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Executives

Richard B. Handler – Chairman of the Board, President & Chief Executive Officer

Peregrine C. De M. Broadbent – Chief Financial Officer & Executive Vice President

Joseph Schenk – Former Chief Financial Officer

Analysts

James Ellman – Seacliff Capital, LLC

William P. Tanona – Goldman Sachs

Jim [Delyle] – Cambridge Price

Douglas Sipkin – Wachovia Securities, Inc.

[Abi Goshe] – Banc of America Securities

Peter Kuechle – Frontier Capital Management Company, LLC

Patrick Pinschmidt – Merrill Lynch

Lauren Smith – Keefer, Bruyette & Woods, Inc.

Jefferies Group, Inc. (JEF) Q4 2007 Earnings Call January 7, 2008 11:00 AM ET

Operator

Welcome to the Jefferies’ investor conference call. A question and answer period will follow management’s prepared remarks. (Operator Instructions) As a reminder this conference call is being recorded. A press release was distributed via business wire before the market opened today and can be accessed at Jefferies website www.Jefferies.com.

Some of the comments made in this conference call may include forward-looking statements. These forward-looking statements may contain statements about management’s current expectations, strategic objectives, growth opportunities, business and prospects. These forward-looking statements are not statements of historical fact and represent only Jefferies belief’s as to future performance. They usually include the words continue, will, believe, should or other similar expressions. Actual results could differ materially from those projected in those forward-looking statements. Please refer to Jefferies annual report on Form 10K filed with the Securities & Exchange Commission on March 1, 2007 and the Jefferies’ Form 10Q & 8Ks for discussions of important factors that could cause actual results to differ materially from those projected in these forward-looking statements.

I would now like to introduce your host for today’s conference Mr. Richard Handler, Chairman & CEO of Jefferies. Mr. Handler you may begin your conference.

Richard B. Handler

Thank you for joining out call to elaborate on the press release we issued this morning regarding Jefferies’ 2007 year end results and to respond to any questions you may have. I am Rich Handler, CEO of Jefferies and with me on the call today are Brian Friedman Chairman of our Executive Committee, Hank Broadbent our new Chief Financial Officer and Joe Schenk our former Chief Financial Officer who retired from Jefferies on December 31st of last year.

Our goal on this call is to specifically explain the anticipated results for 2007 and our fourth quarter and answer any questions that you may have regarding our firm or the current environment. We historically have never given results guidance and do not intend to exchange that practice now or going forward. However, these are unique times and we believe this announcement and call are important and necessary.

We’d like to begin by providing some background to this morning’s release. It’s hard to imagine the last number of months being uglier for US financial services. For Jefferies and for a spectacular first six months of 2007 when our firm was clearly firing on almost every cylinder virtually overnight just with every one of our businesses was impacted at the exact same time by the market environment. We also made some business personnel and risk choices that we regret but have now fixed.

The facts are very simple. We are a company that has had seven and three quarter years of almost straight up growth. We have transitioned successfully from a relative pure broker into a full service global investment banking and securities firm. Our employees are heavily staked through significant [inaudible] ownership in our firm and as such we are well aligned with our outside shareholders. Our balance sheet is secure, highly liquid and grounded with long term capital that we have raised opportunistically at attractive rates and with very long maturities. Our balance sheet contains assets that we understand clearly, are marked properly and almost entirely against transparent market valuation. These are securities and assets that we know well and want to own.

We have had ample opportunities to venture beyond our areas of true expertise and comfort and we passed on each of these. Instead we have focused on our core operating businesses which we believe are healthy and full of opportunity for growth where we very much like our market position. We understand investment banking, sales and trading, research and asset management. We like these businesses and are good at them. Our clients value our expertise and need our services. There is opportunity for growth in each of our core businesses both domestically and globally.

