SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 28, 2001

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, INC.

(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.)
11100 Santa Monica Blvd., Los Angeles, California	90025
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:    (310) 445-1199

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 [   ]

As of September 28, 2001, the registrant had 26,932,700 common shares, $.0001 par value, outstanding.

Page 1 of 18

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
		CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
		CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)
		CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Changes in Securities and Use of Proceeds
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURE

JEFFERIES GROUP, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
SEPTEMBER 28, 2001

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Financial Condition - September 28, 2001 (unaudited) and December 31, 2000		3
	Consolidated Statements of Earnings (unaudited) - Three Months and Nine Months Ended September 28, 2001 and September 29, 2000		4
	Consolidated Statement of Changes in Stockholders’ Equity (unaudited) - Nine Months Ended September 28, 2001		5
	Consolidated Statements of Cash Flows (unaudited) - Nine Months Ended September 28, 2001 and September 29, 2000		6
	Notes to Consolidated Financial Statements (unaudited)		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		17
Item 2.	Changes in Securities and Use of Proceeds		17
Item 6.	Exhibits and Reports on Form 8-K		17

Page 2 of 18

JEFFERIES GROUP, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share amounts)

					September 28,			December 31,
					2001			2000
					(unaudited)
ASSETS
Cash and cash equivalents					$	124,281		$	24,996
Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations						171,978			206,444
Receivable from brokers and dealers						3,102,083			2,860,677
Receivable from customers, officers and directors						163,405			254,562
Securities owned						299,361			224,738
Securities pledged to creditors						56,737			96,324
Investments						166,779			136,047
Premises and equipment						48,944			43,635
Other assets						182,215			110,446
					$	4,315,783		$	3,957,869
LIABILITIES AND STOCKHOLDERS’ EQUITY
Bank loans					$	51,000		$	—
Payable to brokers and dealers						2,882,825			2,423,488
Payable to customers						335,189			501,786
Securities sold, not yet purchased						120,620			171,685
Accrued expenses and other liabilities						219,367			249,918
						3,609,001			3,346,877
Long-term convertible debt						4,175			2,963
Long-term debt						149,655			149,582
						3,762,831			3,499,422
Stockholders’ equity:
	Preferred stock, $.0001 par value. Authorized 10,000,000 shares; none issued					—			—
	Common stock, $.0001 par value. Authorized 100,000,000 shares; issued 27,768,798 shares in 2001 and 25,177,419 shares in 2000					3			3
	Additional paid-in capital					151,158			86,004
	Retained earnings					423,876			384,846
	Less:
		Treasury stock, at cost, 836,098 shares in 2001 and 489,039 shares in 2000				(20,101	)		(10,383	)
		Accumulated other comprehensive loss:
			Currency translation adjustments			(846	)		(885	)
			Additional minimum pension liability			(1,138	)		(1,138	)
		Total accumulated other comprehensive loss				(1,984	)		(2,023	)
				Total stockholders’ equity		552,952			458,447
					$	4,315,783		$	3,957,869

See accompanying unaudited notes to consolidated financial statements.

Page 3 of 18

JEFFERIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
(In thousands, except per share amounts)

			Three Months Ended				Nine Months Ended
			Sept. 28,		Sept. 29,		Sept. 28,		Sept. 29,
			2001		2000		2001		2000
Revenues:
	Commissions		$	51,081	$	51,411	$	165,488	$	164,061
	Principal transactions			54,449		65,445		213,679		203,865
	Corporate finance			22,468		38,240		83,557		73,114
	Interest			31,259		39,589		109,535		124,240
	Asset management			4,652		2,941		15,192		7,249
	Other			1,735		673		3,798		3,148
		Total revenues		165,644		198,299		591,249		575,677
Interest expense				28,565		35,047		95,821		104,423
Revenues, net of interest expense				137,079		163,252		495,428		471,254
Non-interest expenses:
	Compensation and benefits			79,877		102,533		298,605		290,750
	Floor brokerage and clearing fees			10,865		8,719		32,953		27,484
	Communications			9,595		11,526		33,163		35,236
	Occupancy and equipment rental			5,346		4,873		16,973		14,038
	Travel and promotional			5,656		3,728		16,968		13,490
	Other			7,351		6,349		22,672		17,150
		Total non-interest expenses		118,690		137,728		421,334		398,148
Earnings before income taxes				18,389		25,524		74,094		73,106
Income taxes				7,757		10,811		31,226		30,997
		Net earnings	$	10,632	$	14,713	$	42,868	$	42,109
Earnings per share:
	Basic		$	0.43	$	0.62	$	1.76	$	1.76
	Diluted		$	0.40	$	0.60	$	1.67	$	1.74
Weighted average shares:
	Basic			24,938		23,859		24,397		23,862
	Diluted			26,593		24,402		25,746		24,220

See accompanying unaudited notes to consolidated financial statements.

