Investments

We have investments in Jefferies Finance, Jefferies LoanCore LLC (“Jefferies LoanCore”) and KCG Holdings, Inc. (“KCG”). Our investments in Jefferies Finance and Jefferies LoanCore are accounted for under the equity method and are included in Loans to and investments in related parties on the Consolidated Statements of Financial Condition with our share of the investees’ earnings recognized in Other revenues in the Consolidated Statements of Earnings. Our investment in KCG is accounted for at fair value by electing the fair value option available under U.S. GAAP and is included in Financial instruments owned, at fair value - Corporate equity securities on the Consolidated Statements of Financial Condition with changes in fair value recognized in Principal transaction revenues on the Consolidated Statements of Earnings. We have limited partnership interests of 11% and 51% in Jefferies Capital Partners V L.P. and the SBI USA Fund L.P. (together, “JCP Fund V”), respectively, which are private equity funds managed by a team led by Brian P. Friedman, one of our directors and our Chairman of the Executive Committee.

Jefferies Finance

On October 7, 2004, we entered into an agreement with Massachusetts Mutual Life Insurance Company (“MassMutual”) and Babson Capital Management LLC (which is now Barings, LLC) to form Jefferies Finance, a joint venture entity. Jefferies Finance is a commercial finance company whose primary focus is the origination and syndication of senior secured debt to middle market and growth companies in the form of term and revolving loans. Loans are originated primarily through the investment banking efforts of Jefferies. Jefferies Finance may also originate other debt products such as second lien term, bridge and mezzanine loans, as well as related equity co-investments. Jefferies Finance also purchases syndicated loans in the secondary market and acts as an investment advisor for various loan funds.

At February 28, 2017, we and MassMutual each had equity commitments to Jefferies Finance of $600.0 million, for a combined total commitment of $1.2 billion. At February 28, 2017, we had funded $493.9 million of our $600.0 million commitment, leaving $106.1 million unfunded. The investment commitment is scheduled to expire on March 1, 2018 with automatic one year extensions absent a 60 day termination notice by either party.

Jefferies Finance has executed a Secured Revolving Credit Facility with us and MassMutual, to be funded equally, to support loan underwritings by Jefferies Finance. The Secured Revolving Credit Facility bears interest based on the interest rates of the related Jefferies Finance underwritten loans and is secured by the underlying loans funded by the proceeds of the facility. The total Secured Revolving Credit Facility is a committed amount of $500.0 million at February 28, 2017. Advances are shared equally between us and MassMutual. The facility is scheduled to mature on March 1, 2018 with automatic one year extensions absent a 60 day termination notice by either party. At both February 28, 2017 and November 30, 2016, we had funded $0.0 million of our $250.0 million commitment. During the three months ended February 28, 2017 and February 29, 2016, $1.1 million and $2,000 of interest income, respectively, and unfunded commitment fees of $0.3 million and $0.3 million, respectively, are included in the Consolidated Statements of Earnings related to the Secured Revolving Credit Facility.

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



	February 28, 2017		November 30, 2016
Total assets	$	7,455.0	$	7,277.3
Total liabilities	6,471.9		6,336.3
Total equity	983.1		941.1
Our total equity balance	491.5		470.5

The results of Jefferies Finance were net earnings of $42.0 million for the three months ended February 28, 2017 and a net loss of $44.7 million for the three months ended February 29, 2016.

We engage in debt capital markets transactions with Jefferies Finance related to the originations and syndications of loans by Jefferies Finance. In connection with such services, we earned fees of $66.2 million and $19.4 million for the three months ended February 28, 2017 and February 29, 2016, respectively, recognized in Investment banking revenues in the Consolidated Statements of Earnings. In addition, we paid fees to Jefferies Finance in respect of certain loans originated by Jefferies Finance of $2.1 million during the three months ended February 28, 2017, which are recognized as Business development expenses in the Consolidated Statements of Earnings.

We act as a placement agent for CLOs managed by Jefferies Finance, for which we recognized fees of $2.7 million for the three months ended February 28, 2017, which are included in Investment banking revenues on the Consolidated Statement of Earnings. At February 28, 2017 and November 30, 2016, we held securities issued by CLOs managed by Jefferies Finance, which are included within Financial instruments owned, and provided a guarantee whereby we are required to make certain payments to a CLO in the event that Jefferies Finance is unable to meet its obligations to the CLO. Additionally, we have entered into participation agreements and derivative contracts with Jefferies Finance based upon certain securities issued by the CLO. We have recognized revenue of $0.1 million and $1.4 million during the three months ended February 28, 2017 and February 29, 2016, respectively, relating to the derivative contracts.

Under a service agreement, we charged Jefferies Finance $20.2 million and $21.1 million for services provided during the three months ended February 28, 2017 and February 29, 2016, respectively. At February 28, 2017, we had a receivable from Jefferies Finance of $18.0 million included within Other Assets, and at November 30, 2016, we had a payable to Jefferies Finance of $5.8 million included within Accrued expenses and other liabilities, on the Consolidated Statements of Financial Condition.