All that being said and for successfully protecting our firm wide platform as chief stewards for 31 consecutive quarters in the face of a horrendous environment we expect to have loss about $24 million of our shareholders’ capital during the fourth quarter. Although this represents less than 1.5% of our over $1.8 billion shareholders’ equity we are disappointed with ourselves for allowing it to happen. Our press release highlights the fact that we had reasonable results in each of our core businesses: equities, fixed income and commodities and investment banking. Each of these businesses is healthy but none of them performed fully up to our expectations primarily because the environment was so difficult but also because of a mistake we made which we have now corrected.

The core businesses were seemingly not doing too badly so what went wrong? Our results for the fourth quarter were adversely affected by traded losses by two of our principal trading team, a minimal loss in our core high yield business versus our historically profitable results, losses on our investment in our hedge fund platform and finally despite the satisfactory results recorded by our investment bank we missed a bunch of expected revenues due to the postponement of numerous deals due to market condition. Additionally, we have been investing heavily in our company for the past seven years. There is always a lag time between new hires, new businesses and corresponding production and revenues. This confluence of events when combined with a need in our opinion to competitively compensate our most important asset, our people is the reason we expect to report a loss in the fourth quarter.

We would now like to put you directly in our shoes to see the decisions we made and why. In mid October when we released our third quarter earnings we indicated that October had begun on a very positive note after the Fed action. We had already recorded two extremely strong weeks in our trading asset management businesses and as we said on our earnings call our banking backlog indicated a likely result well in excess of the over $175 solidified million we now expect to report. Historically, the fourth quarter has always been our stronger and while we’re not counting on this pace for the first two weeks to be sustainable for the full period we were extremely active across our platform and were benefiting from the intrinsic operating level in our business through an instable environment.

At that time we were feeling confident about the potential for our typical fourth quarter home stretch which would have allowed us to have another full year of solid results. Unfortunately, as we all now know November and December were brutal and I would like to provide you with an exact road map of the items to which we just referred. First, we lost approximately $17 million and $15 million from two principal trading teams. We immediately shutdown one operation and began significantly hedging out the risk of the other as soon as loss limits were exceeded. Both of these teams are made up of quality people who we know well and they had clear track records as money makers focused on securities in which we have true expertise but they got caught up in the meltdown and the money was gone. Our risk management systems worked and we limited the losses but they both happened at the exact same time and it hurt.

Second, we loss $14 million in the fourth quarter on our US hedge fund capital investment seeding program compared to revenues of $10 million and $5 million in the first and second quarters respectively. We have 11 separate funds in which have an interest and eight of them had positive returns for the year. Although we believe they are all quality portfolio managers the fourth quarters was tough on many of them and overall we loss money. We believe strongly in this business and our managers but will of course be vigilant in our ongoing risk oversight and capital allocation.

Third, we anticipate Jefferies high yield trading will record a fourth quarter loss of revenues of approximately $5 million compared to positive $34 million in Q2. It is important to know that despite the downturn in results are core high yield trading business has weathered the storm extremely well. Under the old Jefferies Partners Opportunity Fund structure we were up 2.9% net for the first quarter of the year. We transitioned to the new Jefferies High Yield Trading Platform in the second quarter with a positive 2.5% net. In a course of one of the worse trading environments I have seen in my career we were down 70 basis points in the third quarter and an estimated 60 basis points in the fourth quarter hardly a disaster. We protected our and our investor’s capital, employed zero leverage and have drawn down and employed only a fraction of our available capital. That said we usually make a reasonable amount of money in this business so when a good level of profits are replaced even by minor losses it has a meaningfully impact on the Jefferies Group’s bottom line.

As we said earlier we are not going to give guidance going forward and the future is always uncertain. That being said we’d like to walk you through some specific maps because it may help you better understand the operating model of our firm. If you add up the four enumerated losses from the fourth quarter it totals a loss of approximately $51 million. If you compare that loss to the second quarter and the few trading teams mentioned not meaningfully in operation Jefferies High Yield trading and our investment in the US hedge funds together generated positive revenues of $39 million. The differential in review is approximately $90 million. Given that we have already absorbed the fix costs of these operations at, for example, an 80% incremental contribution rate and a 39% tax rate net earnings would have been $44 million higher. In a separate example in light of the fact that our fourth quarter is generally our strongest of the year for investment banking an incremental $50 million in banking revenue, a 75% incremental contribution rate and a 39% tax rate would yield incremental net earnings of $23 million.