Page 4 of 18

JEFFERIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)
NINE MONTHS ENDED SEPTEMBER 28, 2001
(Dollars in thousands, except per share amounts)

												Accumulated			Total
				Additional								Other			Stock-
		Common		Paid-in		Retained			Treasury			Comprehensive			holders'
		Stock		Capital		Earnings			Stock			Loss			Equity
Balance, December 31, 2000		$	3	$	86,004	$	384,846		$	(10,383	)	$	(2,023	)	$	458,447
Exercise of stock options, including tax benefits (76,256 shares)			—		1,826		—			—			—			1,826
Purchase of treasury stock (330,000 shares)			—		—		—			(9,390	)		—			(9,390	)
Issuance of ESPP and common shares (255,265 shares)			—		5,903		—			—			—			5,903
Issuance of restricted stock (2,242,799 shares), net of forfeitures, and additional vesting of restricted stock shares, including tax benefits			—		55,023		—			(328	)		—			54,695
Employee stock ownership plan amortization and stock purchases, net			—		2,402		—			—			—			2,402
Quarterly dividends ($.05 per share per quarter)			—		—		(3,838	)		—			—			(3,838	)
Comprehensive income:
	Net earnings		—		—		42,868			—			—			42,868
Other comprehensive income, net of tax:
	Translation adjustment		—		—		—			—			39			39
Comprehensive income			—		—		—			—			—			42,907
Balance, September 28, 2001		$	3	$	151,158	$	423,876		$	(20,101	)	$	(1,984	)	$	552,952

See accompanying unaudited notes to consolidated financial statements.

Page 5 of 18

JEFFERIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)

					Nine Months Ended
					Sept. 28,			Sept. 29,
					2001			2000
Cash flows from operating activities:
	Net earnings				$	42,868		$	42,109
	Adjustments to reconcile net earnings to net cash provided by (used in) operations:
		Depreciation and amortization				12,612			8,887
		(Increase) decrease in cash and securities segregated and on deposit for regulatory purposes				35,433			(93,462	)
		(Increase) decrease in receivables:
			Brokers and dealers			(241,406	)		(760,812	)
			Customers, officers and directors			91,157			(29,748	)
		(Increase) decrease in securities owned				(73,593	)		35,934
		Decrease in securities pledged to creditors				39,587			—
		Increase in investments				(30,732	)		(12,796	)
		Increase in other assets				(44,932	)		(30,384	)
		Increase (decrease) in operating payables:
			Brokers and dealers			459,337			578,363
			Customers			(166,597	)		140,029
		Decrease in securities sold, not yet purchased				(51,065	)		(33,468	)
		Increase (decrease) in accrued expenses and other liabilities				(32,747	)		9,256
				Total adjustments		(2,946	)		(188,201	)
				Net cash provided by (used in) operating activities		39,922			(146,092	)

Continued on next page.
 
See accompanying unaudited notes to consolidated financial statements.

Page 6 of 18

JEFFERIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — CONTINUED (Unaudited)
(Dollars in thousands)

