UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

__________

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2022

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 1-5721

JEFFERIES FINANCIAL GROUP INC.

(Exact name of registrant as specified in its Charter)

New York			13-2615557
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)
520 Madison Avenue	New York,	New York	10022
(Address of principal executive offices)			(Zip Code)

(212) 460-1900

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

______________________

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, par value $1 per share	JEF	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of each of the issuer's classes of common stock at June 30, 2022 was 232,452,897.

1

Jefferies Financial Group Inc. and Subsidiaries
Index to Quarterly Report on Form 10-Q
May 31, 2022
PART I. FINANCIAL INFORMATION
	Page
Item 1. Financial Statements	3
Consolidated Statements of Financial Condition (Unaudited)	3
Consolidated Statements of Operations (Unaudited)	4
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	5
Consolidated Statements of Cash Flows (Unaudited)	6
Consolidated Statements of Changes in Equity (Unaudited)	8
Notes to Consolidated Financial Statements (Unaudited)	10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	68
Item 3. Quantitative and Qualitative Disclosures About Market Risk	97
Item 4. Controls and Procedures	106
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	107
Item 1A. Risk Factors	107
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	107
Item 6. Exhibits	108

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

May 31, 2022 and November 30, 2021

(Dollars in thousands, except par value)

(Unaudited)

	May 31, 2022		November 30, 2021
ASSETS
Cash and cash equivalents	$	8,523,117	$	10,755,133
Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations	962,590		1,015,107
Financial instruments owned, at fair value (including securities pledged of $16,398,557 and $12,723,502)	20,247,955		19,828,670
Loans to and investments in associated companies	1,803,542		1,745,790
Securities borrowed	6,312,320		6,409,420
Securities purchased under agreements to resell	4,744,979		7,642,484
Securities received as collateral, at fair value	1,322		7,289
Receivables	9,316,521		7,839,240
Property, equipment and leasehold improvements, net	891,126		911,230
Intangible assets, net and goodwill	1,885,043		1,897,500
Other assets	2,525,295		2,352,247
Total assets (1)	$	57,213,810	$	60,404,110
LIABILITIES
Short-term borrowings	$	354,181	$	221,863
Financial instruments sold, not yet purchased, at fair value	13,665,037		11,699,467
Securities loaned	1,876,434		1,525,721
Securities sold under agreements to repurchase	8,163,890		8,446,099
Other secured financings	2,666,022		4,487,224
Obligation to return securities received as collateral, at fair value	1,322		7,289
Lease liabilities	516,444		548,295
Payables, expense accruals and other liabilities	10,576,405		13,612,367
Long-term debt	8,882,095		9,125,745
Total liabilities (1)	46,701,830		49,674,070
Commitments and contingencies
MEZZANINE EQUITY
Redeemable noncontrolling interests	18,841		25,400
Mandatorily redeemable convertible preferred shares	125,000		125,000
EQUITY
Common shares, par value $1 per share, authorized 600,000,000 shares; 232,321,354 and 243,541,431 shares issued and outstanding, after deducting 84,142,354 and 72,922,277 shares held in treasury	232,321		243,541
Additional paid-in capital	2,156,366		2,742,244
Accumulated other comprehensive income (loss)	(316,977)		(372,143)
Retained earnings	8,228,467		7,940,113
Total Jefferies Financial Group Inc. shareholders' equity	10,300,177		10,553,755
Noncontrolling interests (1)	67,962		25,885
Total equity	10,368,139		10,579,640
Total	$	57,213,810	$	60,404,110

(1)    Total assets include assets related to variable interest entities of $854.8 million and $1.05 billion at May 31, 2022 and November 30, 2021, respectively, Total liabilities include liabilities related to variable interest entities of $2.68 billion and $4.64 billion at May 31, 2022 and November 30, 2021, respectively, and Noncontrolling interests include noncontrolling interests related to variable interest entities of $34.6 million at May 31, 2022. See Note 7 for additional information related to variable interest entities.

See notes to interim consolidated financial statements.