In mid October we were experiencing the positive side of all these businesses and our outlook was for a strong finish to the year consistent with the then prevailing environment and our past experience. We provide these illustrations not as a prediction of the future but to confirm to you our view of the leverage of our platform which unfortunately worked against us in November and December. The bottom line is that these revenues did not materialize and the losses did.

We have taken immediate and decisive action to address a number of issues. We have shut down the trading accounts that lost the money, we terminated a number of employees in these and other business units, we changed management in certain areas, we are modifying some of our compensation formula and more than ever we are focused on containing our non compensation expenses. As a result of the losses and overall revenue shortfall as well as the mix of revenues which affect the company’s flexibility in its year end compensation process Jefferies expects to incur significantly higher compensation costs in the fourth quarter and this is the primary variance that results in the quarterly loss.

Subject to market conditions we believe in 2008 we can achieve appropriate profits in high yield and distress trading as we have for 17.5 of the past 18 years and improve and then grow the profitability of all our trading asset management businesses. Our investment bank has great momentum and continues to evolve towards the global leadership position we believe we can achieve.

In 2006 Brian and I were granted restricted shares in respect to 2007 with a current value at that time of $6.5 and $13 million respectively. In light of our recent results we will receive no bonuses in respect to 2007 and we have at the compensation committee at the board to reduce our future compensation by the value of the number of shares we were granted effectively negating our grant for 2007. We are doing it this way only because these grants have been largely amortized already and by reducing our future compensation the benefits will be reflected in our results over time.

Through September Jefferies had reported seven and three quarter years of record performance. Unlike many of our competitors we have no accounting issues, no series of one time write downs and no structural issues based on faulty business or miss marked inventory. We expect our net revenues for 2007 will be an all time record and are expecting earnings in excess of $140 million will be the third highest in the firm’s 47 year history. We are proud of Jefferies and believe our firm has tremendous momentum. We do not know what the future holds regarding the market environment. It is possible that the market rebounds quickly possibly spurred by Fed action or a global growth [inaudible]. Alternatively we will be living the second half of 2007 for some period of time.

We have a clean balance sheet, we are highly liquid. We have 2,545 highly motivated employee shareholders and a loyal client base that understands our ability to add value. Regardless of the environment we are committed to doing our absolute best every single day and delivering value for our shareholders, clients, employees and bond holders. We are no happy with our fourth quarter results but we chose to get them out of the way early so we can all go back to work immediately and do our absolute best in 2008. With that we’ll be happy to answer any questions you would like to ask.

Question-and-Answer Session

(Operator Instructions) Your first question comes from the line of James Ellman with Seacliff Capital.

James Ellman – Seacliff Capital, LLC

Could you comment on the increase in the compensation ratio you mentioned? And also, the total non interest expense line in aggregate? But, would you expect it would actually go down in the first quarter with the actions you’re taking?

Peregrine C. De M. Broadbent

I’ll take the second part first. On the non comp operating expenses we expect that those expenses will level off at current levels and potentially go down a little bit into 2008. We previously disclosed that in 2007 particularly in the second half we were baring duplicate real estate costs in London as well as some additional costs in New York. That will continue a little bit into the first and second quarters of 2008 but is pretty quickly going away. On some of our other expenses we believe that over the next several quarters we will be able to contain them and possibly reduce them so I think that the aggregate answer to your question is that our fourth quarter levels should prevail into the early part of next year, not go up and over time we may be able to slightly reduce them.