					Nine Months Ended
					Sept. 28,			Sept. 29,
					2001			2000
Cash flows from financing activities:
			Net proceeds from (payments on):
			Bank loans			51,000			90,000
			Subordinated loans on consolidated subsidiary			1,300			—
			Convertible note issuance			—			2,792
			Repurchase of treasury stock			(9,390	)		(9,796	)
			Dividends paid			(3,838	)		(3,650	)
			Exercise of stock options			1,826			1,410
			Issuance of ESPP and common shares			5,903			5,678
			Issuance of restricted stock			38,667			11,446
			Employee Stock Ownership Plan stock purchases			—			(349	)
				Net cash provided by financing activities		85,468			97,531
Cash flows from investing activities:
			Lawrence Helfant, Inc. acquisition (net of cash received)			(12,404	)		—
			Purchase of premises and equipment			(13,652	)		(6,909	)
				Net cash flows from investing activities		(26,056	)		(6,909	)
Effect of foreign currency translation on cash						(49	)		(1,684	)
				Net increase in cash and cash equivalents		99,285			(57,154	)
Cash and cash equivalents — beginning of period						24,996			77,197
Cash and cash equivalents — end of period					$	124,281		$	20,043
Supplemental disclosures of cash flow information:
	Cash paid during the period for:
		Interest			$	103,675		$	102,653
		Income taxes			$	31,085		$	10,819
		Lawrence Helfant, Inc. acquisition:
			Fair value of assets acquired		$	30,628
			Liabilities assumed			(2,196	)
			Stock issued (458,333 shares)			(16,028	)
			Net cash paid for acquisition			12,404
			Cash acquired in acquisition			1,896
			Cash paid for acquisition		$	14,300

See accompanying unaudited notes to consolidated financial statements.

Page 7 of 18

JEFFERIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Consolidated Financial Statements

     The accompanying consolidated financial statements include the accounts of Jefferies Group, Inc. (“Group”) and all its subsidiaries (“Company”), including Jefferies & Company, Inc. (“JEFCO”). The accounts of W & D Securities, Inc. (“W & D”) are consolidated because of the nature and extent of Group’s ownership interest in W & D. The Company and its subsidiaries operate and are managed as a single business segment, that of a securities broker-dealer, which includes several types of financial services, such as principal and agency transactions in equity, convertible debt and high yield, as well as corporate finance activities. Since the Company’s services are provided using the same distribution channels, support services and facilities and all are provided to meet client needs, the Company does not identify assets or allocate all expenses to any service or class of service as a separate business segment.

     All significant intercompany accounts and transactions are eliminated in consolidation. The consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for the fair statement of the results for the interim periods and should be read in conjunction with the Company’s annual report for the year ended December 31, 2000.

Securities Transactions

     All transactions in securities, commission revenues and related expenses are recorded on a trade-date basis. Securities owned and securities sold, not yet purchased, are valued at market, and unrealized gains or losses are reflected in revenues from principal transactions.

Reclassifications

     Certain reclassifications have been made to the prior period’s amounts to conform to the current period’s presentation.

Helfant Acquisition

     To expand its floor brokerage operations, the Company acquired Lawrence Helfant, Inc. (“Helfant”) in the third quarter of 2001, with a combination of stock and cash totaling approximately $30.3 million. The acquisition was accounted for as a purchase and resulted in approximately $20.0 million in goodwill.

Receivable from, and Payable to, Brokers and Dealers

     Receivable from and payable to brokers and dealers consists of the following as of September 28, 2001 (in thousands of dollars):

Receivable from brokers and dealers:
	Securities borrowed	$	2,951,925
	Other		150,158
		$	3,102,083
Payable to brokers and dealers:
	Securities loaned	$	2,792,835
	Other		89,990
		$	2,882,825

Page 8 of 18

JEFFERIES GROUP, INC. AND SUBSIDIARIES

Securities Owned, Securities Pledged to Creditors and Securities Sold, Not Yet Purchased

     The following is a summary of the market value of major categories of securities owned and securities sold, not yet purchased, as of September 28, 2001 (in thousands of dollars):

			Securities
			Sold,
	Securities		Not Yet
	Owned		Purchased
Corporate equity securities	$	63,582	$	69,201
High-yield securities		113,647		1,593
Corporate debt securities		118,685		41,576
U.S. government securities		2,625		8,166
Options		822		84
	$	299,361	$	120,620

     The following is a summary of the market value of major categories of securities pledged to creditors as of September 28, 2001 (in thousands of dollars):

	Securities
	Pledged To Creditors
Corporate equity securities	$	24,197
High yield securities		8,646
Corporate debt securities		23,894
	$	56,737

Investments

     Investments consist of the following as of September 28, 2001 (in thousands of dollars):

Debt and equity investments	$	19,361
Partnership interests		53,564
Equity and debt interests in affiliates		93,854
	$	166,779

