the noncurrent portion of long-term borrowings. Uses of cash capital include the following: (a) illiquid assets such as equipment, goodwill, net intangible assets, exchange memberships, deferred tax assets and certain investments; (b) 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 (c) 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 capital of $11.2 billion as of November 30, 2013 exceeded our cash capital requirements.

Maximum Liquidity Outflow . Our businesses are diverse, and our liquidity needs are determined by many factors, including market movements, collateral requirements and client commitments, all of which can change dramatically in a difficult funding environment. During a liquidity crisis, credit-sensitive funding, including unsecured debt and some types of secured financing agreements, may be unavailable, and the terms (e.g., interest rates, collateral provisions and tenor) or availability of other types of secured financing may change. As a result of our policy to ensure we have sufficient funds to cover what we estimate may be needed in a liquidity crisis, we hold more cash and unencumbered securities and have greater long-term debt balances than our businesses would otherwise require. As part of this estimation process, we calculate a Maximum Liquidity Outflow that could be experienced in a liquidity crisis. Maximum Liquidity Outflow is based on a scenario that includes both a market-wide stress and firm-specific stress, characterized by some or all of the following elements:

Global recession, default by a medium-sized sovereign, low consumer and corporate confidence, and general financial instability.

Severely challenged market environment with material declines in equity markets and widening of credit spreads.

Damaging follow-on impacts to financial institutions leading to the failure of a large bank.

A firm-specific crisis potentially triggered by material losses, reputational damage, litigation, executive departure, and/or a ratings downgrade.

The following are the critical modeling parameters of the Maximum Liquidity Outflow:

Liquidity needs over a 30-day scenario.

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

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 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.

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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 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 brokerage business, including withdrawals of customer credit balances, and a reduction in customer short positions.

Liquidity outflows to clearing banks to ensure timely settlements of cash and securities transactions.

Draws on our unfunded commitments considering, among other things, the type of commitment and counterparty.

Other upcoming large cash outflows, such as tax payments.

Based on the sources and uses of liquidity calculated under the Maximum Liquidity Outflow scenarios we determine, based on a calculated surplus or deficit, additional long-term funding that may be needed versus funding through the repurchase financing market and consider any adjustments that may be necessary to our inventory balances and cash holdings. At November 30, 2013, we have sufficient excess liquidity to meet all contingent cash outflows detailed in the Maximum Liquidity Outflow. We regularly refine our model to reflect changes in market or economic conditions and the firm's business mix.

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 (in thousands):

Successor Predecessor
    November 30,    
2013
Average balance
Quarter ended
  November 30, 2013  
    November 30,    
2012

Cash and cash equivalents:

Cash in banks

  $ 880,443    $ 713,627   $ 1,038,664 

Money market investments

  2,680,676    2,062,773   1,653,931 

Total cash and cash equivalents

  3,561,119    2,776,400   2,692,595 

Other sources of liquidity:

Debt securities owned and securities purchased under agreements to resell (2)

  1,316,867     1,044,222    1,307,378  

Other (3)

  403,738     647,078    423,735  

Total other sources

  1,720,605     1,691,300    1,731,113  

Total cash and cash equivalents and other liquidity sources

  $ 5,281,724     $ 4,467,700    $ 4,423,708  

Total cash and cash equivalents and other liquidity sources as % of Total Assets

13.1% 12.2%

Total cash and cash equivalents and other liquidity sources as % of Total Assets less Goodwill and Intangibles

13.8% 12.3%

(1)

Average balances are calculated based on weekly balances.

(2)

Consists of high quality sovereign government securities and reverse repurchase agreements collateralized by U.S. government securities and other high quality sovereign government securities; deposits with a central bank within the European Economic Area, Canada, Australia, Japan, Switzerland or the USA; and securities issued by a designated multilateral development bank and reverse repurchase agreements with underlying collateral comprised of these securities.

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(3)

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 and additional funds available under the committed senior secured revolving credit facility available for working capital needs of Jefferies Bache.

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. As of November 30, 2013, we have the ability to readily obtain repurchase financing for 73% of our inventory at haircuts of 10% or less, which reflects the liquidity of our inventory. We continually assess the liquidity of our inventory based on the level at which we could obtain financing in the market place for a given asset. Assets are considered to be liquid if financing can be obtained in the repurchase market or the securities lending market at collateral haircut levels of 10% or less. The following summarizes our financial instruments by asset class that we consider to be of a liquid nature and the amount of such assets that have not been pledged as collateral at November 30, 2013 and 2012 (in thousands):

Successor Predecessor
November 30, 2013 November 30, 2012
  Liquid Financial  
Instruments
Unencumbered
  Liquid Financial  
Instruments (2)
  Liquid Financial  
Instruments
Unencumbered
  Liquid Financial  
Instruments (2)

Corporate equity securities

 $ 1,982,877    $ 137,721    $ 1,745,960    $ 426,401  

Corporate debt securities

2,250,512   26,983   2,292,823   61,303  

U.S. Government, agency and municipal securities

2,513,388   400,821   2,114,768   57,681  

Other sovereign obligations

2,346,485   991,774   2,681,457   269,475  

Agency mortgage-backed securities (1)

2,976,133   -      4,052,289   -     

Physical commodities

37,888   -      144,016   -     

 $ 12,107,283    $ 1,557,299    $ 13,031,313    $ 814,860  

(1)

Consists solely of agency mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae. These securities include pass-through securities, securities backed by adjustable rate mortgages ("ARMs"), collateralized mortgage obligations, commercial mortgage-backed securities and interest- and principal-only securities.

(2)

Unencumbered liquid balances represent assets that can be sold or used as collateral for a loan, but have not been.

Average liquid financial instruments for the three and twelve months ended November 30, 2013 were $15.7 billion and $16.1 billion and for the three and twelve months ended 2012 were approximately $16.9 billion and $17.4 billion, respectively.

In addition to being able to be readily financed at modest haircut levels, we estimate that each of the individual securities within each asset class above could be sold into the market and converted into cash within three business days under normal market conditions, assuming that the entire portfolio of a given asset class was not simultaneously liquidated. There are no restrictions on the unencumbered liquid securities, nor have they been pledged as collateral.

Sources of Funding and Capital Resources

Our assets are funded by equity capital, senior debt, convertible debt, mandatorily redeemable convertible preferred stock, mandatorily redeemable preferred interests, 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

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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 84% of our 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. The tenor of our repurchase and reverse repurchase agreements generally exceeds the expected holding period of the assets we are financing.

A significant portion of our financing of European Sovereign inventory is executed using central clearinghouse financing arrangements rather than via bi-lateral arrangements repo agreements. For those asset classes not eligible for central clearinghouse financing, we seek to execute our bi-lateral financings on an extended term basis.

In addition to the above financing arrangements, in November 2012, we initiated a program whereby 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"). At November 30, 2013, the outstanding amount of the notes issued under the program was $195.0 million in aggregate, which is presented within Other secured financings on the Consolidated Statement of Financial Condition. Of the $195.0 million aggregate notes, $75.0 million matures in December 2013, $60.0 million matures in November 2014 and $60.0 million matures in February 2015, bearing interest at a spread over one month LIBOR. For additional discussion on the program, refer to Note 11, Variable Interest Entities, in our consolidated financial statements.

Weighted average maturity of repurchase agreements for non-clearing corporation eligible funded inventory is approximately four months at November 30, 2013. 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. As of November 30, 2013, short-term borrowings as bank loans totaled $12.0 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 bank loans for the nine months ended November 30, 2013 and year ended November 30, 2012 were $43.3 million and $66.4 million, respectively.

Total Capital

We had total long-term capital of $11.2 billion and $8.7 billion resulting in a long-term debt to equity capital ratio of 1.07:1 and 1.30:1 at November 30, 2013 and 2012, respectively. Our total capital base as of November 30, 2013 and 2012 was as follows (in thousands):

Successor Predecessor
    November 30,    
2013
    November 30,    
2012

Long-Term Debt (1)

 $ 5,777,130   $ 4,454,600 

Mandatorily Redeemable Convertible Preferred Stock

-        125,000 

Mandatorily Redeemable Preferred Interest of Consolidated Subsidiaries

-        348,051 

Total Equity

5,421,674  3,782,753 

Total Capital

 $ 11,198,804   $ 8,710,404 

(1)

Long-term debt for purposes of evaluating long-term capital at November 30, 2013 and 2012 excludes $200.0 million and $350.0 million, respectively, of our outstanding borrowings under our long-term revolving Credit Facility and excludes $255.7 million of our 5.875% Senior Notes as of November 30, 2013 as the notes mature in less than one year from November 30, 2013.

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As part of the Merger, our outstanding mandatorily redeemable convertible preferred stock was exchanged for a newly created comparable series of convertible preferred stock that is now issued by Leucadia. This exchange and assumption of convertible preferred stock is considered a part of Leucadia's purchase consideration and therefore results in additional member's equity of Jefferies Group LLC subsequent to the merger. In addition, at November 30, 2012, total equity includes noncontrolling interests in our high yield joint venture of $338.4 million which, on March 1, 2013, was redeemed for $347.6 million, the value at February 28, 2013. Cash redemption payments were made in April and November 2013 and did not have a significant impact on our liquidity. Also, as of April 1, 2013, the mandatorily redeemable preferred interests of consolidated subsidiaries of $362.3 million were redeemed and subsequently contributed to us by Leucadia as member's equity of Jefferies Group LLC.

Long-Term Debt

On January 15, 2013, we issued $1.0 billion in new senior unsecured long-term debt, comprising $600.0 million principal amount 5.125% Senior Notes, due 2023 and $400.0 million principal amount 6.5% Senior Notes, due 2043, for which we received proceeds of $987.3 million, in aggregate. On July 13, 2012, under our Euro Medium Term Note Program we issued senior unsecured notes with a principal amount of €4.0 million which bear interest at 2.25% per annum and mature on July 13, 2022. Proceeds net of original issue discount amounted to €2.8 million. In addition, on April 19, 2012, we issued an additional $200.0 million aggregate principal amount of our 6.875% Senior Notes due April 15, 2021. Proceeds before underwriting discount and expenses amounted to $197.7 million. The total aggregate principal amount issued under this series of notes including the add-on is $750.0 million.

On August 26, 2011, we entered into a committed senior secured revolving credit facility ("Credit Facility") with a group of commercial banks in Dollars, Euros and Sterling, for an aggregate committed amount of $950.0 million with availability subject to one or more borrowing bases and of which $250.0 million can be borrowed by Jefferies Bache Limited without a borrowing base requirement. The borrowers under the Credit Facility are Jefferies Bache Financial Services, Inc., Jefferies Bache, LLC and Jefferies Bache Limited. At November 30, 2013 and 2012, we had borrowings outstanding under the Credit Facility amounting to $200.0 million and $350.0 million, respectively.

The Credit Facility terminates on August 26, 2014. Interest is based on the Federal funds rate or, in the case of Euro and Sterling borrowings, the Euro Interbank Offered Rate and the London Interbank Offered Rate, respectively. The Credit Facility is guaranteed by Jefferies Group LLC and contains financial covenants that, among other things, imposes restrictions on future indebtedness of our subsidiaries, requires Jefferies Group LLC to maintain specified level of tangible net worth and liquidity amounts, and requires certain of our subsidiaries to maintain specified levels of regulated capital. On a monthly basis we provide a certificate to the Administrative Agent of the Credit Facility as to the maintenance of various financial covenant ratios at all times during the preceding month. At November 30, 2013 and 2012, the minimum tangible net worth requirement was $2,564.0 million and $2,200.0 million, respectively and the minimum liquidity requirement was $532.8 million and $400.8 million, respectively for which we were in compliance. Throughout the period, no instances of noncompliance with the Credit Facility occurred and we expect to remain in compliance given our current liquidity, anticipated additional funding requirements given our business plan and profitability expectations. While our subsidiaries are restricted under the Credit Facility from incurring additional indebtedness beyond trade payable and derivative liabilities in the normal course of business, we do not believe that these restrictions will have a negative impact on our liquidity.

Our U.S. broker-dealer, from time to time, makes a market in our long-term debt securities (i.e., purchases and sells our long-term debt securities). During November and December 2011, there was extreme volatility in the price of our debt and a significant amount of secondary trading volume through our market-making desk. Given the volume of activity and significant price volatility, purchases and sales of our debt were treated as debt extinguishment and debt reissuance, respectively. We recognized a gain of $9.9 million and $20.2 million on debt extinguishment which is reported in Other revenues for the years ended November 30, 2012 and 2011, respectively. The balance of Long-term debt was reduced by $37.1 million as a result of the repurchase and subsequent reissuance of our debt below par during November and December 2011, which was being amortized over the remaining life of the debt using the effective yield method. The unamortized balance at November 30, 2012 amounted to $32.2 million and the residual unamortized balance of $30.9 million at February 28, 2013, was reduced to $-0- on March 1, 2013 by application of the acquisition method of accounting.

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As of November 30, 2013, our long-term debt, excluding the Credit Facility, has an average maturity exceeding 8 years. Our next scheduled maturity is the $250.0 million 5.875% Senior Notes that mature in June 2014.

Our long-term debt ratings as of November 30, 2013 are as follows:

          Rating                     Outlook          

Moody's Investors Service

Baa3 Stable

Standard and Poor's

BBB Stable

Fitch Ratings

BBB- Stable

We rely upon our cash holdings and external sources to finance a significant portion of our day to day operations. Access to these external sources, 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 November 30, 2013, 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 $89.2 million. For certain foreign clearing organizations credit rating is only one of several factors employed in determining collateral that could be called. The above represents management's best estimate for additional collateral to be called in the event of credit rating downgrade. The impact of additional collateral requirements are considered in our Contingency Funding Plan and calculation of Maximum Liquidity Outflow, as described above.

Mandatorily Redeemable Preferred Interests of Consolidated Subsidiaries

Mandatorily redeemable preferred interests of $348.1 million at November 30, 2012, represent interests held in JHYH, which are entitled to a pro rata share of the profits and losses of JHYH. On March 31, 2013, Leucadia contributed its mandatorily redeemable preferred interests in JHYH to Jefferies Group LLC as member's equity. We subsequently redeemed the remaining mandatorily redeemable preferred interests in JHYH on April 1, 2013. Further, the business activities of our high yield joint venture was merged with those of Jefferies (our U.S. broker-dealer) and are no longer conducted as a joint venture.

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Contractual Obligations and Commitments

The tables below provide information about our commitments related to debt obligations, investments and derivative contracts as of November 30, 2013. The table presents principal cash flows with expected maturity dates (in millions):

Expected Maturity Date
2014 2015 2016
and
2017
2018
and
2019
2020
and
Later
Total

Debt obligations:

Unsecured long-term debt (contractual principal payments net of unamortized discounts and premiums)

 $ 255.7    $ 516.2    $ 373.2    $ 1,712.4    $ 3,175.3    $ 6,032.8  

Senior secured revolving credit facility

200.0   -      -      -      -      200.0  

Interest payment obligations on senior notes

322.4   313.6   556.8   436.4   1,443.1   3,072.3  

778.1   829.8   930.0   2,148.8   4,618.4   9,305.1  

Commitments and guarantees:

Equity commitments

1.8   7.4   0.8   -      418.2   428.2  

Loan commitments

33.2   19.0   322.6   92.8   -      467.6  

Mortgage-related commitments

819.9   492.9   202.8   -      -      1,515.6  

Forward starting reverse repos and repos

702.3   -      -      -      -      702.3  

Derivative contracts (1):

Derivative contracts - non credit related

841,439.9   4,695.2   14.7   1.2   532.4   846,683.4  

Derivative contracts - credit related

-      -      -      2,708.1   -      2,708.1  

842,997.1   5,214.5   540.9   2,802.1   950.6   852,505.2  

 $  843,775.2    $   6,044.3    $   1,470.9    $ 4,950.9    $ 5,569.0    $  861,810.3  

(1)

Certain of our derivative contracts meet the definition of a guarantee and are therefore included in the above table. For additional information on commitments, see Note 22, Commitments, Contingencies and Guarantees, in our consolidated financial statements.