3

JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Operations

For the periods ended May 31, 2022 and 2021

(In thousands, except per share amounts)

(Unaudited)

	For the Three Months Ended May 31,				For the Six Months Ended May 31,
	2022		2021		2022		2021
Revenues:
Commissions and other fees	$	254,706	$	222,624	$	484,022	$	459,393
Principal transactions	204,589		361,023		453,744		1,280,924
Investment banking	600,859		1,000,700		1,545,907		2,004,312
Interest income	244,699		230,448		458,680		470,945
Other	313,294		351,534		618,594		654,343
Total revenues	1,618,147		2,166,329		3,560,947		4,869,917
Interest expense of Jefferies Group	249,065		215,822		459,950		432,468
Net revenues	1,369,082		1,950,507		3,100,997		4,437,449
Expenses:
Cost of sales	130,449		143,847		226,120		239,406
Compensation and benefits	578,477		831,242		1,368,161		2,003,785
Non-compensation expenses:
Floor brokerage and clearing fees	94,016		76,810		177,977		153,226
Selling, general and other expenses	328,281		341,560		613,538		613,497
Interest expense	9,311		19,943		18,399		40,310
Depreciation and amortization	40,307		39,440		86,244		78,207
Total non-compensation expenses	471,915		477,753		896,158		885,240
Total expenses	1,180,841		1,452,842		2,490,439		3,128,431
Income before income taxes and loss related to associated companies	188,241		497,665		610,558		1,309,018
Loss related to associated companies	(21,700)		(23,526)		(51,685)		(34,094)
Income before income taxes	166,541		474,139		558,873		1,274,924
Income tax provision	49,683		120,820		114,040		339,056
Net income	116,858		353,319		444,833		935,868
Net (income) loss attributable to the noncontrolling interests	(1,096)		669		(127)		1,412
Net loss attributable to the redeemable noncontrolling interests	323		234		896		1,003
Preferred stock dividends	(2,071)		(1,626)		(4,141)		(3,252)
Net income attributable to Jefferies Financial Group Inc. common shareholders	$	114,014	$	352,596	$	441,461	$	935,031
Basic earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:
Net income	$	0.46	$	1.33	$	1.73	$	3.51
Diluted earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:
Net income	$	0.45	$	1.30	$	1.70	$	3.43

See notes to interim consolidated financial statements.

4

JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

For the periods ended May 31, 2022 and 2021

(In thousands)

(Unaudited)

	For the Three Months Ended May 31,				For the Six Months Ended May 31,
	2022		2021		2022		2021
Net income	$	116,858	$	353,319	$	444,833	$	935,868
Other comprehensive income (loss):
Net unrealized holding gains (losses) on available for sale securities arising during the period, net of income tax provision (benefit) of $(121), $(8), $(177) and $(27)	(373)		(27)		(546)		(87)
Net change in unrealized holding gains (losses) on available for sale securities, net of income tax provision (benefit) of $(121), $(8), $(177) and $(27)	(373)		(27)		(546)		(87)
Net foreign currency translation adjustments arising during the period, net of income tax provision (benefit) of $(8,305), $1,348, $(8,490) and $4,601	(22,673)		3,393		(22,689)		14,476
Net change in foreign currency translation adjustments, net of income tax provision (benefit) of $(8,305), $1,348, $(8,490) and $4,601	(22,673)		3,393		(22,689)		14,476
Net change in instrument-specific credit risk arising during the period, net of income tax provision (benefit) of $11,508, $(6,327), $24,734 and $(28,509)	35,764		(18,948)		77,176		(88,162)
Less: reclassification adjustment for changes in instrument-specific credit risk included in net income, net of income tax provision (benefit) of $(1), $849, $(8) and $920	2		(2,637)		24		(2,859)
Net change in instrument-specific credit risk gains (losses), net of income tax provision (benefit) of $11,509, $(7,176), $24,742 and $(29,429)	35,766		(21,585)		77,200		(91,021)
Net pension gains (losses) arising during the period, net of income tax provision (benefit) of $0, $0, $0 and $0	—		—		—		—
Reclassification adjustment for pension (gains) losses included in net income, net of income tax provision (benefit) of $(204), $(264), $(412) and $(525)	611		765		1,201		1,551
Net change in pension liability, net of income tax provision (benefit) of $204, $264, $412 and $525	611		765		1,201		1,551
Other comprehensive income (loss), net of income taxes	13,331		(17,454)		55,166		(75,081)
Comprehensive income	130,189		335,865		499,999		860,787
Comprehensive (income) loss attributable to the noncontrolling interests	(1,096)		669		(127)		1,412
Comprehensive loss attributable to the redeemable noncontrolling interests	323		234		896		1,003
Preferred stock dividends	(2,071)		(1,626)		(4,141)		(3,252)
Comprehensive income attributable to Jefferies Financial Group Inc. common shareholders	$	127,345	$	335,142	$	496,627	$	859,950