We enter into OTC foreign exchange contracts with Jefferies Finance. In connection with these contracts, at February 28, 2017 and November 30, 2016, we had $0.3 million and $4,000, respectively, recorded in Financial instruments sold, not yet purchased on the Consolidated Statements of Financial Condition.

Jefferies LoanCore

On February 23, 2011, we entered into a joint venture agreement with the Government of Singapore Investment Corporation (“GIC”) and LoanCore, LLC and formed Jefferies LoanCore, a commercial real estate finance company. In March 2016, the Canada Pension Plan Investment Board acquired a 24% equity interest in Jefferies LoanCore through a direct acquisition from the GIC. Jefferies LoanCore originates and purchases commercial real estate loans throughout the U.S. with the support of the investment banking and securitization capabilities of Jefferies and the real estate and mortgage investment expertise of the GIC and LoanCore, LLC. Jefferies LoanCore has aggregate equity commitments of $400.0 million. At February 28, 2017 and November 30, 2016, we had funded $122.9 million and $70.1 million, respectively, of our $194.0 million equity commitment and have a 48.5% voting interest in Jefferies LoanCore.

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



	February 28, 2017		November 30, 2016
Total assets	$	1,707.7	$	1,827.2
Total liabilities	1,397.3		1,505.0
Total equity	310.4		322.2
Our total equity balance	150.5		156.3

The net earnings of Jefferies LoanCore were $6.2 million and $5.4 million for the three months ended February 28, 2017 and February 29, 2016, respectively.

We enter into master repurchase agreements with Jefferies LoanCore. For the three months ended February 28, 2017 and February 29, 2016, we earned $0.6 million and $2.8 million, respectively, of interest income and fees related to these agreements. At November 30, 2016, we had reverse repurchase agreements of $68.1 million in connection with these agreements.

Under a service agreement, we charged Jefferies LoanCore $47,000 and $47,000 for three months ended February 28, 2017 and February 29, 2016, respectively. Receivables from Jefferies LoanCore, included within Other assets on the Consolidated Statements of Financial Condition, were $16,000 and $16,000 at February 28, 2017 and November 30, 2016, respectively.

We also enter into OTC foreign exchange contracts with Jefferies LoanCore. In connection with these contracts, we had $5.4 million and $8.3 million at February 28, 2017 and November 30, 2016, respectively, recorded in Payables - brokers, dealers and clearing organizations and $1.0 million at February 28, 2017 recorded in Financial instruments sold, not yet purchased on the Consolidated Statements of Financial Condition.

KCG

At February 28, 2017 and November 30, 2016, we owned approximately 24% of the outstanding common stock of KCG. We elected to record our investment in KCG at fair value under the fair value option, as the investment was acquired as part of our capital markets activities. The valuation of our investment is based on the closing exchange price of KCG and included within Level 1 of the fair value hierarchy. Changes in the fair value of our investment in KCG were $(4.6) million and $(37.3) million for the three months ended February 28, 2017 and February 29, 2016, respectively, and are recognized in Principal transactions revenues on the Consolidated Statements of Earnings.

The following is a summary of selected financial information for KCG at December 31, 2016 and September 30, 2016, the most recently available public financial information for the company (in millions):



	December 31, 2016		September 30, 2016
Total assets	$	6,261.3	$	6,750.6
Total liabilities	4,904.0		5,311.0
Total equity	1,357.3		1,439.6

For the three months ended December 31, 2016 and December 31, 2015, KCG reported net income (loss) of $196.2 million and $(3.0) million, respectively.

We have separately entered into securities lending transactions with KCG in the normal course of our capital markets activities. The balances of securities borrowed and securities loaned were $2.1 million and $2.2 million, respectively, at February 28, 2017, and $9.2 million and $9.2 million, respectively, at November 30, 2016.

JCP Fund V

The amount of our investments in JCP Fund V included within Investments in managed funds on the Consolidated Statements of Financial Condition was $28.6 million and $29.1 million at February 28, 2017 and November 30, 2016, respectively. We account for these investments at fair value based on the NAV of the funds provided by the fund managers (see Note 2, Summary of Significant Accounting Policies). The results from these investments were losses of $0.7 million and $3.0 million for the three months ended February 28, 2017 and February 29, 2016, respectively, and are included in Asset management fees and investment income (loss) from managed funds in the Consolidated Statements of Earnings.

At February 28, 2017 and November 30, 2016, we were committed to invest equity of up to $85.0 million in JCP Fund V. At February 28, 2017 and November 30, 2016, our unfunded commitments relating to JCP Fund V was $11.1 million and $11.5 million, respectively.

The following is a summary of selected financial information for 100.0% of JCP Fund V, in which we own effectively 35.6% of the combined equity interests (in thousands):



	December 31, 2016 (1)		September 30, 2016 (1)
Total assets	$	80,403	$	82,689
Total liabilities	81		73
Total partners’ capital	80,322		82,616



	Three Months Ended
	December 31, 2016 (1)			December 31, 2015 (1)
Net decrease in net assets resulting from operations	$	(2,294	)	$	(7,886	)


(1)	Financial information for JCP Fund V within our financial position and results of operations at February 28, 2017 and November 30, 2016 and for the three months ended February 28, 2017 and February 29, 2016 is included based on the presented periods.