As lessee, we lease certain premises and equipment under noncancelable agreements expiring at various dates through 2029 which are operating leases. At November 30, 2013, future minimum aggregate lease payments for all noncancelable operating leases for fiscal years ended November 30, 2014 through 2018 and the aggregate amount thereafter, are as follows (in thousands):

Gross Subleases Net

2014

 $ 69,823    $ 5,283    $ 64,540  

2015

53,774   2,639   51,135  

2016

58,273   2,493   55,780  

2017

56,505   577   55,928  

2018

54,004   23   53,981  

Thereafter

446,106   -     446,106  

 $   738,485    $   11,015    $   727,470  

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During 2012, we entered into a master sale and leaseback agreement under which we sold and have leased back existing and additional new equipment supplied by the lessor. The lease may be terminated on September 30, 2017 for a termination cost of the present value of the remaining lease payments plus a residual value. If not terminated early, the lease term is approximately five years from the start of the supply of new and additional equipment, which commenced on various dates in 2013 and continues into 2014. Minimum future lease payments are as follows (in thousands):

Fiscal Year

2014

$

3,887  

2015

3,887  

2016

3,887  

2017

3,887  

2018

1,583  

Thereafter

167  

Net minimum lease payments

17,298  

Less amount representing interest

1,508  

Present value of net minimum lease payments

$

    15,790  

Certain of our derivative contracts meet the definition of a guarantee and are therefore included in the above table. For additional information on commitments, see Note 22, Commitments, Contingencies and Guarantees, in 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 value of derivative contracts are reported in the Consolidated Statements of Financial Condition as Financial instruments owned – derivative contracts or Financial instruments sold, not yet purchased – derivative contracts 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, Note 7, Fair Value Disclosures, and Note 8, Derivative Financial Instruments, in our consolidated financial statements.

We are routinely involved with variable interest entities ("VIEs") in connection with our mortgage-backed securities securitization activities. VIEs are entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. VIEs are consolidated by the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a variable interest entity 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. Where we are the primary beneficiary of a VIE, we consolidate the VIE. We do not generally consolidate the various VIEs related to our mortgage-backed securities securitization activities because we are not the primary beneficiary.

At November 30, 2013, we did not have any commitments to purchase assets from our securitization vehicles. At November 30, 2013, we held $387.1 million of mortgage-backed securities issued by VIEs for which we were initially involved as transferor and placement agent, which are accounted for at fair value and recorded within Financial instruments owned on our Consolidated Statement of Financial Condition in the same manner as our other financial instruments. For additional information regarding our involvement with VIEs, see Note 10, Securitization Activities and Note 11, Variable Interest Entities, in our consolidated financial statements.

We expect to make cash payments of $576.3 million on January 31, 2014 related to compensation awards for fiscal 2013.

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 above contractual obligations table. See Note 21, Income Taxes, in our consolidated financial statements for further information.

Equity Capital

On March 1, 2013, all of the outstanding common shares of Jefferies Group LLC were exchanged for shares of Leucadia and Jefferies Group LLC became wholly-owned by Leucadia with Leucadia as the sole equity owner of Jefferies Group LLC. The aggregate purchase price was approximately $4.8 billion and therefore, as a result of the merger, our member's equity capital approximated $4.8 billion upon consummation. Further, we do not anticipate making distributions in the future.

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As compared to March 1, 2013, the increase to total member's equity is attributed to net earnings, the contribution by Leucadia of it mandatorily redeemable preferred interests in consolidated subsidiaries as member's equity and foreign currency translation adjustments to Accumulated other comprehensive income.

The following table sets for the declaration dates, record dates, payment dates and per common share amounts for the dividends declared during the periods ended three months ended February 28, 2013 and the year ended November 30, 2012:

    Declaration Date     Record Date     Payment Date Dividend per    
common share    

Three months ended February 28, 2013:

December 6, 2012

December 21, 2012 December 31, 2012 $0.075

Year ended November 30, 2012:

December 19, 2011

January 17, 2012 February 15, 2012 $0.075

March 19, 2012

April 16, 2012 May 15, 2012 $0.075

June 18, 2012

July 16, 2012 August 15, 2012 $0.075

September 19, 2012

October 15, 2012 November 15, 2012 $0.075

Net Capital

As broker-dealers registered with the SEC and member firms of the Financial Industry Regulatory Authority ("FINRA"), Jefferies and Jefferies Execution are subject to the Securities and Exchange Commission Uniform Net Capital Rule ("Rule 15c3-1"), which requires the maintenance of minimum net capital and which may limit distributions from the broker-dealers. Jefferies and Jefferies Execution have elected to calculate minimum capital requirements using the alternative method permitted by Rule 15c3-1 in calculating net capital. Additionally, Jefferies Bache, LLC is registered as a Futures Commission Merchant and is subject to Rule 1.17 of the Commodities Futures Trading Commission ("CFTC"). Our designated self-regulatory organization is FINRA for our U.S. broker-dealers and the Chicago Mercantile Exchange for Jefferies Bache, LLC.

As of November 30, 2013, Jefferies, Jefferies Execution and Jefferies Bache, LLC's net capital, adjusted net capital, and excess net capital were as follows (in thousands):

Net Capital     Excess Net Capital    

Jefferies

$

891,487   $ 841,539  

Jefferies Execution

4,487   4,237  
  Adjusted Net Capital       Excess Net Capital    

Jefferies Bache, LLC

$

197,957   $ 86,293  

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 and Jefferies Bache Limited which are subject to the regulatory supervision and requirements of the Financial Conduct Authority in the United Kingdom. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") was signed into law on July 21, 2010. The Dodd-Frank Act contains provisions that require the registration of all swap dealers, major swap participants, security-based swap dealers, and/or major security-based swap participants. While entities that register under these provisions will be subject to regulatory capital requirements, these regulatory capital requirements have not yet been finalized. We expect that these provisions will result in modifications to the regulatory capital requirements of some of our entities, and will result in some of our other entities becoming subject to regulatory capital requirements for the first time, including Jefferies Derivative Products, Inc. and Jefferies Bache Financial Services, Inc., which registered as swap dealers with the CFTC during January 2013.

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

Risk Management

Risk is an inherent part of our business and activities. The extent to which we properly and effectively identify, assess, monitor and manage each of the various types of risk involved in our activities is critical to our financial soundness, viability and profitability. Accordingly, we have a comprehensive risk management approach, with a formal governance structure and processes to identify, assess, monitor and manage risk. Principal risks involved in our business activities include market, credit, liquidity and capital, operational, legal and compliance, new business, and reputational risk.

Risk management is a multifaceted process that requires communication, judgment and knowledge of financial products and markets. Accordingly, our risk management process encompasses the active involvement of executive and senior management, and also many departments independent of the revenue-producing business units, including the Risk Management, Operations, Compliance, Legal and Finance Departments. Our risk management policies, procedures and methodologies are fluid in nature and are subject to ongoing review and modification.

For discussion of liquidity and capital risk management refer to, "Liquidity, Financial Condition and Capital Resources" within Item 7. Management's Discussion and Analysis in this Annual Report on Form 10-K.

Governance and Risk Management Structure

Our Board of Directors Our Board of Directors and its Audit Committee play an important role in reviewing our risk management process and risk tolerance. Our Board of Directors and Audit Committee are provided with data relating to risk at each of its regularly scheduled meetings. Our Chief Risk Officer and Global Treasurer meet with the Board of Directors on not less than a quarterly basis to present our risk profile and liquidity profile and to respond to questions.

Risk Committees We make extensive use of internal committees to govern risk taking and ensure that business activities are properly identified, assessed, monitored and managed. Our Risk Management Committee meets weekly to discuss our risk, capital, and liquidity profile in detail. In addition, business or market trends and their potential impact on the risk profile are discussed. Membership is comprised of our Chief Executive Officer and Chairman, Chairman of the Executive Committee, Chief Financial Officer, Chief Risk Officer and Global Treasurer. The Committee approves limits for us as a whole, and across risk categories and business lines. It also reviews all limit breaches. Limits are reviewed on at least an annual basis. Other risk related committees include Market Risk Management, Credit Risk Management, New Business, Underwriting Acceptance, Margin Oversight, Executive Management and Operating Committees. These Committees govern risk taking and ensure that business activities are properly managed for their area of oversight.

Risk Related Policies We make use of various policies in the risk management process:

Market Risk Policy - This policy sets out roles, responsibilities, processes and escalation procedures regarding market risk management.

Independent Price Verification Policy - This policy sets out roles, responsibilities, processes and escalation procedures regarding independent price verification for securities and other financial instruments.

Operational Risk Policy - This policy sets out roles, responsibilities, processes and escalation procedures regarding operational risk management.

Credit Risk Policy - This policy provides standards and controls for credit risk-taking throughout our global business activities. This policy also governs credit limit methodology and counterparty review.

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Risk Management Key Metrics

We apply a comprehensive framework of limits on a variety of key metrics to constrain the risk profile of our business activities. The size of the limit reflects our risk tolerance for a certain activity under normal business conditions. Key metrics included in our framework include inventory position and exposure limits on a gross and net basis, scenario analysis and stress tests, Value-at-Risk, sensitivities (greeks), exposure concentrations, aged inventory, amount of Level 3 assets, counterparty exposure, leverage, cash capital, and performance analysis metrics.

Market Risk

The potential for changes in the value of financial instruments is referred to as market risk. Our market risk generally represents the risk of loss that may result from a change in the value of a financial instrument as a result of fluctuations in interest rates, credit spreads, equity prices, commodity prices and foreign exchange rates, along with the level of volatility. Interest rate risks result primarily from exposure to changes in the yield curve, the volatility of interest rates, and credit spreads. Equity price risks result from exposure to changes in prices and volatilities of individual equities, equity baskets and equity indices. Commodity price risks result from exposure to the changes in prices and volatilities of individual commodities, commodity baskets and commodity indices. Market risk arises from market making, proprietary trading, underwriting, specialist and investing activities. We seek to manage our exposure to market risk 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 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 results of the trading groups.

Value-at-Risk

We estimate Value-at-Risk (VaR) using a model that simulates revenue and loss distributions on substantially all financial instruments by applying historical market changes to the current portfolio. Using the results of this simulation, VaR measures the potential loss in value of our financial instruments over a specified time horizon at a given confidence level. We calculate a one-day VaR using a one year look-back period measured at a 95% confidence level. This implies that, on average, we expect to realize a loss of daily trading net revenue at least as large as the VaR amount on one out of every twenty trading days.

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 of positions that cannot be liquidated or offset with hedges in a one-day period. Published VaR results reflect past trading positions while future risk depends on future positions.

While we believe the assumptions and inputs in our risk model are reasonable, we could incur losses greater than the reported VaR because the historical market prices and rates changes may not be an accurate measure of future market events and conditions. Consequently, this VaR estimate is only one of a number of tools we use in our daily risk management activities. When comparing our VaR numbers to those of other firms, it is important to remember that different methodologies and assumptions could produce significantly different results.

The VaR numbers below are shown separately for interest rate, equity, currency and commodity products, as well as for our overall trading positions using the past 365 days of historical date. 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 following table illustrates the VaR for each component of market risk (in millions).

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Daily VaR (1)

Value-at-Risk In Trading Portfolios

VaR as of November 30,

Daily VaR for the Year Ended November 30,

Risk Categories           2013           2012 2013 2012

 Average     High         Low       Average     High         Low    

Interest Rates

  $ 7.33    $ 5.37    $ 5.38   $ 9.46 $ 3.68   $ 6.74 $ 13.40 $ 4.40 

Equity Prices

12.22   8.02   6.57   12.37 3.85  4.99 13.81 1.15 

Currency Rates

0.56   0.37   0.83   2.07 0.11  0.66 1.94 0.18 

Commodity Prices

0.74   0.77   0.94   1.70 0.37  1.26 2.55 0.45 

Diversification Effect (2)

(4.60)  (3.12)  (3.29)  N/A N/A  (2.99 N/A N/A 

Firmwide

  $ 16.25    $ 11.41    $ 10.43   $ 16.25 $ 6.00   $ 10.66 $ 17.96 $ 5.38 

(1) VaR is the potential loss in value of our trading positions due to adverse market movements over a defined time horizon with a specific confidence level. 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.

Our average daily VaR decreased to $10.43 million for the year ended November 30, 2013 from $10.66 million for the year ended November 30, 2012. Excluding our investment in Knight Capital, the average VaR for the year ended November 30, 2013 and 2012 was $10.37 million and $8.75 million, respectively. The decrease is due to decreased interest rates risk resulting from reduced exposure to international sovereign debt and U.S. mortgages and lower volatility in interest rate asset classes. We also saw an increase in the diversification benefit across asset classes. This decrease was partially offset by higher equity price risk driven by increased exposures to strategic equity holdings/corporate actions regarding certain of our equity holdings. Currency rates risk did not change significantly from the comparable 2012 period.

On April 1, 2013, we redeemed the third party noncontrolling interests in our high yield business. The presentation of VaR therefore reflects the full economic interests of this business since the redemption date. This modification to include a full allocation of the high yield trading business in our calculation had no material effect on VaR calculated for the year ended and as of November 30, 2013.

Our average VaR for the three months ended November 30, 2013 increased from the third fiscal quarter primarily from increased equity price risk related to the acquisition of our holding in Harbinger on September 27, 2013.

The chart below reflects our daily VaR over the last four quarters:

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The primary method used to test the efficacy of the VaR model is to compare our actual daily net revenue for those positions included in our VaR calculation with the daily VaR estimate. This evaluation is performed at various levels of the trading portfolio, from the holding company level down to specific business lines. For the VaR model, trading related revenue is defined as principal transaction revenue, 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 November 30, 2013, results of the evaluation at the aggregate level demonstrated no days when the net trading loss exceeded the 95% one day VaR. For the full fiscal year 2013, there were two days when the net trading loss exceeded the 95% one day VaR. Exclusive of the Knight Capital position, there were no days during the fiscal year when the net trading loss exceeded the 95% one day VaR.

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 or the sensitivity to a 10% stress of the fair value of the positions that are not included in the VaR model at November 30, 2013 (in thousands):

    10% Sensitivity    

Private investments

$ 17,518

Corporate debt securities in default

7,231

Trade claims

5,034

Daily Net Trading Revenue

There were 32 days with trading losses out of a total of 251 trading days in the year ended November 30, 2013, including 7 in the three months ended November 30, 2013. Excluding trading losses associated with the daily marking to market of our position in Knight Capital, in the year ended November 30, 2013, there would have been 19 days with trading losses, of which 6 occurred in the fourth quarter of 2013. Excluding trading losses associated with the daily marking to market of both of our positions in Knight Capital and Harbinger, in the year ended November 30, 2013, there would have been 17 days with trading losses, of which 4 occurred in the fourth quarter of 2013.

The histogram below presents the distribution of our daily net trading revenue for substantially all of our trading activities for the year ended November, 2013 (in millions).

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Scenario Analysis and Stress Tests

While VaR measures potential losses due to adverse changes in historical market prices and rates, we use stress testing to analyze the potential impact of specific events or moderate or extreme market moves on our current portfolio both firm wide and within business segments. Stress scenarios comprise both historical market price and rate changes and hypothetical market environments, and generally involve simultaneous changes of many risk factors. Indicative market changes in our 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, changes in the shape of the yield curve and large moves in European markets. In addition, we also perform ad hoc stress tests and add new scenarios as market conditions dictate. Because our stress scenarios are meant to reflect market moves that occur over a period of time, our estimates of potential loss assume some level of position reduction for liquid positions. 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 is performed and reported regularly as part of the risk management process. Stress testing is used to assess our aggregate risk position as well as for limit setting and risk/reward analysis.

Counterparty Credit Risk and Issuer Country Exposure

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 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.

It is critical to our financial soundness and profitability that we properly and effectively identify, assess, monitor, and manage the various credit and counterparty risks inherent in our businesses. Credit is extended to counterparties in a controlled manner in order to generate acceptable returns, whether such credit is granted directly or is incidental to a transaction. All extensions of credit are monitored and managed on an enterprise level in order to limit exposure to loss related to credit risk.

Our Credit Risk Framework is responsible for identifying credit risks throughout the operating businesses, establishing counterparty limits and managing and monitoring those credit limits. Our framework includes:

defining credit limit guidelines and credit limit approval processes;

 •

providing a consistent and integrated credit risk framework across the enterprise;

 •

approving counterparties and counterparty limits with parameters set by the Risk Management Committee;

 •

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

 •

delivering credit limits to all relevant sales and trading desks;

 •

maintaining credit reviews for all active and new counterparties;

 •

operating a control function for exposure analytics and exception management and reporting;

 •

determining the analytical standards and risk parameters for on-going management and monitoring of global credit risk books;

 •

actively managing daily exposure, exceptions, and breaches;

 •

monitoring daily margin call activity and counterparty performance (in concert with the Margin Department); and

 •

setting the minimum global requirements for systems, reports, and technology.

