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Jefferies Group LLC Reports Fiscal Third Quarter 2018 Financial Results

September 21, 2018

NEW YORK--(BUSINESS WIRE)--Sep 21, 2018--Jefferies Group LLC, a wholly-owned subsidiary of Jefferies Financial Group Inc. (NYSE: JEF), today announced financial results for its fiscal third quarter 2018.

Highlights for the three months ended August 31, 2018:

Total Net Revenues of $778 million Investment Banking Net Revenues of $452 million Total Equities and Fixed Income Net Revenues of $310 million Earnings Before Income Taxes of $87 million Net Earnings of $60 million (reflects a 31% tax rate, which includes the impact of certain unusual discrete items related to our non-U.S. subsidiaries planning in respect of the Tax Cuts and Jobs Act (the “Tax Act”))

Highlights for the nine months ended August 31, 2018:

Total Net Revenues of $2,421 million, up 6% versus the first nine months of last year, excluding last year’s $93 million gain on the sale of KCG¹ Investment Banking Net Revenues of $1,392 million, up 12% compared to the same period last year Total Equities and Fixed Income Net Revenues of $974 million Earnings Before Income Taxes of $332 million Net Earnings of $97 million after Provisional Tax Act-related charge of $160 million, $108 million of which is non-cash; without this charge, we would have reported Adjusted Net Earnings of $258 million²

Rich Handler, Chairman and Chief Executive Officer, and Brian Friedman, Chairman of the Executive Committee, commented: “Our third quarter revenues of $778 million reflect solid performances in Investment Banking, with revenues of $452 million, and in sales and trading where revenues grew to $310 million. The usual summer slow-down appeared to impact activity levels in both the primary and secondary debt markets.”

“Our Investment Banking results reflect lower Leverage Finance transaction levels during the period versus the second quarter of this year and the third quarter of last year. Advisory activity levels were also more muted during the period. Equity Capital markets revenues for the quarter were $139 million, an increase of 29% versus the second quarter and 62% versus last year’s third quarter. Compared to this year’s second quarter, we increased our market share and improved our market rankings in both our new issues businesses, as well as our advisory business. Our fourth quarter investment banking backlog is higher than that of any recent periods, and reflects the investments we have made to broaden and deepen our team and capabilities.”

“Our Equities Sales and Trading business enjoyed another solid quarter, with revenues of $171 million. We continue to add clients to the platform, particularly in Prime Brokerage and Electronic Trading. Fixed Income Sales and Trading volumes were light during the period, particularly in our international rates business. Fixed Income revenues were $140 million, up 17% from the second quarter, despite lower levels of client engagement. Our Emerging Markets business continued to perform well during the period, despite the challenging environment.”

As mentioned before, we expect our going forward tax rate to be about 27%. The higher effective tax rate for this quarter of 31% reflects this run rate plus the impact of certain discrete items related to our non-U.S. subsidiaries planning for the Tax Act.

The attached financial tables should be read in conjunction with our Quarterly Report on Form 10-Q for the quarter ended May 31, 2018 and our Annual Report on Form 10-K for the year ended November 30, 2017. Amounts herein pertaining to August 31, 2018 represent a preliminary estimate as of the date of this earnings release and may be revised in our Quarterly Report on Form 10-Q for the quarter ended August 31, 2018.

This release contains “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 results and performance, including our future market share and expected financial results. It is possible that the actual results may differ materially from the anticipated results indicated in these forward-looking statements. Please refer to our most recent Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from those projected in these forward-looking statements.

Jefferies Group LLC, the world’s only independent full-service global investment banking firm focused on serving clients for over 50 years, is a leader in providing insight, expertise and execution to investors, companies and governments. Our firm provides a full range of investment banking, advisory, sales and trading, research and wealth management services across all products in the Americas, Europe and Asia. Jefferies Group LLC is a wholly-owned subsidiary of Jefferies Financial Group Inc. (NYSE: JEF), a diversified financial services company.

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This presentation of Adjusted financial information is an unaudited non-GAAP financial measure. Adjusted financial information begins with information prepared in accordance with U.S. GAAP and then those results are adjusted to exclude the provisional tax charge of $160 million related to the enactment of the Tax Act in the first nine months of 2018. Adjusted financial information also begins with information prepared in accordance with U.S. GAAP and then those results are adjusted to exclude the $93 million gain on our equity investment in KCG Holdings Inc., which was sold in July 2017. The Company believes that the disclosed Adjusted measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors as they enable investors to evaluate the Company’s results excluding the impact of the provisional tax charge as a result of the enactment of the Tax Act and the gain on the sale of our equity investment in KCG Holdings Inc. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP.

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