See notes to interim consolidated financial statements.

5

JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the six months ended May 31, 2022 and 2021

(In thousands)

(Unaudited)

	For the Six Months Ended May 31,
	2022		2021
Net cash flows from operating activities:
Net income	$	444,833	$	935,868
Adjustments to reconcile net income to net cash provided by (used for) operations:
Deferred income tax benefit	(79,961)		(40,537)
Depreciation and amortization	88,970		83,640
Share-based compensation	22,999		64,257
Provision for doubtful accounts	18,426		48,939
Income related to associated companies	(36,900)		(118,950)
Distributions from associated companies	40,481		39,449
Net change in:
Securities deposited with clearing and depository organizations	—		(23,788)
Financial instruments owned, at fair value	(386,483)		(1,795,263)
Securities borrowed	84,150		219,788
Securities purchased under agreements to resell	2,875,162		(1,811,829)
Receivables from brokers, dealers and clearing organizations	(1,053,046)		(601,333)
Receivables from customers of securities operations	(477,529)		(834,886)
Other receivables	68,158		(91,089)
Other assets	(154,896)		(88,072)
Financial instruments sold, not yet purchased, at fair value	2,006,027		1,937,962
Securities loaned	360,152		461,500
Securities sold under agreements to repurchase	(262,132)		(1,244,181)
Payables to brokers, dealers and clearing organizations	(1,021,898)		2,020,160
Payables to customers of securities operations	(743,632)		(61,147)
Lease liabilities	(40,898)		(27,349)
Trade payables, expense accruals and other liabilities	(1,287,126)		17,124
Other	(455,439)		(71,849)
Net cash provided by (used for) operating activities	9,418		(981,586)
Net cash flows from investing activities:
Acquisitions of property, equipment and leasehold improvements, and other assets	(84,763)		(56,766)
Advances on notes, loans and other receivables	(282,877)		(284,616)
Collections on notes, loans and other receivables	208,227		172,609
Loans to and investments in associated companies	(323,202)		(1,988,158)
Capital distributions and loan repayments from associated companies	258,243		2,025,728
Deconsolidation of asset management entity	(21,221)		—
Other	12,117		2,391
Net cash used for investing activities	$	(233,476)	$	(128,812)

(continued)

See notes to interim consolidated financial statements.

6

JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, continued

For the six months ended May 31, 2022 and 2021

(In thousands)

(Unaudited)

	For the Six Months Ended May 31,
	2022		2021
Net cash flows from financing activities:
Issuance of debt, net of issuance costs	$	2,326,201	$	1,276,311
Repayment of debt	(1,850,880)		(1,153,478)
Net change in other secured financings	(1,821,202)		842,190
Net change in bank overdrafts	(10,296)		49,187
Distributions to noncontrolling interests	—		(13,266)
Contributions from noncontrolling interests	63,171		3,434
Purchase of common shares for treasury	(622,223)		(130,097)
Dividends paid	(142,519)		(99,501)
Other	1,609		1,207
Net cash provided by (used for) financing activities	(2,056,139)		775,987
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(9,795)		4,755
Net decrease in cash, cash equivalents and restricted cash	(2,289,992)		(329,656)
Cash, cash equivalents and restricted cash at beginning of period	11,828,304		9,664,972
Cash, cash equivalents and restricted cash at end of period	$	9,538,312	$	9,335,316

The following presents our cash, cash equivalents and restricted cash by category within the Consolidated Statements of Financial Condition to the total of the same amounts in the Consolidated Statements of Cash Flows above (in thousands):

	May 31,
	2022		2021
Cash and cash equivalents	$	8,523,117	$	8,443,206
Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations	962,590		843,356
Other assets	52,605		48,754
Total cash, cash equivalents and restricted cash	$	9,538,312	$	9,335,316

See notes to interim consolidated financial statements.