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Credit Exposures

Credit exposure exists across a wide-range of products including cash and cash equivalents, loans, securities finance transactions and over-the-counter derivative contracts.

Loans and lending arise in connection with our capital markets activities and represents the notional value of loans that have been drawn by the borrower and lending commitments that were outstanding at November 30, 2013.

Securities and margin finance includes credit exposure arising on securities financing transactions (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.

Derivatives represent over-the-counter ("OTC") derivatives, which are reported net by counterparty when a legal right of setoff exists under an enforceable master netting agreement. Derivatives are accounted for 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 include both interest-bearing and non-interest bearing deposits at banks.

Current counterparty credit exposures at November 30, 2013 and November 30, 2012 are summarized in the tables below and provided by credit quality, region and industry. Credit exposures presented take netting and collateral into consideration by counterparty and master agreement. Collateral taken into consideration includes both collateral received as cash as well as collateral received in the form of securities or other arrangements. Current exposure is the loss that would be incurred on a particular set of positions in the event of default by the counterparty, assuming no recovery. Current exposure equals the fair value of the positions less collateral. Issuer risk is the credit risk arising from inventory positions (for example, corporate debt securities and secondary bank loans). Issuer risk is included in our country risk exposure tables below. Of our counterparty credit exposure at November 30, 2013, excluding cash and cash equivalents, 66% are investment grade counterparties, compared to 58% at November 30, 2012, and are mainly concentrated in North America. When comparing our credit exposure at November 30, 2013 with credit exposure at November 30, 2012, excluding cash and cash equivalents, current exposure has decreased 3% to approximately $1.03 billion from $1.06 billion. The decrease is primarily due to a decrease in loan and repo balances, partially offset by an increase in securities and margin finance balances.

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
  As of November 30,     As of November 30,     As of November 30,     As of November 30,     As of November 30,     As of November 30,  
(in millions)     2013     2012         2013     2012         2013     2012         2013     2012         2013     2012         2013     2012    

AAA Range

-    -      0.2 0.9  -     -      0.2 0.9  2,680.6 1,322.7  2,680.8 1,323.6 

AA Range

-    -      104.8 183.1  14.7 19.1  119.5 202.2  144.1 149.7  263.6 351.9 

A Range

-    -      374.4 163.8  56.7 72.6  431.1 236.4  734.7 1,134.0  1,165.8 1,370.4 

BBB Range

71.0 50.0  39.9 106.7  16.2 13.4  127.1 170.1  1.7 86.2  128.8 256.3 

BB or Lower

120.3 255.0  115.4 112.3  9.5 19.3  245.2 386.6  -     -      245.2 386.6 

Unrated

86.6 57.5  -    -      18.6 1.6  105.2 59.1  -     -      105.2 59.1 

Total

277.9 362.5  634.7 566.8  115.7 126.0  1,028.3 1,055.3  3,561.1 2,692.6  4,589.4 3,747.9 

Counterparty Credit Exposure by Region

Loans and Lending

Securities and Margin
Finance
OTC Derivatives

Total

Cash and Cash Equivalents

Total with Cash and Cash
Equivalents
  As of November 30,     As of November 30,     As of November 30,     As of November 30,     As of November 30,     As of November 30,  
(in millions)     2013         2012         2013         2012         2013         2012         2013         2012         2013         2012         2013         2012    

Asia/Latin America/Other

-    12.5  30.9 23.5  11.6 6.5  42.5 42.5  183.3 125.6  225.8 168.1 

Europe

-    -      180.3 117.4  47.6 42.9  227.9 160.3  269.3 573.9  497.2 734.2 

North America

277.9 350.0  423.5 425.9  56.5 76.6  757.9 852.5  3,108.5 1,993.1  3,866.4 2,845.6 

Total

277.9 362.5  634.7 566.8  115.7 126.0  1,028.3 1,055.3  3,561.1 2,692.6  4,589.4 3,747.9 

Counterparty Credit Exposure by Industry

Loans and Lending

Securities and Margin
Finance
OTC Derivatives

Total

Cash and Cash Equivalents

Total with Cash and Cash
Equivalents
  As of November 30,     As of November 30,     As of November 30,     As of November 30,     As of November 30,     As of November 30,  
(in millions)     2013         2012         2013         2012         2013         2012         2013         2012         2013         2012         2013         2012    

Asset Managers

-    -      7.1 3.3  0.5 0.2  7.6 3.5  2,680.7 1,322.7  2,688.3 1,326.2 

Banks, Broker-dealers

-    -      354.9 312.8  73.8 66.9  428.7 379.7  880.4 1,369.9  1,309.1 1,749.6 

Commodities

-    -      35.6 23.0  9.4 33.2  45.0 56.2  -     -      45.0 56.2 

Other

277.9 362.5  237.1 227.7  32.0 25.7  547.0 615.9  -     -      547.0 615.9 

Total

277.9 362.5  634.7 566.8  115.7 126.0  1,028.3 1,055.3  3,561.1 2,692.6  4,589.4 3,747.9 

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For additional information regarding credit exposure to OTC derivative contracts, refer to Note 8, Derivative Financial Instruments, in our consolidated financial statements included within this Annual Report on Form 10-K.

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 country risk as the country of jurisdiction or domicile of the obligor. Prior to the first quarter of 2013, country risk was defined as the country of jurisdiction or domicile of the obligor's ultimate group parent. The table presented below at November 30, 2012, has been conformed to this presentation. The following tables reflect our top exposure at November 30, 2013 and November 30, 2012 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):

As of November 30, 2013
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

Great Britain

  $ 418.8 $ (181.5) $ (27.2)   $ -     $ 42.5 $ 20.7   $ 113.1   $ 273.3 $ 386.4 

Germany

462.0 (226.1) (70.5)  -    93.2 10.9  3.3  269.5 272.8 

Netherlands

445.7 (198.8) (2.3)  -    5.2 1.5  0.3  251.3 251.6 

Italy

1,181.4 (1,017.6) 74.2   -    1.8 0.1  -      239.9 239.9 

Canada

140.6 (59.0) 18.8   -    99.5 0.2  2.2  200.1 202.3 

Spain

352.3 (159.8) 0.3   -    3.0 0.2  0.1  196.0 196.1 

Puerto Rico

130.1 -      -      -    -     -      -      130.1 130.1 

Luxembourg

75.0 (15.1) -      -    0.1 -      68.0  60.0 128.0 

Hong Kong

33.9 (18.3) (0.9)  -    0.3 -      104.3  15.0 119.3 

Austria

130.2 (32.8) -       -    5.0 -      0.1  102.4 102.5 

Total

  $ 3,370.0 $ (1,909.0) $ (7.6)   $       -     $ 250.6 $ 33.6   $ 291.4   $ 1,737.6 $ 2,029.0 

As of November 30, 2012
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

Great Britain

  $ 691.3 $ (460.1) $ (81.5)   $ 8.5   $ 14.2 $ 25.7   $ 405.8   $ 198.1 $ 603.9 

Luxembourg

163.8 (21.1) 1.1   13.6  1.5 -      96.2  158.9 255.1 

Canada

150.7 (66.6) (23.4)  9.5  103.1 12.6  0.9  185.9 186.8 

Spain

276.6 (85.2) (26.0)  -      4.6 -      0.6  170.0 170.6 

Netherlands

255.6 (129.5) (4.5)  7.5  10.3 0.2  0.3  139.6 139.9 

Hong Kong

28.3 (12.0) 5.1   -      1.8 -      91.2  23.2 114.4 

Germany

413.2 (318.1) (94.7)  3.0  60.3 6.7  20.1  70.4 90.5 

Belgium

177.8 (142.8) (3.7)  -      0.9 -      49.4  32.2 81.6 

Jersey

0.2 (0.6) -       73.7  -     -      -      73.3 73.3 

Sweden

70.7 (15.7) (0.6)  -      0.4 0.2  0.1  55.0 55.1 

Total

  $ 2,228.2 $ (1,251.7) $ (228.2)   $ 115.8   $ 197.1 $ 45.4   $ 664.6   $ 1,106.6 $ 1,771.2 

Exposure to the Sovereign Debt, Corporate and Financial Securities of Greece, Ireland, Italy, Portugal and Spain

As detailed below, our net exposure to sovereign debt of Greece, Ireland, Italy, Portugal, and Spain (before economic derivative hedges) was net long $194.0 million at November 30, 2013, which is approximately 4% of total equity.

The table below reflects not only our exposure to the sovereign debt of Greece, Ireland, Italy, Portugal, and Spain at November 30, 2013 but also includes our exposure to the securities of corporations, financial institutions and mortgage-backed securities collateralized by assets domiciled in these countries. This table is presented in a manner consistent with how management views and monitors these exposures as part of our risk management framework. Our issuer exposure to these European countries arises primarily in the context of our market making activities and

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our role as a major dealer in the debt securities of these countries. Accordingly, our issuer risk arises due to holding securities as long and short inventory, which does not carry counterparty credit exposure. While the economic derivative hedges are presented on a notional basis, we believe this best reflects the reduction in the underlying market risk due to interest rates or the issuer's credit as a result of the hedges. Long and short financial instruments are offset against each other for determining net exposure although they do not represent identical offsetting positions of the same debt security. Components of risk embedded in the securities will generally offset, however, basis risk due to duration and the specific issuer may still exist. Economic hedges as represented by the notional amounts of the derivative contracts may not be perfect offsets for the risk represented by the net fair value of the debt securities. Additional information relating to the derivative contracts, including the fair value of the derivative positions, is included in the following pages.

As of November 30, 2013
(in millions)     Sovereigns         Corporations    

Financial
    Institutions    
    Structured    
Products
      Total      

Financial instruments owned - Debt securities

Greece

  $ -        (4)    $ 9.4     $ 0.9    (4)    $ 3.0     $ 13.3  

Ireland

2.1    (4)  18.4   17.9    (4)  -       38.4  

Italy

1,088.0    (4)  40.0   49.4    (4)  4.0   1,181.4  

Portugal

1.2    (4)  0.6   11.3    (4)  6.0   19.1  

Spain

224.0    (4)  17.5   25.7    (4)  85.0   352.2  

Total fair value of long debt securities (1)

1,315.3    (4)  85.9   105.2    (4)  98.0   1,604.4  

Financial instruments sold - Debt securities

Greece

-        (4)  3.6   0.8   -       4.4  

Ireland

4.6    (4)  11.6   0.2   -       16.4  

Italy

989.7    (4)  12.7   15.2   -       1,017.6  

Portugal

-        (4)  0.4   -       -       0.4  

Spain

127.0    (4)  15.9   16.9   -       159.8  

Total fair value of short debt securities (2)

1,121.3    (4)  44.2   33.1   -       1,198.6  

Total net fair value of debt securities

194.0   41.7   72.1   98.0   405.8  

Derivative contracts - long notional exposure

Greece

-       1.0   2.8   -       3.8  

Ireland

-       17.8   -       -       17.8  

Italy

371.0    (5)  -       -       -       371.0  

Portugal

-       -       -       -       -  

Spain

-       -       0.3   -       0.3  

Total notional amount - long (6)

371.0   18.8   3.1   -       392.9  

Derivative contracts - short notional exposure

Greece

-       2.0   -       -       2.0  

Ireland

-       9.8   6.6   -       16.4  

Italy

276.4    (5)  -       20.4   -       296.8  

Portugal

-       -       -       -       -  

Spain

-       -       -       -       -  

Total notional amount - short (6)

276.4   11.8   27.0   -       315.2  

Total net derivative notional exposure (3)

94.6   7.0   (23.9)  -       77.7  

Total net exposure to select European countries

  $ 288.6     $ 48.7     $ 48.2     $ 98.0     $ 483.5  

  (1)

Long securities represent the fair value of debt securities and are presented within Financial instruments owned - corporate debt securities and government, federal agency and other sovereign obligations and mortgage- and asset-backed securities on the face of the Consolidated Statement of Financial Condition and are accounted for at fair value with changes in fair value recognized in Principal transactions revenues.

  (2)

Short securities represent the fair value of debt securities sold short and are presented within Financial instruments sold, not yet purchased - corporate debt securities and government, federal agency and other sovereign obligations on the face of the Consolidated Statement of Financial Condition and are accounted for at fair value with changes in fair value recognized in Principal transactions revenues.

  (3)

Net derivative contracts reflect the notional amount of the derivative contracts and include credit default swaps, bond futures and listed equity options.

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  (4)

Classification of securities by country and by issuer type is presented based on the view of our Risk Management Department. Risk Management takes into account whether a particular security or issuer of a security is guaranteed or otherwise backed by a sovereign government and also takes into account whether a corporate or financial institution that issues a particular security is owned by a sovereign government when determining domicile and whether a particular security should be classified for risk purposes as a sovereign obligation. The classification of debt securities within the table above will differ from the financial statement presentation in the Consolidated Statement of Financial Condition because the classification used for financial statement presentation in the Consolidated Statement of Financial Condition classifies a debt security solely by the direct issuer and the domicile of the direct issuer.

  (5)

These positions are comprised of bond futures executed on exchanges outside Italy.

  (6)

See further information regarding derivatives on the tables following.

As of November 30, 2013
(in millions)     Greece         Ireland         Italy       Portugal       Spain     Total

Financial instruments owned:

Long sovereign debt securities (1)

  $ -         $ 2.1     $   1,088.0     $ 1.2     $ 224.0     $   1,315.3  

Long non-sovereign debt securities (1)

13.3   36.3   93.4   17.9   128.2   289.1  

Total long debt securities

13.3   38.4   1,181.4   19.1   352.2   1,604.4  

Financial instruments sold, not yet purchased:

Short sovereign debt securities (1)

-       4.6   989.7   -       127.0   1,121.3  

Short non-sovereign debt securities (1)

4.4   11.8   27.9   0.4   32.8   77.3  

Total short debt securities

4.4   16.4   1,017.6   0.4   159.8   1,198.6  

Net fair value - debt securities

8.9   22.0   163.8   18.7   192.4   405.8  

Net derivatives notional amount

1.8   1.4   74.2   -       0.3   77.7  

Total net exposure to select European countries

  $ 10.7     $ 23.4     $ 238.0     $ 18.7     $ 192.7     $ 483.5  

  (1)

Classification of securities by country and by issuer type is presented based on the view of our Risk Management Department. Risk Management takes into account whether a particular security or issuer of a security is guaranteed or otherwise backed by a sovereign government and also takes into account whether a corporate or financial institution that issues a particular security is owned by a sovereign government when determining domicile and whether a particular security should be classified for risk purposes as a sovereign obligation. The classification of debt securities within the table above will differ from the financial statement presentation in the Consolidated Statement of Financial Condition because the classification used for financial statement presentation in the Consolidated Statement of Financial Condition classifies a debt security solely by the direct issuer and the domicile of the direct issuer.

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The table below provides further information regarding the type of derivative contracts executed as economic hedges of issuer exposure to the countries of Greece, Ireland, Italy, Portugal, and Spain as of November 30, 2013. The information is presented based on the notional amount of the contracts and the domicile of the issuer. For credit default swaps, we have immaterial issuer risk to counterparties domiciled in Greece, Ireland, Italy, Portugal and Spain.