As far as the comp expense we haven’t finalized our 2007 numbers yet and the comp is still being worked on but our expectation is that it will be meaningfully higher for the quarter because an x percentage point change for the year translates into four times that for the quarter. So, for example we’ve been running in prior quarters at 54.5, if we are up on the order of 500 basis points or so which would not be a surprise to us. That actually raises the quarterly rate by over 2,000 basis points. I think that gives you a bit of guidance but it’s also being completed and we’ll be announcing final numbers two weeks from Wednesday.

James Ellman – Seacliff Capital, LLC

Alright. And, would you expect that that comp expense ratio or comp expense as a total dollar figure would drop significantly as you move into 2008?

Peregrine C. De M. Broadbent

Yes.

James Ellman – Seacliff Capital, LLC

Finally, with the decrease in comp ration in 2008 versus what we’ve been seeing so far in terms of particularly in the debt underwriting activity going on in the market should we expect if the trends continue on the revenue side to expect the company to make money in the first half of the year? If your current revenue trends continue?

Richard B. Handler

We’re in the business of making money and we want our business model to make money. We’re not predicting the future but we’re not use to not making money and we plan to do our best going forward.

James Ellman – Seacliff Capital, LLC

But, could you give us any commentary or any sort of insight in terms of what you’re seeing currently in terms of revenue trends?

Richard B. Handler

It’s about three days into the quarter. It hasn’t been a wonderful week last week and we’re basically putting 2007 behind us getting ready for 2008.

Peregrine C. De M. Broadbent

The quarter begins in earnest today.

Operator

Your next question comes from the line of William Tanona with Goldman Sachs.

William P. Tanona – Goldman Sachs

Could you guys give us a little bit more granularity as to what the trading strategies or the trading desk were that loss the $17 million and the $15 million? And, just given some of the comments you made it sounded like these were desks that were just opened in the fourth quarter? I wanted to see if that was right? As well if these were new strategies?

Peregrine C. De M. Broadbent

They are desks that were opened essentially at the beginning of the third quarter and we have in addition to our high yield equity convertible fixed income general operations we had about six different trading teams that were trading on more of a principal basis. Some of them have been with us for longer periods of time. These two unfortunately, started up on early July and because of the environment incurred the losses. So, it was two out of six. The two were shut down the other four were all profitable in the fourth quarter.

Richard B. Handler

And the securities they were trading were high yield and listed equities.

William P. Tanona – Goldman Sachs

In terms of you talked about head count outside of those desks and you talked about other head count reductions as well. Can you give us a sense as to the size and the magnitude and where those were impacted?

Richard B. Handler

The narrow head count reduction of the most recent number of weeks is am modest reduction in the order of 15 to 20 people. From time-to-time over the course of 2007 as we have grown and absorbed our growth we have had some number of terminations but these specific ones that we’re referring to are relatively modest in size. This is not a layoff it was selective terminations either because of performance or other changes in the environments.

William P. Tanona – Goldman Sachs

Then I guess lastly as I think about the comp I mean you guys had been pretty aggressive in building out over the course of the last couple of years even with this fourth quarter results you still put up record revenues so I guess I’m looking at the compensation line and saying your revenues seem to be up around 7% year-over-year to records yet your comp is up 20% or appears that it’s going to be up 20%. Was the primary driver of that because of all these new hires that you had made? Or, was it more of the competitive threats that you felt out there? I’m just trying to connect the dots.

Richard B. Handler

It’s always a few different things but it’s not so much the hires we made. It is the losses we absorbed because just to be clear where the numerating $51 million of losses from four sources and we’re suggesting that our revenue for the quarter, I’m just going back to our press release to get the exact number, $345 to $365 and let’s just use the midpoint for a moment. If $51 million of losses had not materialized that means we actually had revenues in excess of $400 million. So, first of all we’re paying comp and incurring costs on revenue that is essentially negated by the losses. Secondly, to the extent that we expected and probably the whole market expected stronger revenues in the second half of the year particularly in the fourth quarter to the extent that those revenues did not materialize there is some amount of fixed costs that’s associated with it that you can’t eliminate fast enough.