7

JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the three months ended May 31, 2022 and 2021

(In thousands, except par value and per share amounts)

(Unaudited)

	Jefferies Financial Group Inc. Common Shareholders
	Common Shares $1 Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Subtotal		Noncontrolling Interests		Total
Balance, March 1, 2022	$	240,169	$	2,390,787	$	(330,308)	$	8,189,652	$	10,490,300	$	58,619	$	10,548,919
Net income attributable to Jefferies   Financial Group Inc. common   shareholders							114,014		114,014				114,014
Net income attributable to the   noncontrolling interests									—		1,096		1,096
Other comprehensive income, net of income taxes					13,331				13,331				13,331
Contributions from noncontrolling interests									—		29,468		29,468
Share-based compensation expense			13,253						13,253				13,253
Change in fair value of redeemable noncontrolling interests			(5,137)						(5,137)				(5,137)
Deconsolidation of Asset Management entity									—		(21,221)		(21,221)
Purchase of common shares for treasury	(8,013)		(250,021)						(258,034)				(258,034)
Dividends ($0.30 per common share)							(75,199)		(75,199)				(75,199)
Other	165		7,484						7,649		—		7,649
Balance, May 31, 2022	$	232,321	$	2,156,366	$	(316,977)	$	8,228,467	$	10,300,177	$	67,962	$	10,368,139

	Jefferies Financial Group Inc. Common Shareholders
	Common Shares $1 Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Subtotal		Noncontrolling Interests		Total
Balance, March 1, 2021	$	246,703	$	2,804,243	$	(346,544)	$	7,041,460	$	9,745,862	$	32,496	$	9,778,358
Net income attributable to Jefferies   Financial Group Inc. common   shareholders							352,596		352,596				352,596
Net loss attributable to the   noncontrolling interests									—		(669)		(669)
Other comprehensive loss, net of income taxes					(17,454)				(17,454)				(17,454)
Contributions from noncontrolling interests									—		3,354		3,354
Distributions to noncontrolling interests									—		(11,793)		(11,793)
Share-based compensation expense			43,579						43,579				43,579
Change in fair value of redeemable noncontrolling interests			(3,715)						(3,715)				(3,715)
Dividends ($0.20 per common share)							(53,943)		(53,943)				(53,943)
Other	329		5,380						5,709		(658)		5,051
Balance, May 31, 2021	$	247,032	$	2,849,487	$	(363,998)	$	7,340,113	$	10,072,634	$	22,730	$	10,095,364

See notes to interim consolidated financial statements.

8

JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the six months ended May 31, 2022 and 2021

(In thousands, except par value and per share amounts)

(Unaudited)

	Jefferies Financial Group Inc. Common Shareholders
	Common Shares $1 Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Subtotal		Noncontrolling Interests		Total
Balance, December 1, 2021	$	243,541	$	2,742,244	$	(372,143)	$	7,940,113	$	10,553,755	$	25,885	$	10,579,640
Net income attributable to Jefferies   Financial Group Inc. common   shareholders							441,461		441,461				441,461
Net income attributable to the   noncontrolling interests									—		127		127
Other comprehensive income, net of income taxes					55,166				55,166				55,166
Contributions from noncontrolling interests									—		63,171		63,171
Share-based compensation expense			22,999						22,999				22,999
Change in fair value of redeemable noncontrolling interests			(13,128)						(13,128)				(13,128)
Deconsolidation of Asset Management entity									—		(21,221)		(21,221)
Purchase of common shares for treasury	(18,051)		(604,172)						(622,223)				(622,223)
Dividends ($0.60 per common share)							(153,107)		(153,107)				(153,107)
Other	6,831		8,423						15,254		—		15,254
Balance, May 31, 2022	$	232,321	$	2,156,366	$	(316,977)	$	8,228,467	$	10,300,177	$	67,962	$	10,368,139