As of November 30, 2013
(in millions)     Greece         Ireland           Italy           Portugal           Spain             Total      

Derivative contracts - long notional exposure

Credit default swaps

  $ -         $ -         $ -         $ -       $ -         $ -      

Bond future contracts

-       -       371.0   -       -       371.0  

Listed equity options

3.8   17.8   -       -       0.3   21.9  

Total notional amount - long

3.8   17.8   371.0   -       0.3   392.9  

Derivative contracts - short notional exposure

Credit default swaps

-       -       20.4   -       -       20.4  

Bond future contracts

-       -       276.4   -       -       276.4  

Listed equity options

2.0   16.4   -       -       -       18.4  

Total notional amount - short

2.0   16.4   296.8   -       -       315.2  

Net derivatives notional amount

  $   1.8     $   1.4     $     74.2     $     -         $     0.3     $     77.7  

The following table provides the fair value of the above derivative contracts at November 30, 2013 (in millions):

As of November 30, 2013
    Greece         Ireland           Italy           Portugal           Spain             Total      

Derivative contracts - long fair value

Credit default swaps

  $ -       $ -         $ -         $ -         $ -       $ -      

Bond future contracts

-       -       -       -       -       -      

Listed equity options

2.7   1.2   -       -       -       3.9  

Total fair value - long

2.7   1.2   -       -       -       3.9  

Derivative contracts - short fair value

Credit default swaps

-       -       0.2   -       -       0.2  

Bond future contracts

-       -       -       -       -       -      

Listed equity options

0.1  1.8   -       -       -       1.9  

Total fair value - short

0.1  1.8   0.2   -       -       2.1  

Net derivatives fair value

  $     2.6     $     (0.6)    $   (0.2)    $     -         $     -       $ 1.8  

In addition, our non-U.S. sovereign obligations recorded in financial instruments owned and financial instruments sold, not yet purchased are routinely financed through reverse repurchase agreements and repurchase agreements, of which a significant portion are executed with central clearing organizations. Accordingly, we utilize foreign sovereign obligations as underlying collateral for our repurchase financing arrangements. At November 30, 2013, repurchase financing arrangements that are used to finance the debt securities presented above had underlying collateral of issuers domiciled in Greece, Ireland, Italy, Portugal and Spain as follows (in millions):

As of November 30, 2013

    Reverse Repurchase    
Agreements (1)
Repurchase
      Agreements (1)      
Net

Greece

  $ -         $ -         $ -      

Ireland

5.5   65.7   (60.2) 

Italy

899.2   1,162.5   (263.3) 

Portugal

-       2.8   (2.8) 

Spain

89.3   218.5   (129.2) 

Total

  $

    994.0  

  $

    1,449.5  

  $

          (455.5) 

  (1)

Amounts represent the contract amount of the repurchase financing arrangements.

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For the quarter ended November 30, 2013, our exposure to the sovereign debt of Greece, Ireland, Italy, Portugal and Spain calculated on an average daily basis was as follows (in millions):

Remaining Maturity
    Less Than One Year    
Remaining Maturity
  Greater Than or Equal  
to One Year
  Total Average Balance  

Financial instruments owned - Debt securities

Greece

  $ -         $ -         $ -      

Ireland

1.1   5.3   6.4  

Italy

1,123.1   1,193.5   2,316.6  

Portugal

0.1   1.0   1.1  

Spain

93.2   195.0   288.2  

Total average fair value of long debt securities (1)

1,217.5   1,394.8   2,612.3  

Financial instruments sold - Debt securities

Greece

-       -       -      

Ireland

-       5.1   5.1  

Italy

377.3   1,383.6   1,760.9  

Portugal

-       1.3   1.3  

Spain

0.1   131.8   131.9  

Total average fair value of short debt securities

377.4   1,521.8   1,899.2  

Total average net fair value of debt securities

840.1   (127.0)  713.1  

Derivative contracts - long notional exposure

Greece

-       -       -      

Ireland

-       -       -      

Italy

-       116.2   (2)  116.2   (2) 

Portugal

-       -       -      

Spain

-       -       -      

Total average notional amount - long

-       116.2   116.2  

Derivative contracts - short notional exposure

Greece

-       -       -      

Ireland

-       -       -      

Italy

-       350.4   350.4  

Portugal

-       -       -      

Spain

-       -       -      

Total average notional amount - short

-       350.4   350.4  

Total average net derivative notional exposure (3)

-       (234.2)  (234.2) 

Total average net exposure to select European countries

  $ 840.1     $ (361.2)    $ 478.9  

  (1)

Classification of securities by country and by issuer type is presented based on the view of our Risk Management Department. Risk Management takes into account whether a particular security or issuer of a security is guaranteed or otherwise backed by a sovereign government and also takes into account whether a corporate or financial institution that issues a particular security is owned by a sovereign government when determining domicile and whether a particular security should be classified for risk purposes as a sovereign obligation. The classification of debt securities within the table above will differ from the financial statement presentation in the Consolidated Statement of Financial Condition because the classification used for financial statement presentation in the Consolidated Statement of Financial Condition classifies a debt security solely by the direct issuer and the domicile of the direct issuer.

  (2)

These positions are comprised of bond futures executed on exchanges outside Italy.

  (3)

Net derivative contracts reflect the notional amount of the derivative contracts and include credit default swaps and bond futures.

Our collateral management of the risk due to exposure from these sovereign obligations is subject to our overall collateral and cash management risk framework. For further discussion regarding our cash and liquidity management framework and processes, see "Liquidity, Financial Condition and Capital Resources" within Item 7. Management's Discussion and Analysis in this Annual Report on Form 10-K.

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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.

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 implementation of operational risk processes are centralized and consistent firm wide.

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

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new and pending regulations and legislation and participate in various industry interest groups. We also maintain an anonymous hotline for employees or others to report suspected inappropriate actions by us or by our employees or agents.

New Business Risk

New business risk refers to the risks of entering into a new line of business or offering a new product. By entering a new line of business or offering a new product, we may face risks that we are unaccustomed to dealing with and may increase the magnitude of the risks we currently face. The New Business Committee reviews proposals for new businesses and new products to determine if we are prepared to handle the additional or increased risks associated with entering into such activities.

Reputational Risk

We recognize that maintaining our reputation among clients, investors, regulators and the general public is an important aspect of minimizing legal and operational risks. Maintaining our reputation depends on a large number of factors, including the selection of our clients and the conduct of our business activities. We seek to maintain our reputation by screening potential clients and by conducting our business activities in accordance with high ethical standards. Our reputation and business activity can be affected by statements and actions of third parties, even false or misleading statements by them. We actively monitor public comment concerning us and are vigilant in seeking to assure accurate information and perception prevails.

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Item 7A.  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 II, Item 7 of this Form 10-K.

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Item 8.  Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Management's Report on Internal Control over Financial Reporting

65

Report of Independent Registered Public Accounting Firm

66

Report of Independent Registered Public Accounting Firm

67

Report of Independent Registered Public Accounting Firm

68

Consolidated Statements of Financial Condition as of November 30, 2013 and 2012

69

Consolidated Statements of Earnings for the Nine Months Ended November  30, 2013, Three Months Ended February 28, 2013 and the Years Ended November 30, 2012 and 2011

72

Consolidated Statements of Comprehensive Income for the Nine Months Ended November  30, 2013, Three Months Ended February 28, 2013 and for the Years November 30, 2012 and 2011

73

Consolidated Statements of Changes in Equity for the Nine Months Ended November  30, 2013, Three Months Ended February 28, 2013 and for the Years Ended November 30, 2012 and 2011

74

Consolidated Statements of Cash Flows for the Nine Months Ended November  30, 2013, Three Months Ended February 28, 2013 and for the Years Ended November 30, 2012 and 2011

75

Notes to Consolidated Financial Statements

77

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Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management evaluated our internal control over financial reporting as of November 30, 2013. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework . As a result of this assessment and based on the criteria in this framework, management has concluded that, as of November 30, 2013, our internal control over financial reporting was effective.

PricewaterhouseCoopers LLP, our independent registered public accounting firm, has audited and issued a report on our internal control over financial reporting, which appears on page 66.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Member of Jefferies Group LLC

In our opinion, the accompanying consolidated statement of financial condition as of November 30, 2013 and the related consolidated statements of earnings, of comprehensive income, of changes in equity, and of cash flows for the period March 1, 2013 through November 30, 2013 present fairly, in all material respects, the financial position of Jefferies Group LLC and its subsidiaries (the "Successor" company) at November 30, 2013, and the results of their operations and their cash flows for the period March 1, 2013 through November 30, 2013 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of November 30, 2013, based on criteria established in accordance with the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe our audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

New York, New York

January 28, 2014

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Report of Independent Registered Public Accounting Firm

To Board of Directors and Shareholders of Jefferies Group, Inc.

In our opinion, the consolidated statements of earnings, of comprehensive income, of changes in equity and of cash flows for the period from December 1, 2012 through February 28, 2013 (the "Predecessor" company) present fairly, in all material respects, the results of operations and cash flows of Jefferies Group, Inc. and its subsidiaries for the period December 1, 2012 through February 28, 2013, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

New York, New York

January 28, 2014

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Member of Jefferies Group LLC

We have audited the consolidated statement of financial condition of Jefferies Group LLC (formerly Jefferies Group, Inc.) and subsidiaries (the "Company") as of November 30, 2012, and the related consolidated statements of earnings, comprehensive income, stockholders' equity, and cash flows for the years ended November 30, 2012 and 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Jefferies Group LLC and subsidiaries as of November 30, 2012, and the results of their operations and their cash flows for the years ended November 30, 2012 and 2011, in conformity with accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

New York, New York

January 28, 2013 (January 28, 2014 as to the effects discussed in Note 1–Immaterial Prior Year Adjustments)

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JEFFERIES GROUP LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands)

Successor Predecessor
      November 30,      
2013
      November 30,      
2012

ASSETS

Cash and cash equivalents

 $ 3,561,119   $ 2,692,595 

Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations

3,616,602  4,082,595 

Financial instruments owned, at fair value, including securities pledged of $13,253,537 and $12,334,745 at November 30, 2013 and November 30, 2012, respectively.

Corporate equity securities

2,098,597  1,762,775 

Corporate debt securities

2,982,768  3,038,146 

Government, federal agency and other sovereign obligations

5,346,152  5,153,750 

Mortgage- and asset-backed securities

4,473,135  5,398,078 

Loans and other receivables

1,349,128  678,311 

Derivatives

261,093  368,292 

Investments, at fair value

101,282  127,023 

Physical commodities

37,888  144,016 

Total financial instruments owned, at fair value

16,650,043  16,670,391 

Investments in managed funds

57,285  57,763 

Loans to and investments in related parties

701,873  586,420 

Securities borrowed

5,359,846  5,094,679 

Securities purchased under agreements to resell

3,746,920  3,357,602 

Securities received as collateral

11,063 

Receivables:

Brokers, dealers and clearing organizations

2,119,279  1,424,027 

Customers

1,046,945  916,284 

Fees, interest and other

251,072  196,811 

Premises and equipment

202,467  185,991 

Goodwill

1,722,346  365,670 

Other assets

1,130,136  662,713 

Total assets

 $ 40,176,996   $ 36,293,541 

Continued on next page.

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JEFFERIES GROUP LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION – CONTINUED

(In thousands, except share amounts)

Successor Predecessor
      November 30,      
2013
      November 30,      
2012

LIABILITIES AND EQUITY

Short-term borrowing

 $ 12,000   $ 150,000 

Financial instruments sold, not yet purchased, at fair value:

Corporate equity securities

1,823,299  1,539,332 

Corporate debt securities

1,346,078  1,389,312 

Government, federal agency and other sovereign obligations

3,155,683  3,666,112 

Mortgage- and asset-backed securities

34,691  228,251 

Loans

695,300  207,227 

Derivatives

180,079  242,087 

Physical commodities

36,483  183,142 

Total financial instruments sold, not yet purchased, at fair value

7,271,613  7,455,463 

Collateralized financings:

Securities loaned

2,506,122  1,934,355 

Securities sold under agreements to repurchase

10,779,845  8,181,250 

Other secured financings

234,711  62,300 

Obligation to return securities received as collateral

11,063 

Payables:

Brokers, dealers and clearing organizations

1,281,253  2,819,677 

Customers

5,208,768  5,568,017 

Accrued expenses and other liabilities

1,217,141  1,062,068 

Long-term debt

6,232,806  4,804,607 

Mandatorily redeemable convertible preferred stock

125,000 

Mandatorily redeemable preferred interests of consolidated subsidiaries

348,051 

Total liabilities

34,755,322  32,510,788 

EQUITY

Common stock, $0.0001 par value. Authorized 500,000,000 shares; issued 204,147,007 shares at November 30, 2012

20 

Member's paid-in capital/ Additional paid-in capital

5,280,420  2,219,959 

Retained earnings

1,281,855 

Treasury stock, at cost, 835,033 shares at November 30, 2012

(12,682) 

Accumulated other comprehensive income (loss):

Currency translation adjustments

21,341  (38,009) 

Additional minimum pension liability

2,759  (15,128) 

Total accumulated other comprehensive income (loss)

24,100  (53,137) 

Total member's / common stockholders' equity

5,304,520  3,436,015 

Noncontrolling interests

117,154  346,738 

Total equity

5,421,674  3,782,753 

Total liabilities and equity

 $ 40,176,996   $ 36,293,541 

Continued on next page.

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JEFFERIES GROUP LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION – CONTINUED

(In thousands)

The table below presents the carrying amount and classification of assets of consolidated variable interest entities ("VIEs") that can be used only to settle obligations of the consolidated VIEs and the liabilities of consolidated VIEs for which creditors (or beneficial interest holders) do not have recourse to our general credit. The assets and liabilities of these consolidated VIEs are included in the Consolidated Statements of Financial Condition and are presented net of intercompany eliminations.

Successor Predecessor
        November 30,        
2013
        November 30,        
2012

Assets

Cash and cash equivalents

 $ 176  $ 388,279 

Financial instruments owned, at fair value

Corporate equity securities

105,271 

Corporate debt securities

394,043 

Mortgage- and asset-backed securities

15,589 

Loans and other receivables

97,500  383,667 

Investments, at fair value

412  5,836 

Total financial instruments owned, at fair value

97,912  904,406 

Receivables:

Brokers, dealers and clearing organizations

236,594 

Fees, interest and other

10,931 

Other assets

2,275  348 

Total assets

 $ 100,363   $ 1,540,558 

Liabilities

Financial instruments sold, not yet purchased, at fair value:

Corporate debt securities

325,979 

Loans

199,610 

Derivatives

505 

Total financial instruments sold, not yet purchased, at fair value

526,094 

Collateralized financings:

Other secured financings

226,000  62,300 

Payables:

Brokers, dealers and clearing organizations

201,237 

Accrued expenses and other liabilities

706  10,656 

Mandatorily redeemable preferred interests of consolidated subsidiaries

348,051 

Total liabilities

 $ 226,706   $ 1,148,338 

See accompanying notes to consolidated financial statements.

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JEFFERIES GROUP LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share amounts)

Successor Predecessor
   Nine Months Ended      Three Months Ended   Year Ended Year Ended
November 30, 2013 February 28, 2013   November 30, 2012      November 30, 2011   

Revenues:

Commissions

 $ 472,596    $ 146,240    $ 548,437    $ 562,858  

Principal transactions

399,091   300,278   1,035,974   428,035  

Investment banking

1,003,517   288,278   1,125,883   1,122,528  

Asset management fees and investment income from managed funds

36,093   10,883   26,966   44,125  

Interest

714,248   249,277   1,031,839   1,248,132  

Other

94,195   27,004   164,974   152,092  

Total revenues

2,719,740   1,021,960   3,934,073   3,557,770  

Interest expense

579,059   203,416   872,421   980,825  

Net revenues

2,140,681   818,544   3,061,652   2,576,945  

Interest on mandatorily redeemable preferred interests of consolidated subsidiaries

3,368   10,961   42,883   3,622  

Net revenues, less interest on mandatorily redeemable preferred interests of consolidated subsidiaries

2,137,313   807,583   3,018,769   2,573,323  

Non-interest expenses:

Compensation and benefits

1,213,908   474,217   1,770,798   1,482,604  

Non-compensation expenses:

Floor brokerage and clearing fees

150,774   46,155   183,013   154,445  

Technology and communications

193,683   59,878   244,511   215,940  

Occupancy and equipment rental

86,701   24,309   97,397   84,951  

Business development

63,115   24,927   95,330   93,645  

Professional services

72,802   24,135   73,427   66,305  

Other

92,035   14,475   62,498   56,099  

Total non-compensation expenses

659,110   193,879   756,176   671,385  

Total non-interest expenses

1,873,018   668,096   2,526,974   2,153,989  

Earnings before income taxes

264,295   139,487   491,795   419,334  

Income tax expense

94,686   48,645   168,646   132,966  

Net earnings

169,609   90,842   323,149   286,368  

Net earnings attributable to noncontrolling interests

8,418   10,704   40,740   1,750  

Net earnings attributable to Jefferies Group LLC

 $ 161,191    $ 80,138    $ 282,409    $ 284,618  

Earnings per common share:

Basic

N/A  $ 0.35    $ 1.23    $ 1.28  

Diluted

N/A  $ 0.35    $ 1.22    $ 1.28  

Dividends declared per common share

N/A  $ 0.075   $ 0.300   $ 0.300 

Weighted average common shares:

Basic

N/A 213,732   215,989   211,056  

Diluted

N/A 217,844   220,101   215,171  

See accompanying notes to consolidated financial statements.