So, there’s really a number of factors. Also, a little bit of severance. But, those are the two primary drivers. The fact that we have losses that offset revenues and you’re compensating on the positive revenues as well as actually having a small amount of costs associated with the losing businesses. Secondly, you have a certain amount of fixed costs and you can argue that they’re not necessarily fixed costs in the traditional sense, they can be somewhat variable costs but in short periods of time they are relatively fixed. So, the timing of all of this being in the fourth quarter being that there’s no other quarters to the year in which to recover it the fact that the revenue disappears even if it comes next year it doesn’t help this quarter it all contributes to the number.

William P. Tanona – Goldman Sachs

That’s helpful color. Lastly, on the asset management side you also talked about the losses there. Have you rethought your strategies as it pertains to kind of the hedge fund business and your willingness and ability to seed additional funds?

Peregrine C. De M. Broadbent

We continue to believe in the strategy. We continue to be willing to seed funds. We do it on a very, very selective basis. If you caught what we said we have currently 11 separate funds. Eight of them had positive returns for the year so the losses derived from a relatively small number of them. Obviously, the overall results were a little weaker in the fourth quarter. These aren’t big numbers. In other words, versus what we’re trying to do we think that this unfortunately is the vagaries of the markets overtime. If the only thing that happened in our quarter was that our hedge funds had had a weaker result we wouldn’t be having this phone call. It’s the aggregation of that with all of the other factors that bring us to this call.

William P. Tanona – Goldman Sachs

I guess just as I think about those numbers if that many funds had performed well or had positive results to have that big of a decline in the asset management revenues would suggest that they had pretty outsized negative returns. Is that correct?

Peregrine C. De M. Broadbent

You’re right to try to isolate it. It is two factors. One is the level of negative returns and the other is the relative capital. In other words, each of our funds are in different points in their gestation so that the amount of capital that’s committed to each fund will vary. We won’t go into the specifics of how much capital is in a particular fund or the individual performance of a specific fund but if eight out 11 were positive and three out of 11 were negative one could assume that one or more of the negative funds were among our larger funds and that can happen obviously.

Operator

Your next question comes from the line of Jim [Delyle] with Cambridge Price.

Jim [Delyle] – Cambridge Price

My question gets at just trying to determine that the write downs are over in terms of some of the investment. I refer back to a particular – you folks and I’m not sure which of your funds of even if it is a fund that you’re referring to in the write down today with the $25 million investor and NovaStar preferred back in July of last year. I was wondering if that was included in the write downs and which funds they were in? Or, if they’re not included whether Jefferies has any risk to that?

Peregrine C. De M. Broadbent

That holding is in a fund that is substantially third party capital. It represents approximately 4% of the total capital committed to that fund. So, it’s not material to that fund. Moreover, Jefferies economic investment in that fund is approximately 8%. So, 8% on $25 million is $2 million. That would be the gross exposure of Jefferies and yes it has been marked to market and we believe is not material in anyway to Jefferies.

Operator

Your next question comes from the line of Douglas Sipkin with Wachovia.

Douglas Sipkin – Wachovia Securities, Inc.

Just a broader question if you could provide I guess relative to the past what percentage of compensation is variable now generally speaking compared to maybe 2003, 2004 and 2005?

Peregrine C. De M. Broadbent

We don’t have off the top of our heads what that percentage will be. But, what I would point out to you is that there’s no materially change in the amount of our compensation that is “variable”. What you have to recognize is that variable compensation takes several forms. So, in the case of some of our personnel it varies with the revenue that the produce but once they produce that revenue that compensation can be paid on a monthly or a quarterly basis. The best example of that would be our sales people. In the case of our bankers it is also variable. It doesn’t follow as strict as set of formulas and is paid at year end. So, apropos your question the variability of our overall compensation probably stays at very high levels and higher than possibly others, I don’t know what others do. But, at any given short term period that variability can be very limited because payouts take place on a periodic basis. They don’t come back so that compensation from all sales people for the earlier parts of the year has already been paid. So, there’s a definition of variable that is correct but you have to distinguish between that which is directly tied to revenue and that which is more discretionary and has even greater variability.