Cash and Cash Equivalents

     Cash and cash equivalents include cash in banks and short term investments. Cash equivalents are part of the cash management activities of the Company and generally mature within 90 days. The following is a summary of cash and cash equivalents as of September 28, 2001 (in thousands of dollars):

Cash in banks	$	21,078
Short term investments		103,203
	$	124,281

Page 9 of 18

JEFFERIES GROUP, INC. AND SUBSIDIARIES

Earnings per Share

     The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the three month and nine month periods ended September 28, 2001 and September 29, 2000 (in thousands, except per share amounts):

	Three Months Ended				Nine Months Ended
	Sept. 28,		Sept. 29,		Sept. 28,		Sept. 29,
	2001		2000		2001		2000
Net earnings	$	10,632	$	14,713	$	42,868	$	42,109
Shares for basic and diluted calculations:
Average shares used in basic computation		24,938		23,859		24,397		23,862
Stock options		591		325		510		208
Restricted stock		1,064		218		839		150
Average shares used in diluted computation		26,593		24,402		25,746		24,220
Earnings per share:
Basic	$	0.43	$	0.62	$	1.76	$	1.76
Diluted	$	0.40	$	0.60	$	1.67	$	1.74

Asset Management

     The following summarizes revenues from asset management for the three month and nine month periods ended September 28, 2001 and September 29, 2000 (in thousands of dollars):

	Three Months Ended				Nine Months Ended
	Sept. 28,		Sept. 29,		Sept. 28,		Sept. 29,
	2001		2000		2001		2000
High Yield (HY)
Performance based	$	3,175	$	1,883	$	11,050	$	4,893
Asset based		733		444		1,770		871
Non-HY Employee Funds
Asset based		83		57		248		57
International		661		557		2,124		1,428
Total	$	4,652	$	2,941	$	15,192	$	7,249

Other Comprehensive Income (Loss)

     The following summarizes other comprehensive income and accumulated other comprehensive loss at September 28, 2001 and for the three months then ended (in thousands of dollars):

	Before-Tax		Income Tax		Net-of-Tax
	Amount		or Benefit		Amount
Currency translation adjustments	$	2,608	$	—	$	2,608
Minimum pension liability adjustment		—		—		—
Other comprehensive income	$	2,608	$	—	$	2,608

Page 10 of 18

JEFFERIES GROUP, INC. AND SUBSIDIARIES

				Minimum			Accumulated
	Currency			Pension			Other
	Translation			Liability			Comprehensive
	Adjustments			Adjustment			Income (Loss)
Beginning at June 29, 2001	$	(3,454	)	$	(1,138	)	$	(4,592	)
Change in third quarter of 2001		2,608			—			2,608
Ending at September 28, 2001	$	(846	)	$	(1,138	)	$	(1,984	)

     The following summarizes other comprehensive loss and accumulated other comprehensive loss at September 29, 2000 and for the three months then ended (in thousands of dollars):

	Before-Tax			Income Tax		Net-of-Tax
	Amount			or Benefit		Amount
Currency translation adjustments	$	(747	)	$	—	$	(747	)
Minimum pension liability adjustment		—			—		—
Other comprehensive loss	$	(747	)	$	—	$	(747	)

				Minimum			Accumulated
	Currency			Pension			Other
	Translation			Liability			Comprehensive
	Adjustments			Adjustment			Income (Loss)
Beginning at June 30, 2000	$	(701	)	$	(183	)	$	(884	)
Change in third quarter of 2000		(747	)		—			(747	)
Ending at September 29, 2000	$	(1,448	)	$	(183	)	$	(1,631	)

     Comprehensive income for the three months ended September 28, 2001 and September 29, 2000 was as follows:

	Sept. 28,		Sept. 29,
	2001		2000
Net earnings	$	10,632	$	14,713
Other comprehensive income (loss)		2,608		(747	)
Comprehensive income	$	13,240	$	13,966

     The following summarizes other comprehensive income and accumulated other comprehensive loss at September 28, 2001 and for the nine months then ended (in thousands of dollars):

	Before-Tax		Income Tax		Net-of-Tax
	Amount		or Benefit		Amount
Currency translation adjustments	$	39	$	—	$	39
Minimum pension liability adjustment		—		—		—
Other comprehensive income	$	39	$	—	$	39