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JEFFERIES GROUP LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

Successor Predecessor
  Nine Months Ended  
November 30, 2013
  Three Months Ended  
February 28, 2013
Year Ended
   November 30, 2012   
Year Ended
   November 30, 2011   

Net earnings

  $  169,609     $ 90,842     $ 323,149     $  286,368  

Other comprehensive income, net of tax:

Currency translation adjustments

21,341   (10,018)  1,511   3,339  

Minimum pension liability adjustments, net of tax (1)

2,759   -   (4,158)  (2,551) 

Total other comprehensive income, net of tax (2)

24,100   (10,018)  (2,647)  788  

Comprehensive income

193,709   80,824   320,502   287,156  

Net earnings attributable to noncontrolling interests

8,418   10,704   40,740   1,750  

Comprehensive income attributable to Jefferies Group LLC

  $ 185,291     $ 70,120     $  279,762     $ 285,406  

(1)

Includes income tax benefit of $2.5 million, $-0-, $0.2 million and $1.8 million for the nine months ended November 30, 2013, three months ended February 28, 2013, and the years ended November 30, 2012 and 2011, respectively.

(2)

No Other comprehensive income (loss) is attributable to noncontrolling interests.

See accompanying notes to consolidated financial statements.

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JEFFERIES GROUP LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except per share amounts)

Successor Predecessor
     Nine Months Ended     
November 30, 2013
     Three Months Ended     
February 28, 2013
Year Ended
     November 30, 2012     
Year Ended
     November 30, 2011     

Common stock, par value $0.0001 per share

Balance, beginning of period

 $ -    $ 20    $ 20    $ 20  

Issued

-   1   1   2  

Retired

-   -   (1)  (2) 

Balance, end of period

 $ -    $ 21    $ 20    $ 20  

Member's paid-in capital

Balance, beginning of period

 $  4,754,101    $ -    $ -    $ -  

Contributions

362,255   -   -   -  

Net earnings to Jefferies Group LLC

161,191   -   -   -  

Tax benefit for issuance of share-based awards

2,873   -   -   -  

Balance, end of period

 $ 5,280,420    $ -    $ -    $ -  

Additional paid-in capital

Balance, beginning of period

 $ -    $ 2,219,959    $ 2,207,410    $  2,218,123  

Benefit plan share activity (3)

-   3,138   12,076   31,176  

Share-based expense, net of forfeitures and clawbacks

-   22,288   83,769   134,076  

Proceeds from exercise of stock options

-   57   104   95  

Acquisitions and contingent consideration

-   2,535   -   419  

Tax (deficiency) benefit for issuance of share-based awards

-   (17,965)  19,789   32,200  

Equity component of convertible debt, net of tax

-   -   (427)  (217) 

Dividend equivalents on share-based plans

-   1,418   6,531   8,883  

Issuance of treasury stock

-   -   97,770  

Retirement of treasury stock

-   -   (109,293)  (315,115) 

Balance, end of period

 $ -    $ 2,231,430    $ 2,219,959    $ 2,207,410  

Retained earnings

Balance, beginning of period

 $ -    $ 1,281,855    $ 1,067,858    $ 850,654  

Net earnings to common shareholders

-   80,138   282,409   284,618  

Dividends

-   (17,217)  (68,412)  (67,414) 

Balance, end of period

 $ -    $  1,344,776    $ 1,281,855    $ 1,067,858  

Accumulated other comprehensive income (loss) (1) (2)

Balance, beginning of period

 $ -    $ (53,137)   $ (50,490)   $ (51,278) 

Currency adjustment

21,341   (10,018)  1,511   3,339  

Pension adjustment, net of tax

2,759   -   (4,158)  (2,551) 

Balance, end of period

 $ 24,100    $ (63,155)   $ (53,137)   $ (50,490) 

Treasury stock, at cost

Balance, beginning of period

 $ -    $ (12,682)   $ (486)   $ (539,530) 

Purchases

-   (166,541)  (113,562)  (152,827) 

Returns / forfeitures

-   (1,922)  (7,928)  (20,368) 

Issues

-   -   397,122  

Retirement of treasury stock

-   -   109,294   315,117  

Balance, end of period

 $ -    $ (181,145)   $ (12,682)   $ (486) 

Total member's / common stockholders' equity

 $ 5,304,520    $ 3,331,927    $ 3,436,015    $ 3,224,312 

Noncontrolling interests

Balance, beginning of period

 $ 356,180    $ 346,738    $ 312,663    $ 332,976  

Net earnings attributable to noncontrolling interests

8,418   10,704   40,740   1,750  

Contributions

100,210   -   -   1,713  

Distributions

(25)  (1,262)  (13,570)  (22,056) 

Redemptions

(347,629)  -   -   -  

Consolidation (deconsolidation) of asset management entity

-   -   6,905   (1,720) 

Balance, end of period

 $ 117,154    $ 356,180    $ 346,738    $ 312,663  

Total equity

 $ 5,421,674    $ 3,688,107    $  3,782,753    $ 3,536,975  

(1)

The components of other comprehensive loss are attributable to Jefferies Group LLC (formerly Jefferies Group, Inc.). None of the components of other comprehensive loss are attributable to noncontrolling interests.

(2)

There were no reclassifications out of Accumulated other comprehensive loss during the nine months ended November 30, 2013.

(3)

Includes grants related to the Incentive Plan, Deferred Compensation Plan, and Directors' Plan.

See accompanying notes to consolidated financial statements.

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JEFFERIES GROUP LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Successor Predecessor
  Nine Months Ended  
  November 30, 2013  
  Three Months Ended  
  February 28, 2013  
  Year Ended  
  November 30, 2012  
  Year Ended  
  November 30, 2011  

Cash flows from operating activities:

Net earnings

 $ 169,609    $ 90,842   $ 323,149    $ 286,368  

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

Depreciation and amortization

(2,509)  17,393  72,692   68,522  

Gain on conversion option

(6,914)  -    -   

Bargain purchase gain

-    (3,368)  (52,509) 

Gain on repurchase of long-term debt

-    (9,898)  (21,107) 

Gain on sale of mortgage servicing rights

-    (23,826)  -   

Interest on mandatorily redeemable preferred interests of consolidated subsidiaries

3,368   10,961   42,883   3,622  

Accruals related to various benefit plans and stock issuances, net of forfeitures

-    23,505   87,918   144,886  

Deferred income taxes

31,284   30,835   84,643   30,177  

Income on loans to and investments in related parties

(92,181)  -    -   

Distributions received on investments in related parties

37,742   -    -   

Other adjustments

(7,826)  (1,154)  (4,094)  (3,724) 

Net change in assets and liabilities:

Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations

113,754   352,891  (738,117)  1,417,107  

Receivables:

Brokers, dealers and clearing organizations

336,263   (1,027,671)  (101,903)  1,652,426  

Customers

225   (130,543)  200,679   385,686  

Fees, interest and other

(29,388)  (29,149)  (33,694)  3,856  

Securities borrowed

(41,678)  (224,557)  75,379   3,014,442  

Financial instruments owned

(200,974)  229,394   52,737   299,558  

Loans to and investments in related parties

-    (197,166)  7,302   (375,031) 

Investments in managed funds

2,674   (2,213)  12,977   60,855  

Securities purchased under agreements to resell

(156,197)  (224,418)  (463,829)  372,470  

Other assets

47,296   (5,346)  (22,178)  (122,568) 

Payables:

Brokers, dealers and clearing organizations

(507,722)  (1,031,335)  (82,031)  880,998  

Customers

(249,305)  (111,139)  804,539   (2,324,839) 

Securities loaned

600,539  (28,138)  227,737   (1,428,852) 

Financial instruments sold, not yet purchased

(2,511,777)  2,327,667  801,971   (2,892,462) 

Securities sold under agreements to repurchase

2,794,412   (197,493)  (1,439,130)  (1,083,191) 

Accrued expenses and other liabilities

414,515   (267,336)  316,367   (599,677) 

Net cash provided by (used in) operating activities

745,210   (394,170)  188,905   (282,987) 

Cash flows from investing activities:

Contributions to loans to and investments in related parties

(2,241,232)  -    -   

Distributions from loans to and investments in related parties

2,360,691   -    -   

Net payments on premises and equipment

(48,534)  (10,706)  (63,236)  (77,330) 

Cash received (paid) in connection with acquisition during the period, net of cash acquired

-    2,257   (320,697) 

Cash disposed in connection with disposal of reporting units, net of cash received

(4,939)  -    -   

Cash received from sales of mortgage servicing rights

-    30,851   -   

Consolidation of asset management entity

-    9,711   -   

Cash received from contingent consideration

3,796   1,203  4,104   3,733  

Cash paid from contingent consideration

-    (1,172)  (754) 

Net cash provided by (used in) investing activities

69,782   (9,503)  (17,485)  (395,048) 

Continued on next page.

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CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED

(In thousands)

Successor Predecessor
  Nine Months Ended  
  November 30, 2013  
  Three Months Ended  
  February 28, 2013  
  Year Ended  
  November 30, 2012  
  Year Ended  
  November 30, 2011  

Cash flows from financing activities:

Excess tax benefits from the issuance of share-based awards

 $ 3,054   $ 5,682   $ 31,413    $ 34,552  

Proceeds from short-term borrowings

13,623,650  6,744,000  12,912,063   3,032,010  

Payments on short-term borrowings

(13,711,650)  (6,794,000)  (12,819,557)  (3,283,231) 

Proceeds from secured credit facility

920,000  900,000  1,325,000   260,000  

Payments on secured credit facility

(980,000)  (990,007)  (1,075,000)  (160,000) 

Repayment of long-term debt

(253,232)  -   

Proceeds from other secured financings

114,711  60,000  -    -   

Payments on repurchase of long-term debt

(1,435)  (49,692) 

Payments on mandatorily redeemable preferred interest of consolidated subsidiaries

(64)  (61)  (5,366)  (8,973) 

Payments on repurchase of common stock

(166,541)  (113,562)  (152,827) 

Payments on dividends

(15,799)  (61,881)  (58,531) 

Proceeds from exercise of stock options, not including tax benefits

57  104  95  

Net proceeds from issuance of common shares

-    494,892  

Net proceeds from issuance of senior notes, net of issuance costs

991,469  201,010   794,587  

Proceeds from contributions of noncontrolling interests

100,210  -    1,713  

Payments on distributions to noncontrolling interests

(347,654)  (1,262)  (13,570)  (22,056) 

Net cash (used in) provided by financing activities

(277,743)  733,538  125,987   882,539  

Effect of exchange rate changes on cash and cash equivalents

5,912  (4,502)  1,391   295  

Net increase in cash and cash equivalents

543,161  325,363  298,798   204,799  

Cash and cash equivalents at beginning of period

3,017,958  2,692,595  2,393,797   2,188,998  

Cash and cash equivalents at end of period

 $ 3,561,119   $ 3,017,958   $ 2,692,595    $ 2,393,797  

Supplemental disclosures of cash flow information:

Cash paid (received) during the period for:

Interest

 $ 638,657   $ 178,836   $ 869,354   $ 943,031 

Income taxes, net of refunds

55,251  (34,054)  43,113  153,416 

Noncash financing activities:

In connection with the merger with Leucadia National Corporation, Jefferies Group LLC recorded acquisition accounting adjustments which resulted in changes to equity. Refer to Note 4, Leucadia Merger and Related Transactions, for further details.

On March 31, 2013, Leucadia contributed its mandatorily redeemable preferred interests in JHYH to Jefferies Group, LLC. The contribution was recorded as a capital contribution and increased member's equity by $362.3 million. Refer to Note 4, Leucadia Merger and Related Transactions, for further details.

See accompanying notes to consolidated financial statements.

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Index

Note Page

Note 1. Organization and Basis of Presentation

78

Note 2. Summary of Significant Accounting Policies

81

Note 3. Accounting Developments

89

Note 4. Leucadia Merger and Related Transactions

91

Note 5. Acquisition s

94

Note 6. Cash, Cash Equivalents and Short-Term Investments

95

Note 7. Fair Value Disclosures

96

Note 8. Derivative Financial Instruments

113

Note 9. Collateralized Transactions

118

Note 10. Securitization Activities

119

Note 11. Variable Interest Entities

121

Note 12. Investments

126

Note 13. Goodwill and Other Intangible Assets

129

Note 14. Short-Term Borrowings

133

Note 15. Long-Term Debt

133

Note 16. Mandatorily Redeemable Convertible Preferred Stock

135

Note  17. Noncontrolling Interests and Mandatorily Redeemable Preferred Interests of Consolidated Subsidiaries

135

Note 18. Benefit Plans

136

Note 19. Compensation Plans

142

Note 20. Earnings per Share

144

Note 21. Income Taxes

145

Note 22. Commitments, Contingencies and Guarantees

148

Note 23. Net Capital Requirements

152

Note 24. Segment Reporting

153

Note 25. Related Party Transactions

154

Note 26. Selected Quarterly Financial Data (Unaudited)

156

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Note 1. Organization and Basis of Presentation

Organization

Jefferies Group LLC, and its subsidiaries operate as a global full service, integrated securities and investment banking firm. Jefferies Group LLC was previously known as Jefferies Group, Inc., which on March 1, 2013 was converted into a limited liability company and renamed Jefferies Group LLC. In addition, certain subsidiaries of Jefferies Group, Inc. also converted into limited liability companies. The accompanying Consolidated Financial Statements therefore refer to Jefferies Group LLC and represent the accounts of Jefferies Group, Inc., as it was formerly known, and all our subsidiaries (together "we" or "us"). The subsidiaries of Jefferies Group LLC include Jefferies LLC ("Jefferies"), Jefferies Execution Services, Inc. ("Jefferies Execution"), Jefferies Bache, LLC, Jefferies International Limited, Jefferies Bache Limited, Jefferies Hong Kong Limited, Jefferies Bache Financial Services, Inc., Jefferies Mortgage Funding, LLC and Jefferies Leveraged Credit Products, LLC and all other entities in which we have a controlling financial interest or are the primary beneficiary.

On March 1, 2013, Jefferies Group LLC through a series of merger transactions, became an indirect wholly owned subsidiary of Leucadia National Corporation ("Leucadia") (referred to herein as the "Merger"). Each outstanding share of Jefferies Group LLC was converted into 0.81 of a share of Leucadia common stock (the "Exchange Ratio"). Leucadia did not assume nor guarantee any of our outstanding debt securities. Our 3.875% Convertible Senior Debentures due 2029 are now convertible into Leucadia common shares at a price that reflects the Exchange Ratio and the 3.25% Series A Convertible Cumulative Preferred Stock of Jefferies Group, Inc. was exchanged for a comparable series of convertible preferred shares of Leucadia. Jefferies Group LLC continues to operate as a full-service investment banking firm and as the holding company of its various regulated and unregulated operating subsidiaries. Richard Handler, our Chief Executive Officer and Chairman, was also appointed the Chief Executive Officer of Leucadia, as well as a Director of Leucadia. Brian Friedman, our Chairman of the Executive Committee, was also appointed Leucadia's President and a Director of Leucadia. Following the merger, we continue to operate as a full-service global investment banking firm, retain a credit rating separate from Leucadia and remain an SEC reporting company, filing annual, quarterly and periodic financial reports.

We operate in two business segments, Capital Markets and Asset Management. Capital Markets, which represents principally our entire business, includes our securities, commodities, futures and foreign exchange trading and investment banking activities, which provides the research, sales, trading, origination and advisory effort for various equity, fixed income and advisory products and services. Asset Management provides investment management services to various private investment funds, separate accounts and mutual funds. Our parent, Leucadia is establishing an asset management business and we expect to transition our limited asset management business to Leucadia during 2014.

In addition, on April 1, 2013, we merged Jefferies High Yield Trading, LLC (our high yield trading broker-dealer) with Jefferies (a U.S. broker-dealer) and our high yield activities are now all conducted by Jefferies. In addition, during the three months ended May 31, 2013, we redeemed the third party interests in our high yield joint venture.