Douglas Sipkin – Wachovia Securities, Inc.

Okay. That’s helpful. Then just shifting gears a little bit spending a little more time on the asset management business given that it looks like we are in a new environment with volatility and less correlation, less predictability have you guys given some thought to maybe rolling out or acquiring more traditional asset management products which could maybe provide a little bit more stability and maybe sort of work like I guess an asset management business should in terms of generating more stable fee income. Because, it does appear that volatility is here to stay.

Peregrine C. De M. Broadbent

We are constantly looking at opportunities. We’ve been reluctant to go into the more standard asset management businesses primarily because they tend to have lower growth rates and at the same time the valuations have been relatively heady and we haven’t felt that would make a real value contribution to our platform. We find that the potential margins in the alternative asset platforms are very attractive and while others have acquired their way into it we have tried steadily to build our way into it. There is a matter of gaining critical mass and gaining maturity in it. We obviously haven’t got there in these last few months may have slowed it down a little but we still very much believe in our potential. It doesn’t rule out the possibility that we would acquire in the future.

Richard B. Handler

By the same token we’re living this everyday. We recognize that the environment has changed. We recognize that valuations have changed, opportunities have changed. And, one of the good pieces of news through all this is we still have a very stable, clean platform to build from. By the same token we recognize that risk and volatility seems to be every where we step these days and we’re being prudent about it and making sure that we do the right thing on a daily basis and look at all opportunities.

Douglas Sipkin – Wachovia Securities, Inc.

Just finally, which I always ask just your pulse – the high yield market – there is some feel that the fall rates in 2008 are going to jump materially off of a very low number 06 and 05. Is that necessarily a negative for you guys or is it opportunities that you might be able to discover in the distressed world or if you anticipate that stuff correctly?

Richard B. Handler

First of all I don’t think there’s any question that the fall rates are going to have to go up here. There still at a relatively historical low. So, when we raise our new high yield opportunity trading business – set it up with a six year lockup anticipating some pretty ugly times. And, I think we’re positioned extremely well, that’s what we were trying to do the last six months is make sure that we did not dig ourselves into too big of a hole to when it gets really ugly to be able to take advantage of it. That’s really how we’re situation right now. [Inaudible] between 60 and 70 basis points by the same token it’s the type of environment where we can get really smacked very hard and I do believe that falls are coming and I want to make sure we’re positioned to take advantage of it. It’s more of a long term strategic money making opportunity than any weekly, monthly or quarterly but it represents a huge opportunity for us and that’s why we have more capital than ever, why we haven’t employed any leverage and why we had the capital locked up for six years.

Operator

Your next question comes from the line of [Abi Goshe] with Banc of America Securities

[Abi Goshe] – Banc of America Securities

On the compensation line were there any contingent payments triggered during the quarter related to your acquisitions you guys had made over the years?

Peregrine C. De M. Broadbent

In connection with several of the acquisitions there are earn out payments that are made from time-to-time but they do apply continuously through the year so the answer is yes.

[Abi Goshe] – Banc of America Securities

Now, were they relatively outsized of what you guys were initially thinking?

Peregrine C. De M. Broadbent

Two points: number one, they weren’t extraordinary but number two, they are not in the compensation line of our income statement they are added to the acquisition price and go on to our balance sheet.

[Abi Goshe] – Banc of America Securities

[Inaudible] One other question you guys said you had roughly $51 million in losses in Q4 and that compared to $39 million in positive revenues in Q2 or was that in Q3?

Peregrine C. De M. Broadbent

We were comparing it to Q2.

Richard B. Handler

We were comparing it to what we hope is a stabled environment versus a non stable environment to give you a sense of the magnitude.

[Abi Goshe] – Banc of America Securities

Do you have the corresponding Q3 number as it relates to those four areas?

