Investments

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

Jefferies Finance

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

At August 31, 2018, we and MassMutual each had equity commitments to Jefferies Finance of $750.0 million, for a combined total commitment of $1.5 billion. At August 31, 2018, we had funded $706.5 million of our $750.0 million commitment, leaving $43.5 million unfunded. The investment commitment is scheduled to expire on March 1, 2019 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, which bears interest based on the interest rates of the related Jefferies Finance underwritten loans and is secured by the underlying loans funded by the proceeds of the facility. The total Secured Revolving Credit Facility is a committed amount of $500.0 million at August 31, 2018. Advances are shared equally between us and MassMutual. The facility is scheduled to mature on March 1, 2019 with automatic one year extensions absent a 60 day termination notice by either party. At August 31, 2018, we had funded $0.0 million of our $250.0 million commitment. The following summarizes the activity included in our Consolidated Statements of Earnings related to the facility (in millions):



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

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



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



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

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



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

(1)

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

(2)

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


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


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


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

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

We enter into OTC foreign exchange contracts with Jefferies Finance. In connection with these contracts we had $0.2 million recorded in Payables—brokers, dealers and clearing organizations and $1.5 million recorded in Financial instruments owned, at fair value in our Consolidated Statements of Financial Condition at August 31, 2018 and November 30, 2017, respectively.

JCP Fund V

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



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

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

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



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


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

Epic Gas

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

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



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



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


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


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

Jefferies LoanCore

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

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

KCG

Our investment in KCG was sold on July 20, 2017. The change in the fair value of our investment in KCG was a net gain of $2.2 million and $93.4 million for the three and nine months ended August 31, 2017, respectively, and was included in Principal transaction revenues in our Consolidated Statements of Earnings. We had 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 was based on the closing exchange price of KCG and included in Level 1 of the fair value hierarchy. For the three months ended March 31, 2017 and December 31, 2016, KCG reported net earnings of $3.2 million and $196.2 million, respectively.