On July 1, 2011, we acquired Prudential Bache's Global Commodities Group ("Global Commodities Group" or "Jefferies Bache") from Prudential Financial Inc. ("Prudential"). The Global Commodities Group provided execution and clearing services (including sales and trading activities) covering a wide variety of commodity, financial and foreign exchange futures, swaps and forward contracts to an institutional client base. The acquisition allowed us to offer clients globally an increased range of products, including exchange-traded futures and over-the-counter trading in energy, metals and agricultural markets. On February 1, 2012, we acquired the corporate broking business of Hoare Govett from The Royal Bank of Scotland Group plc ("RBS"). The acquired business represented the corporate broking business carried on under the name RBS Hoare Govett in the United Kingdom and comprised corporate broking advice and services. The acquisition of Hoare Govett provided us with the opportunity to continue our growth in corporate broking in the U.K. and significantly expand the capabilities and reach of our established European Investment Banking and Equities business units. See Note 5, Acquisitions for further details.

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Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for financial information and with the instructions to Form 10-K.

As more fully described in Note 4, Leucadia Merger and Related Transactions, the Merger is accounted for using the acquisition method of accounting, which requires that the assets, including identifiable intangible assets, and liabilities of Jefferies Group LLC be recorded at their fair values at the date of the Merger. The application of the acquisition method of accounting has been pushed down and reflected in the financial statements of Jefferies Group LLC as a wholly-owned subsidiary of Leucadia. The application of push down accounting represents the termination of the prior reporting entity and the creation of a new reporting entity, which do not have the same bases of accounting. As a result, our consolidated financial statements for 2013 are presented for the period from March 1, 2013 through November 30, 2013 for the new reporting entity (the "Successor"), and before March 1, 2013 for the prior reporting entity (the "Predecessor.") The Predecessor and Successor periods are separated by a vertical line to highlight the fact that the financial information for such periods have been prepared under two different cost bases of accounting.

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these 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 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.

Cash Flow Statement Presentation

For the nine months ended November 30, 2013, certain amounts relating to loans and investments in related parties are classified as components of investing activities on the Consolidated Statements of Cash Flows to conform to the presentation of our Parent company in connection with the establishment of a new accounting entity through the application of push down accounting. These amounts were classified by the Predecessor entity as operating activities for reporting periods prior to the merger.

Consolidation

Our policy is to consolidate all entities in which we control by ownership a majority of the outstanding voting stock. In addition, we consolidate entities which meet the definition of a variable interest entity for which we are the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a variable interest entity 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 the Consolidated Statements of Financial Condition and Consolidated Statements of Changes in Equity. The portion of net earnings attributable to the noncontrolling interests are presented as Net earnings to noncontrolling interests in the Consolidated Statements of Earnings.

In situations where we have significant influence, but not control, of an entity that does not qualify as a variable interest entity, 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 within Other revenues or Principal transaction 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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Immaterial 2013 Adjustments

We have made correcting adjustments (referred to as "adjustments") to our historical financial statements for the quarters of 2013 and for the year ended November 30, 2013, the results of which are included within our financial statements for the nine months ended November 30, 2013. We do not believe these adjustments are material to our financial statements for any previously reported period.

The first adjustment relates to a revised estimate of our litigation reserve resulting in an additional $17.0 million on a pre-tax basis recognized in Other expenses in the fourth quarter of 2013. We have adjusted our estimate of the reserve relating to an investigation of the purchases and sales of mortgage-backed securities based on an agreement reached in principle subsequent to our report on Form 8-K, dated December 17, 2013 in which we announced our financial results for our fiscal fourth quarter of 2013. Additionally, we have reduced our estimate for bad debt provision on certain investment banking receivables on a pre-tax basis by $1.3 million in the fourth quarter of 2013 resulting in a reduction in Other expenses by such amount in this Annual Report on Form 10-K for the year ended November 30, 2013. The impact of these adjustments is a reduction in Income tax expense of $1.2 million and a reduction in Net earnings of $14.5 million during the fourth quarter of 2013.

In addition to and unrelated to the adjustments described above, we have reduced Income tax expense by $4.4 million to correct for income tax expense recognized during the fourth quarter of 2013. It was determined that such income tax expense properly related to each of the years from fiscal 2009 to fiscal 2012. This had the effect of understating goodwill in the purchase price allocation by $4.4 million as the additional income tax liability in existence at the merger date reduces the fair value of the net assets acquired. We have evaluated the effects of this correction and concluded that it is not material to the previously issued Annual Reports on Form 10-K for the previously reported periods or to the previously issued Quarterly Reports on Form 10-Q for the three months ended May 31, 2013 and August 31, 2013. Nevertheless, we have revised our consolidated net earnings for the nine months ended November 30, 2013 as reflected in this Form 10-K for the year ended November 30, 2013 to correct for the effect of this item and appropriately reflected the increase of $4.4 million in goodwill within our Consolidated Statement of Financial Condition.

Further, we are adjusting Commissions revenues and Floor brokerage and clearing fees in the respective financial statement line items to reflect certain exchange fees charged to customers in our futures business on a gross rather than net basis for $60.6 million in 2013. Although Floor brokerage and clearing fees were recorded on a net basis to Commissions revenue, thereby resulting in an understatement in Commissions revenues, Total revenues, Net revenues, Floor brokerage and clearing fees and Total non-interest expenses for various periods, there was no impact on Net earnings. We do not believe these adjustments are material to our consolidated financial statements for any reported period.

Immaterial Prior Year Adjustments

Similar to the 2013 adjustments to Commissions revenues and Floor brokerage and clearing fees discussed above, we are also revising our prior period consolidated financial statements for these items. The impact of these adjustments is an increase of $62.9 million and $28.1 million, in both the Commissions revenue and Floor brokerage and clearing fees, for the years ended November 30, 2012 and 2011, respectively. We do not believe these adjustments are material to our consolidated financial statements for any reported period.

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The following sets forth the effects of the adjustments on affected line items within our previously reported Consolidated Statements of Earnings for 2012 and 2011. There is no effect on our Consolidated Statement of Financial Condition as of November 30, 2012, Consolidated Statements of Changes in Stockholders' Equity for the years 2012 and 2011 and Consolidated Statements of Cash Flows for the years 2012 and 2011.

Consolidated Statement of Earnings

Year Ended November 30,
2012 2011
(in thousands) As
   Previously   
Reported
    Adjusted     As
   Previously   
Reported
    Adjusted    

Commissions revenues

  $ 485,569     $ 548,437     $ 534,726       $ 562,858  

Total revenues

3,871,205   3,934,073   3,529,638   3,557,770  

Net revenues

2,998,784   3,061,652   2,548,813   2,576,945  

Net revenues, less mandatorily redeemable preferred interest

2,955,901   3,018,769   2,545,191   2,573,323  

Floor brokerage and clearing fees

120,145   183,013   126,313   154,445  

Total non-compensation expenses

693,308   756,176   643,253   671,385  

Total non-interest expenses

2,464,106   2,526,974   2,125,857   2,153,989  

Note 2. Summary of Significant Accounting Policies

Revenue Recognition Policies

Commissions.   All customer securities transactions are reported on the Consolidated Statements of Financial Condition on a settlement date basis with related income reported on a trade-date basis. 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. These arrangements are accounted for on an accrual basis and, as we are not the primary obligor for these arrangements, netted against commission revenues in the Consolidated Statements of Earnings. The commissions and related expenses on client transactions executed by Jefferies Bache, LLC, a futures commission merchant, are recorded on a half-turn basis.

Principal Transactions.   Financial instruments owned and Financial instruments sold, but not yet purchased (all of which are recorded on a trade-date basis) are carried at fair value with gains and losses reflected in Principal transactions in the Consolidated Statements of Earnings on a trade date basis. Fees received on loans carried at fair value are also recorded within Principal transactions.

Investment Banking .   Underwriting revenues and fees from mergers and acquisitions, restructuring and other investment banking advisory assignments or engagements are recorded when the services related to the underlying transactions are completed under the terms of the assignment or engagement. Expenses associated with such assignments are deferred until reimbursed by the client, the related revenue is recognized or the engagement is otherwise concluded. Expenses are recorded net of client reimbursements and netted against revenues. Unreimbursed expenses with no related revenues are included in Business development and Professional services expenses in the Consolidated Statements of Earnings.

Asset Management Fees and Investment Income From Managed Funds .  Asset management fees and investment income from managed funds include revenues we earn from management, administrative and performance fees from funds and accounts managed by us, revenues from management and performance fees we earn from related-party managed funds and investment income from our investments in these funds. We earn fees in connection with management and investment advisory services performed for various funds and managed accounts. These fees are based on assets under management or an agreed upon notional amount and may include performance fees based upon the performance of the funds. Management and administrative fees are generally recognized over the period that the related service is provided. Generally, performance fees are earned when the return on assets under management

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exceeds certain benchmark returns, "high-water marks" or other performance targets. Performance fees are accrued (or reversed) on a monthly basis based on measuring performance to date versus any relevant benchmark return hurdles stated in the investment management agreement. Performance fees are not subject to adjustment once the measurement period ends (generally annual periods) and the performance fees have been realized.

Interest Revenue and Expense.  We recognize contractual interest on Financial instruments owned and Financial instruments sold, but not yet purchased, on an accrual basis as a component of interest revenue and expense. Interest flows on derivative trading transactions and dividends are included as part of the fair valuation of these contracts and recognized in Principal transactions in the Consolidated Statements of Earnings rather than as a component of interest revenue or expense. We account for our short-term borrowings, long-term borrowings and our mandatorily redeemable convertible preferred stock on an accrual basis with related interest recorded as Interest expense. Discounts/premiums arising on our long-term debt are accreted / amortized to Interest expense using the effective yield method over the remaining lives of the underlying debt obligations. In addition, we recognize interest revenue related to our securities borrowed and securities purchased under agreements to resell activities and interest expense related to our securities loaned and securities sold under agreements to repurchase activities on an accrual basis.

Cash Equivalents

Cash equivalents include highly liquid investments, including money market funds, not held for resale with original maturities of three months or less.

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

In accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, Jefferies as a broker-dealer carrying client accounts, is subject to requirements related to maintaining cash or qualified securities in a segregated reserve account for the exclusive benefit of its clients. In addition, certain financial instruments used for initial and variation margin purposes with clearing and depository organizations are recorded in this caption. Jefferies Bache, LLC, as a futures commission merchant, is obligated by rules mandated by the Commodities Futures Trading Commission under the Commodities Exchange Act, to segregate or set aside cash or qualified securities to satisfy such regulations, which regulations have been promulgated to protect customer assets. Certain other entities are also obligated by rules mandated by their primary regulators to segregate or set aside cash or equivalent securities to satisfy regulations, promulgated to protect customer assets.

Financial Instruments

Financial instruments owned and Financial instruments sold, not yet purchased are recorded at fair value, either as required by accounting pronouncements or through the fair value option election. These instruments primarily represent our trading activities and include both cash and derivative products. Gains and losses are recognized in Principal transactions in our Consolidated Statements of Earnings. 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).

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 as follows:

Level 1:

Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

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Level 2:

Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these financial instruments include cash instruments for which quoted prices are available but traded less frequently, derivative instruments whose fair value have been derived using a model where inputs to the model are directly observable in the market, or can be derived principally from or corroborated by observable market data, and instruments that are fair valued using other financial instruments, the parameters of which can be directly observed.

Level 3:

Instruments that have little to no pricing observability as of the reported date. These financial instruments are measured using management's best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

Financial instruments are valued at quoted market prices, if available. Certain financial instruments have bid and ask prices that can be observed in the marketplace. For financial instruments whose inputs are based on bid-ask prices, the financial instrument is valued at the point within the bid-ask range that meets our best estimate of fair value. We use prices and inputs that are current as of the measurement date. For financial instruments that do not have readily determinable fair values using quoted market prices, the determination of fair value is based upon consideration of available information, including types of financial instruments, current financial information, restrictions on dispositions, fair values of underlying financial instruments and quotations for similar instruments.

The valuation of financial instruments may include the use of valuation models and other techniques. Adjustments to valuations derived from valuation models may be made when, in management's judgment, features of the financial instrument such as its complexity, the market in which the financial instrument is traded and risk uncertainties about market conditions require that an adjustment be made to the value derived from the models. Adjustments from the price derived from a valuation model reflect management's judgment that other participants in the market for the financial instrument being measured at fair value would also consider in valuing that same financial instrument. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.

The availability of observable inputs can vary and is affected by a wide variety of factors, including, for example, the type of financial instrument and market conditions. As the observability of prices and inputs may change for a financial instrument from period to period, this condition may cause a transfer of an instrument among the fair value hierarchy levels. Transfers among the levels are recognized at the beginning of each period. The degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

Valuation Process for Financial Instruments

Our Independent Price Verification ("IPV") Group, which is part of our Finance department, in partnership with Risk Management, is responsible for establishing our valuation policies and procedures. The IPV Group and Risk Management, which are independent of our business functions, play an important role and serve as a control function 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. The IPV Group reports to the Global Controller and is subject to the oversight of the IPV Committee, which is comprised of our Chief Financial Officer, Global Controller, Global Head of Product Control, Chief Risk Officer and Principal Accounting Officer, among other personnel. Our independent price verification policies and procedures are reviewed, at a minimum, annually and changes to the policies require the approval of the IPV Committee.

Price Testing Process. The business units are responsible for determining the fair value of our financial instruments using approved valuation models and methodologies. In order to ensure that the business unit valuations represent a

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fair value exit price, the IPV Group tests and validates the fair value of our financial instruments inventory. In the testing process, the IPV Group obtains prices and valuation inputs from sources independent of Jefferies, consistently adheres to established procedures set forth in our valuation policies for sourcing prices and valuation inputs and utilizing valuation methodologies. Sources used to validate fair value prices and inputs include, but are not limited to, exchange data, recently executed transactions, pricing data obtained from third party vendors, pricing and valuation services, broker quotes and observed comparable transactions.

To the extent discrepancies between the business unit valuations and the pricing or valuations resulting from the price testing process are identified, such discrepancies are investigated by the IPV Group and fair values are adjusted, as appropriate. The IPV Group maintains documentation of its testing, results, rationale and recommendations and prepares a monthly summary of its valuation results. This process also forms the basis for our classification of fair values within the fair value hierarchy (i.e., Level 1, Level 2 or Level 3). The IPV Group utilizes the additional expertise of Risk Management personnel in valuing more complex financial instruments and financial instruments with less or limited pricing observability. The results of the valuation testing are reported to the IPV Committee on a monthly basis, which discusses the results and is charged with the final conclusions as to the financial instrument fair values in the consolidated financial statements. This process specifically assists the Chief Financial Officer in asserting as to the fair presentation of our financial condition and results of operations as included within our Quarterly Reports on Form 10-Q and Annual Report on Form 10-K. At each quarter end, the overall valuation results, as concluded upon by the IPV Committee, are presented to the Audit Committee.

Judgment exercised in determining Level 3 fair value measurements is supplemented by daily analysis of profit and loss performed by the Product Control functions. Gains and losses, which result from changes in fair value, are evaluated and corroborated daily based on an understanding of each of the trading desks' overall risk positions and developments in a particular market on the given day. Valuation techniques generally rely on recent transactions of suitably comparable financial instruments and use the observable inputs from those comparable transactions as a validation basis for Level 3 inputs. Level 3 fair value measurements are further validated through subsequent sales testing and market comparable sales, if such information is available. Level 3 fair value measurements require documentation of the valuation rationale applied, which is reviewed for consistency in application from period to period; and the documentation includes benchmarking the assumptions underlying the valuation rationale against relevant analytic data.

Third Party Pricing Information.   Pricing information obtained from external data providers (including independent pricing services and brokers) may incorporate a range of market quotes from dealers, recent market transactions and benchmarking model derived prices to quoted market prices and trade data for comparable securities. External pricing data is subject to evaluation for reasonableness by the IPV Group using a variety of means including comparisons of prices to those of similar product types, quality and maturities, consideration of the narrowness or wideness of the range of prices obtained, knowledge of recent market transactions and an assessment of the similarity in prices to comparable dealer offerings in a recent time period. We have a process whereby we challenge the appropriateness of pricing information obtained from external data providers (including independent pricing services and brokers) in order to validate the data for consistency with the definition of a fair value exit price. Our process includes understanding and evaluating the external data providers' valuation methodologies. For corporate, U.S. government and agency, and municipal debt securities, and loans, to the extent independent pricing services or broker quotes are utilized in our valuation process, the vendor service providers are collecting and aggregating observable market information as to recent trade activity and active bid-ask submissions. The composite pricing information received from the independent pricing service is not based on unobservable inputs or proprietary models. For mortgage- and other asset-backed securities and collateralized debt obligations, our independent pricing service uses a matrix evaluation approach incorporating both observable yield curves and market yields on comparable securities as well as implied inputs from observed trades for comparable securities in order to determine prepayment speeds, cumulative default rates and loss severity. Further, we consider pricing data from multiple service providers as available as well as compare pricing data to prices we have observed for recent transactions, if any, in order to corroborate our valuation inputs.