	Jefferies Financial Group Inc. Common Shareholders
	Common Shares $1 Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Subtotal		Noncontrolling Interests		Total
Balance, December 1, 2020	$	249,751	$	2,911,223	$	(288,917)	$	6,531,836	$	9,403,893	$	34,632	$	9,438,525
Cumulative effect of the adoption of accounting standards							(19,915)		(19,915)				(19,915)
Balance, December 1, 2020, as adjusted	249,751		2,911,223		(288,917)		6,511,921		9,383,978		34,632		9,418,610
Net income attributable to Jefferies   Financial Group Inc. common   shareholders							935,031		935,031				935,031
Net loss attributable to the   noncontrolling interests									—		(1,412)		(1,412)
Other comprehensive loss, net of income taxes					(75,081)				(75,081)				(75,081)
Contributions from noncontrolling interests									—		3,434		3,434
Distributions to noncontrolling interests									—		(13,266)		(13,266)
Share-based compensation expense			64,257						64,257				64,257
Change in fair value of redeemable noncontrolling interests			(10,773)						(10,773)				(10,773)
Purchase of common shares for treasury	(5,103)		(124,994)						(130,097)				(130,097)
Dividends ($0.40 per common share)							(106,839)		(106,839)				(106,839)
Other	2,384		9,774						12,158		(658)		11,500
Balance, May 31, 2021	$	247,032	$	2,849,487	$	(363,998)	$	7,340,113	$	10,072,634	$	22,730	$	10,095,364

See notes to interim consolidated financial statements.

9

Jefferies Financial Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Index
Note	Page
Note 1. Nature of Operations	11
Note 2. Basis of Presentation and Significant Accounting Policies	12
Note 3. Fair Value Disclosures	14
Note 4. Derivative Financial Instruments	31
Note 5. Collateralized Transactions	37
Note 6. Securitization Activities	40
Note 7. Variable Interest Entities	41
Note 8. Loans to and Investments in Associated Companies	45
Note 9. Intangible Assets, Net and Goodwill	49
Note 10. Short-Term Borrowings	49
Note 11. Long-Term Debt	50
Note 12. Mezzanine Equity	51
Note 13. Compensation Plans	52
Note 14. Accumulated Other Comprehensive Income (Loss)	53
Note 15. Revenues from Contracts with Customers	53
Note 16. Income Taxes	59
Note 17. Common Shares and Earnings Per Common Share	60
Note 18. Commitments, Contingencies and Guarantees	61
Note 19. Net Capital Requirements	63
Note 20. Other Fair Value Information	64
Note 21. Related Party Transactions	64
Note 22. Segment Information	65

10

JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1.  Nature of Operations

Jefferies Financial Group Inc. ("Jefferies," "we," "our" or the "Company") is engaged in investment banking and capital markets, and asset management. Our strategy focuses on continuing to build out our investment banking effort, enhancing our capital markets businesses and further developing our Leucadia Asset Management alternative asset management platform, while returning excess capital to shareholders. Jefferies Group LLC ("Jefferies Group"), our largest subsidiary, was established in 1962 and is the largest independent U.S.-headquartered global full-service integrated investment banking and securities firm.

Jefferies Group operates in two business segments: Investment Banking and Capital Markets, and Asset Management. Investment Banking and Capital Markets includes investment banking, capital markets and other related services. Investment banking provides underwriting and financial advisory services to clients across most industry sectors in the Americas, Europe, the Middle East and Africa, and Asia Pacific. Capital markets businesses operate across the spectrum of equities and fixed income products.

Within Asset Management, we manage, invest in and provide services to a diverse group of alternative asset management platforms across a spectrum of investment strategies and asset classes. Asset Management offers institutional clients an innovative range of investment strategies through its affiliated managers.