				Minimum			Accumulated
	Currency			Pension			Other
	Translation			Liability			Comprehensive
	Adjustments			Adjustment			Income (Loss)
Beginning at December 31, 2000	$	(885	)	$	(1,138	)	$	(2,023	)
Change in 2001		39			—			39
Ending at September 28, 2001	$	(846	)	$	(1,138	)	$	(1,984	)

Page 11 of 18

JEFFERIES GROUP, INC. AND SUBSIDIARIES

     The following summarizes other comprehensive loss and accumulated other comprehensive loss at September 29, 2000 and for the nine months then ended (in thousands of dollars):

	Before-Tax			Income Tax		Net-of-Tax
	Amount			or Benefit		Amount
Currency translation adjustments	$	(1,684	)	$	—	$	(1,684	)
Minimum pension liability adjustment		—			—		—
Other comprehensive loss	$	(1,684	)	$	—	$	(1,684	)

				Minimum			Accumulated
	Currency			Pension			Other
	Translation			Liability			Comprehensive
	Adjustments			Adjustment			Income (Loss)
Beginning at December 31, 1999	$	236		$	(183	)	$	53
Change in 2000		(1,684	)		—			(1,684	)
Ending at September 29, 2000	$	(1,448	)	$	(183	)	$	(1,631	)

     Comprehensive income for the nine months ended September 28, 2001 and September 29, 2000 was as follows:

	Sept. 28,		Sept. 29,
	2001		2000
Net earnings	$	42,868	$	42,109
Other comprehensive income (loss)		39		(1,684	)
Comprehensive income	$	42,907	$	40,425

Net Capital Requirements

     As registered broker-dealers, JEFCO, W & D and Helfant are subject to the Securities and Exchange Commission’s Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net capital. JEFCO and W & D have elected to use the alternative method permitted by the Rule, which requires that they each maintain minimum net capital, as defined, equal to the greater of $250,000 or 2% of the aggregate debit balances arising from customer transactions, as defined. Helfant has elected to use the aggregate indebtedness standard permitted by the Rule, which requires it to maintain its aggregate indebtedness to all other persons at less than 1500 percent of its net capital.

     Net capital changes from day to day, but as of September 28, 2001, JEFCO’s, W & D’s and Helfant’s net capital was $125.0 million, $1.9 million and $3.3 million, respectively, which exceeded minimum net capital requirements by $120.5 million, $1.6 million and $3.0 million, respectively.

Quarterly Dividends

     In 1988, the Company instituted a policy of paying regular quarterly dividends. There are no restrictions on the Company’s present ability to pay dividends on common stock, other than the governing provisions of the Delaware General Corporation Law.

Dividends per Common Share (declared and paid):

	1st Qtr.		2nd Qtr.		3rd Qtr.
2001	$	.05	$	.05	$	.05
2000	$	.05	$	.05	$	.05

Page 12 of 18

JEFFERIES GROUP, INC. AND SUBSIDIARIES

Off-Balance Sheet Risk

     In the normal course of business, the Company had letters of credit outstanding aggregating $32.8 million at September 28, 2001, to satisfy various collateral requirements in lieu of depositing cash or securities.

Segment Reporting

     The company’s operations have been classified into a single business segment, a securities broker-dealer, which includes several types of financial services. This segment includes the traditional securities brokerage and investment banking activities of the Company. The Company’s business is predominantly in the United States with less than 10% of revenues and approximately 2% of assets attributable to international operations.

New Accounting Pronouncements

     In July 2001, the Financial Accounting Standards Board issued two Statements: Statement No. 141, “Business Combinations”, and Statement No. 142, “Goodwill and Other Intangible Assets”.

     Those Statements will change the accounting for business combinations and goodwill in two significant ways. First, Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Use of the pooling-of-interests method will be prohibited. Second, Statement 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Thus, amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of that Statement, which, for companies with calendar year ends, will be January 1, 2002. The implementation of these statements is not expected to have a material impact on the Company.