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Model Review Process.   Where a pricing model is to be used to determine fair value, the pricing model is reviewed for theoretical soundness and appropriateness by Risk Management, independent from the trading desks, and then approved by Risk Management to be used in the valuation process. Review and approval of a model for use may include benchmarking the model against relevant third party valuations, testing sample trades in the model, backtesting the results of the model against actual trades and stress-testing the sensitivity of the pricing model using varying inputs and assumptions. In addition, recently executed comparable transactions and other observable market data are considered for purposes of validating assumptions underlying the model. Models are independently reviewed and validated by Risk Management annually or more frequently if market conditions or use of the valuation model changes.

Investments in Managed Funds

Investments in managed funds include our investments in funds managed by us and our investments in related-party managed funds in which we are entitled to a portion of the management and/or performance fees. Investments in nonconsolidated managed funds are accounted for at fair value with gains or losses included in Asset management fees and investment income from managed funds in the Consolidated Statements of Earnings.

Loans to and Investments in Related Parties

Loans to and investments in related parties include investments in private equity and other operating entities made in connection with our capital markets activities in which we exercise significant influence over operating and capital decisions and loans issued in connection with such activities. Loans to and investments in related parties are accounted for using the equity method or at cost, as appropriate. Revenues on Loans to and investments in related parties are included in Other revenues in the Consolidated Statements of Earnings. See Note 12, Investments, and Note 25, Related Party Transactions, for additional information regarding certain of these investments.

Receivable from and Payable to Customers

Receivable from and payable to customers includes amounts receivable and payable on cash and margin transactions. Securities owned by customers and held as collateral for these receivables are not reflected in the accompanying consolidated financial statements. Receivable from officers and directors included within this financial statement line item represents balances arising from their individual security transactions. These transactions are subject to the same regulations as customer transactions and are provided on substantially the same terms.

Securities Borrowed and Securities Loaned

Securities borrowed and securities loaned are carried at the amounts of cash collateral advanced and received in connection with the transactions and accounted for as collateralized financing transactions. In connection with both trading and brokerage activities, we borrow securities to cover short sales and to complete transactions in which customers have failed to deliver securities by the required settlement date, and lend securities to other brokers and dealers for similar purposes. We have an active securities borrowed and lending matched book business in which we borrow securities from one party and lend them to another party. When we borrow securities, we generally provide cash to the lender as collateral, which is reflected in our Consolidated Statements of Financial Condition as Securities borrowed. We earn interest revenues on this cash collateral. Similarly, when we lend securities to another party, that party provides cash to us as collateral, which is reflected in our Consolidated Statements of Financial Condition as Securities loaned. We pay interest expense on the cash collateral received from the party borrowing the securities. The initial collateral advanced or received approximates or is greater than the fair value of the securities borrowed or loaned. We monitor the fair value of the securities borrowed and loaned on a daily basis and request additional collateral or return excess collateral, as appropriate.

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Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase

Securities purchased under agreements to resell and Securities sold under agreements to repurchase (collectively "repos") are accounted for as collateralized financing transactions and are recorded at their contracted resale or repurchase amount plus accrued interest. We earn and incur interest over the term of the repo, which is reflected in Interest income and Interest expense on our Consolidated Statements of Earnings on an accrual basis. Repos are presented in the Consolidated Statements of Financial Condition on a net-basis-by counterparty, where permitted by generally accepted accounting principles. We monitor the fair value of the underlying securities daily versus the related receivable or payable balances. Should the fair value of the underlying securities decline or increase, additional collateral is requested or excess collateral is returned, as appropriate.

Premises and Equipment

Premises and equipment are depreciated using the straight-line method over the estimated useful lives of the related assets (generally three to ten years). Leasehold improvements are amortized using the straight-line method over the term of the related leases or the estimated useful lives of the assets, whichever is shorter. Premises and equipment includes internally developed software, which was increased to its fair market value in the allocation of the purchase price on March 1, 2013. The revised carrying values of internally developed software ready for its intended use are depreciated over the remaining useful life. See Note 4, Leucadia Merger and Related Transactions for more information regarding the allocation of the purchase price.

As of November 30, 2013 and 2012, furniture, fixtures and equipment amounted to $278.5 million and $266.2 million, respectively, and leasehold improvements amounted to $134.1 million and $133.1 million, respectively. Accumulated depreciation and amortization was $210.1 million and $213.3 million as of November 30, 2013 and 2012, respectively. Included within furniture, fixtures and equipment is equipment recorded under capital leases with a cost of $ $19.5 million at November 30, 2013 and 2012, which is being amortized over the lease term.

Depreciation and amortization expense amounted to $38.8 million for the nine months ended November 30, 2013, $12.9 million for the three months ended February 28, 2013 and $50.5 million and $43.7 million for the years ended November 30, 2012 and 2011, respectively.

Goodwill and Intangible Assets

Goodwill .   Goodwill represents the excess acquisition cost over the fair value of net tangible and intangible assets acquired. Goodwill is not amortized and is subject to annual impairment testing on August 1 or between annual tests if an event or change in circumstance occurs that would more likely than not reduce the fair value of a reporting unit below its carrying value. In testing for goodwill impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, we conclude that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is not required. If we conclude otherwise, we are required to perform the two-step impairment test. The goodwill impairment test is performed at the reporting unit level by comparing the estimated fair value of a reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not impaired. If the estimated fair value is less than carrying value, further analysis is necessary to determine the amount of impairment, if any.

The fair value of reporting units are based on widely accepted valuation techniques that we believe market participants would use, although the valuation process requires significant judgment and often involves the use of significant estimates and assumptions. The methodologies we utilize in estimating the fair value of reporting units include market capitalization, price-to-book multiples of comparable exchange traded companies and multiples of merger and acquisitions of similar businesses. The estimates and assumptions used in determining fair value could have a significant effect on whether or not an impairment charge is recorded and the magnitude of such a charge. Adverse market or economic events could result in impairment charges in future periods. Refer to Note 13, Goodwill and Other Intangible Assets, for further information on our assessment of goodwill.

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Intangible Assets .   Intangible assets deemed to have finite lives are amortized on a straight line basis over their estimated useful lives, where the useful life is the period over which the asset is expected to contribute directly, or indirectly, to our future cash flows. Intangible assets are reviewed for impairment on an interim basis when certain events or circumstances exist. For amortizable intangible assets, impairment exists when the carrying amount of the intangible asset exceeds its fair value. At least annually, the remaining useful life is evaluated.

An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, we have the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If we conclude otherwise, we are required to perform a quantitative impairment test. Subsequent reversal of impairment losses is not permitted. Our annual indefinite-lived intangible asset impairment testing date is August 1.

To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset that is amortized over the remaining useful life of that asset, if any. Subsequent reversal of impairment losses is not permitted.

Income Taxes

Prior to the Merger we filed a consolidated U.S. federal income tax return, which included all of our qualifying subsidiaries. Post Merger, our results of operations are included in the consolidated federal and applicable state income tax returns filed by Leucadia. In states that neither accept nor require combined or unitary tax returns, certain subsidiaries file separate state income tax returns. We also are subject to income tax in various foreign jurisdictions in which we operate. For the Successor period, we account for our provision for income taxes using a "separate return" method. Amounts provided for income taxes are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. Under acquisition accounting for the Merger, the recognition of certain assets and liabilities at fair value created a change in the financial reporting basis for our assets and liabilities, while the tax basis of our assets and liabilities remained the same. As a result, deferred tax assets and liabilities were recognized for the change in the basis differences. In the Successor period, Jefferies provides deferred taxes on its temporary differences and on any carryforwards that it could claim on its hypothetical tax return. The realization of deferred tax assets is assessed and a valuation allowance is recorded to the extent that it is more likely than not that any portion of the deferred tax asset will not be realized on the basis of its projected separate return results. The tax benefit related to Leucadia dividends and dividend equivalents paid on nonvested share-based payment awards are recognized as an increase to Additional paid-in capital. These amounts are included in tax benefits for issuance of share-based awards on the Consolidated Statements of Changes in Equity.

We record uncertain tax positions using a two-step process: (i) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position; and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

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Legal Reserves

In the normal course of business, we have been named, from time to time, as a defendant in legal and regulatory proceedings. We are also involved, from time to time, in other exams, investigations and similar reviews (both formal and informal) by governmental and self-regulatory agencies regarding our businesses, certain of which may result in judgments, settlements, fines, penalties or other injunctions.

We recognize a liability for a contingency in Accrued expenses and other liabilities when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. If the reasonable estimate of a probable loss is a range, we accrue the most likely amount of such loss, and if such amount is not determinable, then we accrue the minimum in the range as the loss accrual. The determination of the outcome and loss estimates requires significant judgment on the part of management. At November 30, 2013, we have reserved approximately $22.4 million relating to an investigation of the purchases and sales of mortgage-backed securities that in January 2014 resulted in a non-prosecution agreement reached in principle with the United States Attorney for the District of Connecticut and a settlement agreement in principle with the Securities and Exchange Commission, which remains subject to review and approval by the SEC Commissioners. We believe that any other matters for which we have determined a loss to be probable and reasonably estimable are not material to the consolidated financial statements.

In many instances, it is not possible to determine whether any loss is probable or even possible or to estimate the amount of any loss or the size of any range of loss. We believe that, in the aggregate, the pending legal actions or regulatory proceedings and any other exams, investigations or similar reviews (both formal and informal) should not have a material adverse effect on our consolidated results of operations, cash flows or financial condition. In addition, we believe that any amount that could be reasonably estimated of potential loss or range of potential loss in excess of what has been provided in the consolidated financial statements is not material.

Share-based Compensation

Share-based awards are measured based on the grant-date fair value of the award and recognized over the period from the service inception date through the date the employee is no longer required to provide service to earn the award. Expected forfeitures are included in determining share-based compensation expense.

Foreign Currency Translation

Assets and liabilities of foreign subsidiaries having non-U.S. dollar functional currencies are translated at exchange rates at the end of a period. Revenues and expenses are translated at average exchange rates during the period. 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. Gains or losses resulting from foreign currency transactions are included in Principal transactions in the Consolidated Statements of Earnings.

Earnings per Common Share

As a single member limited liability company, earnings per share is not calculated for Jefferies Group LLC (the Successor company).

Prior to the Merger, Jefferies Group, Inc. (the Predecessor company) had common shares and other common share equivalents outstanding. For the Predecessor periods, basic earnings per share ("EPS") is computed by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding and certain other shares committed to be, but not yet issued. Net earnings available to common shareholders represent net earnings to common shareholders reduced by the allocation of earnings to participating securities. Losses are not allocated to participating securities. Common shares outstanding and certain other shares committed to be, but not yet issued, include restricted stock and restricted stock units ("RSUs") for which no future service is required. For Predecessor periods, diluted EPS is computed by dividing net earnings available to common shareholders plus

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dividends on dilutive mandatorily redeemable convertible preferred stock by the weighted average number of common shares outstanding and certain other shares committed to be, but not yet issued, plus all dilutive common stock equivalents outstanding during the period. Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and, therefore, are included in the earnings allocation in computing earnings per share under the two-class method of earning per share. Restricted stock and RSUs granted as part of our share-based compensation contain nonforfeitable rights to dividends and dividend equivalents, respectively, and therefore, prior to the requisite service being rendered for the right to retain the award, restricted stock and RSUs meet the definition of a participating security. As such, Basic and Diluted earnings per share are calculated under the two-class method.

Securitization Activities

We engage in securitization activities related to corporate loans, commercial mortgage loans and mortgage-backed and other asset-backed securities. Such transfers of financial assets are accounted for as sales when we have relinquished control over the transferred assets. The gain or loss on sale of such financial assets depends, in part, on the previous carrying amount of the assets involved in the transfer allocated between the assets sold and the retained interests, if any, based upon their respective fair values at the date of sale. We may retain interests in the securitized financial assets as one or more tranches of the securitization. These retained interests are included within Financial instruments owned in the Consolidated Statements of Financial Condition at fair value. Any changes in the fair value of such retained interests are recognized within Principal transactions revenues in the Consolidated Statements of Earnings.

When a transfer of assets does not meet the criteria of a sale, we account for the transfer as a secured borrowing and continue to recognize the assets of a secured borrowing in Financial instruments owned and recognize the associated financing in Other secured financings in the Consolidated Statements of Financial Condition.

Note 3.  Accounting Developments

Accounting Standards to be Adopted in Future Periods

Income Taxes.    In July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists to eliminate diversity in practice. The guidance requires an entity to net their unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements against a deferred tax asset for a net operating loss carryforward, a similar tax loss or tax credit carryforward, unless such tax loss or credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes resulting from the disallowance of a tax position. In the event that the tax position is disallowed or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit shall be presented in the financial statements as a liability and shall not be combined with deferred tax assets. The guidance is effective for annual reporting periods beginning after December 15, 2013, and interim periods therein and is to be applied prospectively. We do not expect that the adoption of this ASU will have a material effect on our consolidated financial statements.

Balance Sheet Offsetting Disclosures.    In December 2011, the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities and in January 2013 the FASB issued ASU 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The updates require new disclosures regarding balance sheet offsetting and related arrangements. For derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions, the updates require disclosure of gross asset and liability amounts, amounts offset on the balance sheet, and amounts subject to the offsetting requirements but not offset on the balance sheet. The guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods (fiscal quarter ended February 28, 2014), and is to be applied retrospectively. This guidance does not amend the existing guidance on when it is appropriate to offset; as a result, this guidance will not affect our financial condition, results of operations or cash flows.

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Adopted Accounting Standards

Accumulated Other Comprehensive Income.   In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The guidance requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety from accumulated other comprehensive income to net income in the same reporting period, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. We adopted the guidance effective March 1, 2013, presenting the additional disclosures within our Consolidated Statements of Changes in Equity. Adoption did not affect our results of operation, financial condition or cash flows.

Indefinite-Lived Intangible Asset Impairment.    In July 2012, the FASB issued ASU No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment. The guidance permits an entity to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset, other than goodwill, is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. The update does not revise the requirement to test indefinite-lived intangible assets annually for impairment, or more frequently if deemed appropriate. The adoption of this guidance on December 1, 2012 did not affect our financial condition, results of operations or cash flows as it did not affect how impairment is calculated.

Goodwill Testing .   In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment. The update outlines amendments to the two step goodwill impairment test permitting an entity to first assess qualitative factors in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step quantitative goodwill impairment test. We adopted this guidance on December 1, 2012, which did not change how goodwill impairment is calculated nor assigned to reporting units and therefore had no effect on our financial condition, results of operations or cash flows.

Comprehensive Income .   In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income. The update requires entities to report comprehensive income either (1) in a single continuous statement of comprehensive income or (2) in two separate but consecutive statements. We adopted the guidance on March 1, 2012, and elected the two separate but consecutive statements approach. Accordingly, we now present our Consolidated Statements of Comprehensive Income immediately following our Consolidated Statements of Earnings within our consolidated financial statements.

Fair Value Measurements and Disclosures.   In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. The amendments prohibit the use of blockage factors at all levels of the fair value hierarchy and provide guidance on measuring financial instruments that are managed on a net portfolio basis. Additional disclosure requirements include transfers between Levels 1 and 2; and for Level 3 fair value measurements, a description of our valuation processes and additional information about unobservable inputs impacting Level 3 measurements. We adopted this guidance on March 1, 2012 and have reflected the new disclosures in our consolidated financial statements. The adoption of this guidance did not have an impact on our financial condition, results of operations or cash flows.

Reconsideration of Effective Control for Repurchase Agreements. In April 2011, the FASB issued ASU No. 2011-03, Reconsideration of Effective Control for Repurchase Agreements. In assessing whether to account for repurchase and other agreements that both entitle and obligate the transferor to repurchase or redeem financial assets before their maturity as sales or as secured financing, this guidance removes from the assessment of effective control 1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the

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agreed terms and 2) the collateral maintenance implementation guidance related to that criterion. The adoption of this guidance for transactions beginning on or after January 1, 2012 did not have an impact on our financial condition, results of operations or cash flows.