Peregrine C. De M. Broadbent

If you go to our third quarter release you will see that our high yield I think was negative $7 million revenues and in the asset management area you’ll see that the loss in our asset management investment I believe was approximately $12 million. The two trading teams’ numbers are not separately broken out so you wouldn’t see that there. But, you would find those two numbers there.

Richard B. Handler

But you also have to contract the third quarter which historically has been one of our slower quarters with the fourth quarter which has historically been one of our best quarters which really magnifies the variance.

Operator

Your next question comes from the line of Peter Kuechle with Frontier Capital.

Peter Kuechle – Frontier Capital Management Company, LLC

Just a quick question given the quote in the press release about substantial liquidity and where your stock stands today just your thoughts on buybacks.

Richard B. Handler

We did buy back stock during the quarter. I believe the number was roughly 3.4 million shares is what we purchased which for us was a very large by historical standards purchase. I think the average price was roughly $24.25. So, give me a C- on my trading ability today versus then. But, the point is that we believe in the platform of this company and the one thing that is fortunate is that we’re in a situation where we’re not going outside looking for cash to sure up our business. We have a very strong capital base and one of the things you do in times like this is take advantage of it and buy stock in. But, by the same token we’re very cognoscenti of making sure we do well by the rating agencies and the bond holders so we balance all constituencies.

Operator

(Operator Instructions) Your next question comes from the line of Patrick Pinschmidt with Merrill Lynch.

Patrick Pinschmidt – Merrill Lynch

I’m just curious what if any changes you may have made to your risk systems given what happen with the two principal trading teams? And, beyond that if you’re comfortable with the levels of the remaining teams.

Richard B. Handler

The reality is our risk systems work extremely well. We knew the businesses that we were in, we knew the securities that we owned, we knew the people who were managing them and we knew the thresholds that we were willing to basically live with. The reality is that in a very short period of time volatility got exceptionally high and we decided to close down these positions and even from the moment we decide to close them down to the actual execution of closing them down there was some [inaudible] there as well because as you all remember in November and December there weren’t a whole lot of bids that were abundant. We found them and we dealt with them. I would just add in the spectrum of our entire firm and the global capital base in all of our businesses while we’re extremely embarrassed and not happy about them they are not major events they just happened all at the same time when we had a revenue shortfall.

Operator

Your next question comes from the line of Lauren Smith with KBW.

Lauren Smith – Keefer, Bruyette & Woods, Inc.

Just two quick ones – what is remaining on your current buy back authorization?

Peregrine C. De M. Broadbent

I believe – how much was given? 1 million and 1.6 million, is that right?

Richard B. Handler

Somewhere less than $2 million shares.

Lauren Smith – Keefer, Bruyette & Woods, Inc.

Okay. Given that you bought around 3.4 at significantly higher prices would we expect potentially an additional authorization?

Peregrine C. De M. Broadbent

Remember, we do issue stock to people as part of compensation. We are very mindful of dilution and we basically want to make sure that we do the right things in terms of dealing with our share account. We have a regular board meeting in two weeks which would normally be for our fourth quarter numbers and we’ll address it then.

Richard B. Handler

And, we are in a blackout until after that board meeting and the formal announcement of our numbers.

Lauren Smith – Keefer, Bruyette & Woods, Inc.

Lastly, can you be more specific about you said you made certain management changes could you be a little more specific about that in what businesses? Or, are you really just referencing the principal trading group?

Peregrine C. De M. Broadbent

We made several changes in our equity department. We previously had two co-heads. We named one of those two as sole head of the department. We wanted to have a singular voice in that department and we wanted to be sure that the execution focus was heightened. In addition, we took both our sales and trading derivatives and put them under one gentleman who had previously been operating the sales side of it and we think those moves together with other changes that we made over the last year give us a more focused and clearer management structure.

Operator

(Operator Instructions) At this time there are no further questions.

Richard B. Handler

Thanks everybody. We’re going to go back to work and do better for you in 2008. Thank you.

Operator

This concludes today’s Jefferies’ investor conference call. You may now disconnect.

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