Goodwill

     Goodwill represents the excess of cost over net assets acquired and is included in other assets. The following is a summary of goodwill as of September 28, 2001 (in thousands of dollars):

					Excess of Purchase
	Excess of Purchase				Price Over Net
	Price Over Net		Accumulated		Assets Acquired
Acquisition	Assets Acquired		Amortization		Remaining		Acquisition Date	Amortization Period
The Europe Company	$	13,376	$	1,599	$	11,777	Aug. 2000	10 years
Lawrence Helfant, Inc.		20,007		—		20,007	Sept. 2001	None
	$	33,383	$	1,599	$	31,784

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JEFFERIES GROUP, INC. AND SUBSIDIARIES

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

Analysis of Financial Condition

     Total assets increased $357.9 million from $3,957.9 million at December 31, 2000 to $4,315.8 million at September 28, 2001. Total liabilities increased $263.4 million from $3,499.4 million at December 31, 2000 to $3,762.8 million at September 28, 2001. The increase in assets and liabilities is mostly due to an increase in the balances associated with JEFCO’s securities borrowed and loaned matched book business. Additionally, total stockholders’ equity increased $94.5 million from $458.4 million at December 31, 2000 to $553.0 million at September 28, 2001. The increase in stockholders’ equity was partly due to stock issuances and amortization, net of stock purchases amounting to $55.4 million and net earnings of $42.9 million.

Third Quarter 2001 Versus Third Quarter 2000

     Revenues, net of interest expense, decreased 16% to $137.1 million, compared to $163.3 million for the third quarter of 2000. The decrease was due primarily to a $15.8 million, or 41%, decrease in corporate finance, an $11.0 million, or 17%, decrease in principal transactions, a $1.8 million, or 41%, decrease in net interest income (interest revenues less interest expense), partially offset by a $1.7 million, or 58%, increase in asset management, and a $1.1 million increase in other income. Commissions revenues remained relatively unchanged, despite being closed for four trading days as a result of the September 11th tragedy. Principal transactions revenue decreased mostly due to the Equities and International Divisions. Corporate finance revenues decreased due mostly to a decrease in advisory fees. Net interest income was down mostly due to decreased securities borrowed and loaned matched book business and decreased interest rates. Asset management increased due to more assets under management and greater profitability. Other income increased mostly due to several miscellaneous items.

     Total non-interest expenses decreased 14% to $118.7 million, compared to $137.7 million for the third quarter of 2000. Compensation and benefits decreased $22.7 million, or 22%, mostly due to a decrease in incentive based compensation accruals, despite an increased headcount. Floor brokerage and clearing fees increased $2.1 million, or 25%, due to increased volume of business executed on the various exchanges. Travel and promotional increased $1.9 million, or 52%, largely due to an increase in business travel. Communications decreased $1.9 million, or 17%, mostly due to negotiated refunds and lower rate charges on some services. Other expense increased $1.0 million or 16%, largely due to higher legal expense. Occupancy and equipment rental increased $473,000, or 10%, mostly due to office expansion.

     Earnings before income taxes were down 28% to $18.4 million, compared to $25.5 million for the same prior year period. The effective tax rate was approximately 42% for the third quarter of 2001 and 2000. Net earnings were down $4.1 million to $10.6 million, compared to $14.7 million for the same prior year period.

     Basic net earnings per share were $0.43 for the third quarter of 2001 on 24,938,000 shares compared to $0.62 in the 2000 period on 23,859,000 shares. Diluted net earnings per share were $0.40 for the third quarter of 2001 on 26,593,000 shares compared to $0.60 in the comparable 2000 period on 24,402,000 shares.

First Nine Months 2001 Versus First Nine Months 2000

     Revenues, net of interest expense, increased 5% to $495.4 million, compared to $471.3 million for the first nine months of 2000. The increase was due primarily to a $10.4 million, or 14%, increase in corporate finance, a $9.8 million, or 5%, increase in principal transactions, a $7.9 million, or 110%, increase in asset management, and a $1.4 million, or 1%, increase in commissions, a $650,000, or 21%, increase in other income, partially offset by a $6.1 million, or 31%, decrease in net interest income (interest revenues less interest expense). Commissions and principal transactions revenue increased mostly due to the High Yield, Convertibles and Equities Divisions. Corporate finance revenues increased due mostly to an increase in debt underwriting. Net interest income was down mostly due to decreased securities borrowed and loaned matched book business and interest rates. Asset management increased due to more assets under management and greater profitability. Other income increased mostly due to several miscellaneous items.