Note 4. Leucadia Merger and Related Transactions

Merger Transaction

On March 1, 2013, Jefferies Group LLC completed a merger transaction with Leucadia and became a wholly-owned subsidiary of Leucadia as described in Note 1 Organization and Basis of Presentation. Each share of Jefferies Group Inc.'s common stock outstanding was converted into common shares of Leucadia at an Exchange Ratio of 0.81 of a Leucadia common share for each share of Jefferies Group, Inc. (the "Exchange Ratio"). Leucadia exchanged Jefferies Group, Inc.'s $125.0 million 3.25% Series A-1 Convertible Cumulative Preferred Stock for a new series of Leucadia $125.0 million 3.25% Cumulative Convertible Preferred Shares. In addition, each restricted share and restricted stock unit of Jefferies Group, Inc. common stock was converted at the Exchange Ratio, into an equivalent award of shares of Leucadia, with all such awards for Leucadia shares subject to the same terms and conditions, including, without limitation, vesting and, in the case of performance-based restricted stock units, performance being measured at existing targets.

Leucadia did not assume or guarantee any of our outstanding debt securities, but our 3.875% Convertible senior Debentures due 2029 with an aggregate principal amount of $345.0 million are now convertible into common shares of Leucadia. Other than the conversion into Leucadia common shares, the terms of the debenture remain the same.

The merger resulted in a change in our ownership and was recorded under the acquisition method of accounting by Leucadia and pushed-down to us by allocating the total purchase consideration of $4.8 billion to the cost of the assets acquired, including intangible assets, and liabilities assumed based on their estimated fair values at the date of the merger. The excess of the total purchase price over the fair value of assets acquired and the liabilities assumed is recorded as goodwill. The goodwill arising from the merger consists largely of our commercial potential and the value of our assembled workforce.

In connection with the merger, we recognized $11.5 million, $2.1 million and $4.7 million in transaction costs during the nine months ended November 30, 2013, three months ended February 28, 2013 and the year ended November 30, 2012, respectively.

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The summary computation of the purchase price and the fair values assigned to the assets and liabilities are presented as follows (in thousands except share amounts):

Purchase Price

Jefferies common stock outstanding

205,368,031  

Less: Jefferies common stock owned by Leucadia

(58,006,024) 

Jefferies common stock acquired by Leucadia

147,362,007  

Exchange ratio

0.81  

Leucadia's shares issued (excluding for Jefferies shares held by Leucadia)

119,363,226  

Less: restricted shares issued for share-based payment awards (1)

(6,894,856) 

Leucadia's shares issued, excluding share-based payment awards

112,468,370  

Closing price of Leucadia's common stock (2)

  $ 26.90  

Fair value of common shares acquired by Leucadia

3,025,399  

Fair value of 3.25% cumulative convertible preferred shares (3)

125,000  

Fair value of shares-based payment awards (4)

343,811  

Fair value of Jefferies shares owned by Leucadia (5)

1,259,891  

Total purchase price

  $                 4,754,101  

(1)

Represents shares of restricted stock included in Jefferies common stock outstanding that contained a future service requirement as of March 1, 2013.

(2)

The value of the shares of common stock exchanged with Jefferies shareholders was based upon the closing price of Leucadia's common stock at February 28, 2013, the last trading day prior to the date of acquisition.

(3)

Represents Leucadia's 3.25% Cumulative Convertible Preferred Shares issued in exchange for Jefferies Group, Inc.'s 3.25% Series A-1 Convertible Cumulative Preferred Stock.

(4)

The fair value of share-based payment awards is calculated in accordance with ASC 718, Compensation – Stock Compensation. Share-based payment awards attributable to pre-combination service are included as part of the total purchase price. Share-based payment awards attributable to pre-combination service is estimated based on the ratio of the pre-combination service performed to the original service period of the award.

(5)

The fair value of Jefferies shares owned by Leucadia was based upon a price of $21.72, the closing price of Jefferies common stock at February 28, 2013.

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Assets acquired (1):

Cash and cash equivalents

  $ 3,017,958  

Cash and securities segregated

3,728,742  

Financial instruments owned, at fair value

16,413,535  

Investments in managed funds

59,976  

Loans to and investments in related parties

766,893  

Securities borrowed

5,315,488  

Securities purchased under agreements to resell

3,578,366  

Securities received as collateral

25,338  

Receivables:

Brokers, dealers and clearing organizations

2,444,085  

Customers

1,045,251  

Fees, interest and other

225,555  

Premises and equipment

192,603  

Indefinite-lived intangible exchange memberships and licenses (2)

15,551  

Finite-lived intangible customer relationships (2)(3)

136,002  

Finite-lived trade name (2)(4)

131,299  

Other assets

939,600  

Total assets

  $ 38,036,242  

Liabilities assumed (1):

Short-term borrowings

  $ 100,000  

Financial instruments sold, not yet purchased, at fair value

9,766,876  

Securities loaned

1,902,687  

Securities sold under agreements to repurchase

7,976,492  

Other secured financings

122,294  

Obligation to return securities received as collateral

25,338  

Payables:

Brokers, dealers and clearing organizations

1,787,055  

Customers

5,450,781  

Accrued expenses and other liabilities

793,843  

Long-term debt

6,362,024  

Mandatorily redeemable preferred interests

358,951  

Total liabilities

  $ 34,646,341  

Noncontrolling interests

356,180  

Fair value of net assets acquired, excluding goodwill (1)

  $ 3,033,721  

Goodwill (1)

  $         1,720,380  

(1)

Modifications to the purchase price allocation have been made since the initial presentation included in our Quarterly Report on Form 10-Q for the three months ended May 31, 2013, which reflect additional information obtained about the fair value of the assets acquired and liabilities assumed. These modifications include adjustments of $4.8 million to reduce the fair value of the total assets acquired and $14.0 million to increase the total liabilities assumed at March 1, 2013. The impact of the adjustments resulted in an increase of goodwill of $18.8 million from the previously presented balance of $1,701.6 million in our Quarterly Report on Form 10-Q for the three months ended May 31, 2013 to $1,720.4 million as reflected in this table.

(2)

Intangible assets are recorded within Other assets on the Consolidated Statement of Financial Condition.

(3)

The fair value of the finite-lived customer relationships will be amortized on a straight line basis over a weighted average useful life of approximately 14.4 years.

(4)

The fair value of the finite-lived trade name will be amortized on a straight line basis over a useful life of 35 years.

Intangible assets, not including goodwill, totaling approximately $282.9 million were identified and recognized as part of the acquisition accounting. The goodwill of $1.7 billion resulting from the Merger is not deductible for tax purposes.

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Reorganization of Jefferies High Yield Holdings, LLC

On March 1, 2013, we commenced a reorganization of our high yield joint venture with Leucadia, conducted through Jefferies High Yield Holdings, LLC ("JHYH") (the parent of Jefferies High Yield Trading, LLC (our high yield trading broker-dealer)). On March 1, 2013, we redeemed the outstanding third party noncontrolling interests in JHYH of $347.6 million. On March 31, 2013, Leucadia contributed its mandatorily redeemable preferred interests in JHYH of $362.3 million to Jefferies Group LLC as member's equity. On April 1, 2013, we redeemed the mandatorily redeemable preferred interests in JHYH received from Leucadia. In addition, on April 1, 2013, our high yield trading broker-dealer was merged into Jefferies LLC (our U.S. securities broker-dealer).

Note 5.  Acquisitions

Hoare Govett

On February 1, 2012, we acquired the corporate broking business of Hoare Govett from RBS. Total cash consideration paid by us to RBS for the acquisition was £1. In addition, under the terms of the purchase agreement RBS agreed to pay us approximately £1.9 million towards retention payments made to certain employees, which constituted a reduction of the final purchase price. The business acquired represents the corporate broking business carried on under the name RBS Hoare Govett in the United Kingdom and comprised corporate broking advice and services, as well as certain equity sales and trading activities. The acquisition included the Hoare Govett trade name, domain name, client agreements and the exclusive right to carry on the business in succession to RBS.

We accounted for the acquisition under the acquisition method of accounting . Accordingly, the assets acquired, including identifiable intangible assets, and liabilities assumed were recorded at their respective fair values as of the date of acquisition. The fair values of the net assets acquired, including identifiable intangible assets, specifically the Hoare Govett trademark/trade name, was approximately $0.3 million, which exceeded the negative purchase price of $3.1 million (cash consideration paid of £1 less remittance from RBS of £1.9 million), resulting in a bargain purchase gain of approximately $3.4 million. The bargain purchase gain is included within Other revenues in the Consolidated Statement of Earnings for the year ended November 30, 2012 and is reported within the Capital Markets business segment. Approximately $0.4 million was recognized at the date of acquisition as the fair value of the Hoare Govett trade name. See Note 13, Goodwill and Other Intangible Assets for further details. Additionally, on February 1, 2012, we recognized a deferred tax liability of approximately $0.1 million, recorded within Accrued expenses and other liabilities on the Consolidated Statement of Financial Condition.

Our results of operations for the year ended November 30, 2012 include the results of operations of Hoare Govett for ten months for the period from February 1, 2012 to November 30, 2012. The acquisition closed on February 29, 2012.

Global Commodities Group

On July 1, 2011, we acquired Prudential Bache's Global Commodities Group from Prudential. Total cash payments made as consideration for the acquisition were $422.0 million. The acquisition included 100% of the equity interests in Prudential Bache Commodities LLC, a U.S.-based full-service futures commission merchant; Prudential Bache Securities LLC, a US-based registered broker-dealer, which has since merged with Jefferies; Bache Commodities Limited, a UK-based global commodities and financial derivatives broker; Prudential Bache Financial Services, Inc., a global over-the-counter commodities dealer; and Bache Commodities (Hong Kong) Ltd., a Hong Kong-based licensed futures dealer. In addition, we acquired related information technology assets and contracts used by the Global Commodities Group. We refer to this business collectively as "Jefferies Bache." The business of Jefferies Bache is included within the Capital Markets business segment.

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We accounted for the acquisition under the acquisition method of accounting, resulting in a bargain purchase gain of $52.5 million which is included in Other revenues in the Consolidated Statement of Earnings for the year ended November 30, 2011, is not taxable and is reported within the Capital Markets business segment .

Note 6.  Cash, Cash Equivalents and Short-Term Investments

We generally invest our excess cash in money market funds and other short-term instruments. Cash equivalents include highly liquid investments not held for resale and with original maturities of three months or less. The following are financial instruments classified as cash and cash equivalents that are deemed by us to be generally readily convertible into cash as of November 30, 2013 and November 30, 2012 (in thousands):

Successor Predecessor
    November 30,         November 30,    
2013 2012

Cash and cash equivalents:

Cash in banks

 $ 880,443  $ 1,038,664

Money market investments

2,680,676 1,653,931

Total cash and cash equivalents

 $ 3,561,119  $ 2,692,595

Cash and securities segregated (1)

 $ 3,616,602  $ 4,082,595

(1)

Consists of deposits at exchanges and clearing organizations, as well as deposits in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, which subjects Jefferies as a broker-dealer carrying client accounts to requirements related to maintaining cash or qualified securities in a segregated reserve account for the exclusive benefit of its clients, and Jefferies Bache, LLC which, as a futures commission merchant, is subject to the segregation requirements pursuant to the Commodity Exchange Act.

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Note 7.  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 as of November 30, 2013 and 2012 by level within the fair value hierarchy (in thousands):

Successor
November 30, 2013
     Level 1 (1)           Level 2 (1)           Level 3      Counterparty and
Cash Collateral
Netting (2)
        Total        

Assets:

Financial instruments owned:

Corporate equity securities

  $ 1,913,220    $ 175,493     $ 9,884    $ -     $ 2,098,597 

Corporate debt securities

2,957,102   25,666  -   2,982,768 

Collateralized debt obligations

182,095   37,216  -   219,311 

U.S. government and federal agency securities

2,293,221  40,389   -   2,333,610 

Municipal securities

664,054   -   664,054 

Sovereign obligations

1,458,803  889,685   -   2,348,488 

Residential mortgage-backed securities

2,932,268   105,492  -   3,037,760 

Commercial mortgage-backed securities

1,130,410   17,568  -   1,147,978 

Other asset-backed securities

55,475   12,611  -   68,086 

Loans and other receivables

1,203,238   145,890  -   1,349,128 

Derivatives

40,952  2,472,237   1,493  (2,253,589)   261,093 

Investments at fair value

40   101,242  -   101,282 

Physical commodities

37,888   -   37,888 

Total financial instruments owned

  $ 5,706,196     $ 12,740,374     $ 457,062    $ (2,253,589)     $ 16,650,043 

Cash and cash equivalents

  $ 3,561,119     $   $   $ -     $ 3,561,119 

Investments in managed funds

  $ -     $   $ 57,285    $ -     $ 57,285 

Cash and securities segregated and on deposit for regulatory purposes  (3)

  $ 3,612,602     $   $   $ -     $ 3,612,602 

Securities received as collateral

  $ 11,063     $   $   $ -     $ 11,063 

Total Level 3 assets

  $ 514,347 

Liabilities:

Financial instruments sold, not yet purchased:

Corporate equity securities

  $ 1,782,903    $ 40,358    $ 38    $   $ 1,823,299 

Corporate debt securities

1,346,078  1,346,078 

U.S. government and federal agency securities

1,324,326  1,324,326 

Sovereign obligations

1,360,269  471,088  1,831,357 

Residential mortgage-backed securities

34,691  34,691 

Loans

672,838  22,462  695,300 

Derivatives

43,829  2,480,463  8,398  (2,352,611)  180,079 

Physical commodities

36,483  36,483 

Total financial instruments sold, not yet purchased

  $ 4,511,327     $ 5,081,999     $ 30,898    $ (2,352,611)    $ 7,271,613 

Obligation to return securities received as collateral

  $ 11,063    $ -     $   $ -     $ 11,063 

Other secured financings

  $   $ 31,000     $ 8,711    $ -     $ 39,711 

Embedded conversion option

  $   $ 9,574     $   $ -     $ 9,574 

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(1)

During the nine months ended November 30, 2013, we transferred listed equity options with a fair value of $403.0 million within Financial instruments owned and $423.0 million within Financial instruments sold, not yet purchased from Level 1 to Level 2 as adjustments to the exchange closing price are necessary to best reflect the fair value of the population at its exit price.

(2)

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

(3)

Cash and securities segregated and on deposit for regulatory purposes include U.S. government securities with a fair value of $304.2 million.

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November 30, 2013 and 2012

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Predecessor
November 30, 2012
     Level 1  (1)      Level 2  (1)      Level 3      Counterparty and
Cash Collateral
Netting (2)
        Total        

Assets:

Financial instruments owned:

Corporate equity securities

  $ 1,608,715    $ 137,245    $ 16,815    $   $ 1,762,775 

Corporate debt securities

3,034,515  3,631  3,038,146 

Collateralized debt obligations

87,239  31,255  118,494 

U.S. government and federal agency securities

1,720,617  115,310  1,835,927 

Municipal securities

619,969  619,969 

Sovereign obligations

1,722,044  975,810  2,697,854 

Residential mortgage-backed securities (5)

3,997,390  156,069  4,153,459 

Commercial mortgage-backed securities (5)

1,001,581  30,202  1,031,783 

Other asset-backed securities

93,228  1,114  94,342 

Loans and other receivables

497,918  180,393  678,311 

Derivatives (5)

615,024  1,674,062  328  (1,921,122)  368,292 

Investments at fair value

43,126  83,897  127,023 

Physical commodities

144,016  144,016 

Total financial instruments owned

  $ 5,666,400    $ 12,421,409    $ 503,704    $ (1,921,122)    $ 16,670,391 

Level 3 financial instruments for which the firm does not bear economic exposure  (3)

(53,289) 

Level 3 financial instruments for which the firm bears economic exposure

  $ 450,415 

Cash and cash equivalents

  $ 2,692,595    $   $   $   $ 2,692,595 

Investments in managed funds

  $   $   $ 57,763    $   $ 57,763 

Cash and securities segregated and on deposit for regulatory purposes  (4)

  $ 4,082,595    $   $   $   $ 4,082,595 

Total Level 3 assets for which the firm bears economic exposure

  $ 508,178