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JEFFERIES GROUP, INC. AND SUBSIDIARIES

     Total non-interest expenses increased 6% to $421.3 million, compared to $398.1 million for the first nine months of 2000. Compensation and benefits increased $7.9 million, or 3%, mostly due to increased headcount. Other expense increased $5.5 million or 32%, largely due to higher legal expense. Floor brokerage and clearing fees increased $5.5 million, or 20%, due to increased volume of business executed on the various exchanges. Travel and promotional increased $3.5 million, or 26%, largely due to an increase in business travel. Occupancy and equipment rental increased $2.9 million, or 21%, mostly due to office expansion. Communications decreased $2.1 million, or 6%, mostly due to negotiated refunds and lower rate charges on some services.

     Earnings before income taxes were $74.1 million compared to $73.1 million for the same prior year period. The effective tax rate was approximately 42% for the first nine months of both 2001 and 2000. Net earnings were up $759,000 to $42.9 million, compared to $42.1 million for the same prior year period.

     Basic net earnings per share were $1.76 for the nine months of 2001 on 24,397,000 shares compared to $1.76 in the 2000 period on 23,862,000 shares. Diluted net earnings per share were $1.67 for the first nine months of 2001 on 25,746,000 shares compared to $1.74 in the comparable 2000 period on 24,220,000 shares.

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JEFFERIES GROUP, INC. AND SUBSIDIARIES

Revenues by Source

     The following provides a breakdown of total revenues by source for the three months and nine months ended September 28, 2001 and September 29, 2000.

		Three Months Ended
		Sept. 28, 2001					Sept. 29, 2000
				% of					% of
				Total					Total
		Amount		Revenues			Amount		Revenues
		(Dollars in thousands)
Commissions and principal transactions:
	Equities	$	66,267		40	%	$	78,962		40	%
	International		13,093		8			19,706		10
	High Yield		17,035		10			11,848		6
	Convertible		8,153		5			6,031		3
	Other proprietary trading		982		1			309		—
	Total		105,530		64			116,856		59
Corporate finance			22,468		13			38,240		19
Interest			31,259		19			39,589		20
Asset management			4,652		3			2,941		2
Other			1,735		1			673		—
	Total revenues	$	165,644		100	%	$	198,299		100	%

		Nine Months Ended
		Sept. 28, 2001					Sept. 29, 2000
				% of					% of
				Total					Total
		Amount		Revenues			Amount		Revenues
		(Dollars in thousands)
Commissions and principal transactions:
	Equities	$	251,572		43	%	$	248,521		43	%
	International		48,192		8			64,223		11
	High Yield		51,114		9			32,464		6
	Convertible		25,257		4			19,073		3
	Other proprietary trading		3,032		—			3,645		1
	Total		379,167		64			367,926		64
Corporate finance			83,557		14			73,114		13
Interest			109,535		18			124,240		22
Asset management			15,192		3			7,249		1
Other			3,798		1			3,148		—
	Total revenues	$	591,249		100	%	$	575,677		100	%

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JEFFERIES GROUP, INC. AND SUBSIDIARIES

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     Many aspects of the Company’s business involve substantial risks of liability. In the normal course of business, the Company and its subsidiaries have been named as defendants or co-defendants in lawsuits involving primarily claims for damages. The Company’s management believes that pending litigation will not have a material adverse effect on the Company.

Item 2. Changes in Securities and Use of Proceeds

     During July 2001, the Company issued 312,207 shares of restricted stock as consideration for the purchase of minority interests in FS Private Investment LLC and FS Private Investments III LLC. The securities were issued in a transaction not involving a public offering and were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

     During September and October 2001, the Company issued 458,333 common stock shares (443,333 of which are restricted common stock shares) to the owners of Lawrence Helfant, Inc. in connection with and as partial consideration for the Company’s acquisition of Lawrence Helfant, Inc. The securities were issued in a transaction not involving a public offering and were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

Item 6. Exhibits and Reports on Form 8-K

     (b)  Reports on Form 8-K.

          None.

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JEFFERIES GROUP, INC. AND SUBSIDIARIES

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	JEFFERIES GROUP, INC. (Registrant)
Date: November 9, 2001	By:	/s/ Joseph A. Schenk
		Joseph A. Schenk Chief Financial Officer

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