We own a legacy portfolio of businesses and investments that we historically denominated as our "Merchant Banking" business and are reflected in our consolidated results as consolidated subsidiaries, equity investments, securities or in other ways. We are well along in the process of liquidating this portfolio, with the intention of selling to third parties, distributing to shareholders or transferring the balance of this portfolio to our Asset Management reportable segment over the next few years. Our Merchant Banking reportable segment primarily includes Linkem (fixed wireless broadband services in Italy); Vitesse Energy, LLC ("Vitesse Energy") (oil and gas production and development); real estate, primarily HomeFed LLC ("HomeFed"); Idaho Timber (manufacturing) and FXCM Group, LLC ("FXCM") (provider of online foreign exchange trading services).

On December 1, 2021, we made a $477 million contribution of net assets, including both Merchant Banking and Asset Management investments, to Jefferies Group. The transferred Merchant Banking investments are now being managed by a different management team, while the Asset Management investments continue to be managed by the co-Presidents of Asset Management who oversee all asset management activities across the Company. As a result, we transferred $194 million of net assets out of our Merchant Banking segment: $139 million of these net assets, including $48 million of net assets relating to Foursight Capital LLC ("Foursight"), were transferred into our Investment Banking and Capital Markets segment; the remaining $55 million of net assets transferred are now managed by the co-Presidents of Asset Management and are included in our Asset Management segment. Prior year amounts have been reclassified to conform to current segment reporting.

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Note 2.  Basis of Presentation and Significant Accounting Policies

Our unaudited interim consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes which are normally included in our Form 10-K. These financial statements reflect all adjustments (consisting of normal recurring items or items discussed herein) that management believes are necessary to fairly state results for the interim periods presented. Results of operations for interim periods are not necessarily indicative of annual results of operations. For a detailed discussion about the Company's significant accounting policies, see Note 2, Significant Accounting Policies, included in our Annual Report on Form 10-K for the year ended November 30, 2021 ("2021 10-K").

The preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates and assumptions that affect the reported amounts in the financial statements and disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate all of these estimates and assumptions. During the six months ended May 31, 2022, there were no significant changes made to the Company's significant accounting policies.

Receivables

At May 31, 2022 and November 30, 2021, Receivables include receivables from brokers, dealers and clearing organizations of $5.93 billion and $4.90 billion, respectively, and receivables from customers of securities operations of $2.09 billion and $1.62 billion, respectively.

Foursight, Jefferies Group's wholly-owned subsidiary, is an automobile loan originator and servicer. Foursight had automobile loan receivables, including accrued interest and related fees, of $872.5 million and $812.6 million at May 31, 2022 and November 30, 2021, respectively, which are classified as either held for investment or held for sale depending on the intent to hold the underlying collateral and which are collateralized by a security interest in the vehicles' titles. Of these amounts, $731.4 million and $682.7 million at May 31, 2022 and November 30, 2021, respectively, were in securitized vehicles. See Notes 6 and 7 for additional information on Foursight's securitization activities. Additionally, automobile loan receivables of $111.1 million and $103.0 million at May 31, 2022 and November 30, 2021, respectively, were pledged for loans outstanding under credit facilities. Foursight's automobile loan receivables held for investment consisted of approximately 17% and 19% with credit scores 680 and above, 47% and 51% with scores between 620 and 679 and 36% and 30% with scores below 620 at May 31, 2022 and November 30, 2021, respectively.

A rollforward of the allowance for credit losses related to receivables for the three and six months ended May 31, 2022 and 2021 is as follows (in thousands):

	For the Three Months Ended May 31,				For the Six Months Ended May 31,
	2022		2021		2022		2021
Beginning balance	$	79,369	$	76,392	$	75,999	$	53,926
Adjustment for change in accounting principle for current expected credit losses	—		—		—		26,519
Provision for doubtful accounts (1)	9,425		45,672		18,426		48,939
Charge-offs, net of recoveries (1)	(2,769)		(42,810)		(8,400)		(50,130)
Ending balance	$	86,025	$	79,254	$	86,025	$	79,254

(1) The three and six months ended May 31, 2021 includes a $39.0 million bad debt expense related to our prime brokerage business.

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Other Investments

At May 31, 2022 and November 30, 2021, the Company had other investments (classified as Other assets and Loans to and investments in associated companies) in which fair values are not readily determinable, aggregating $77.3 million and $119.4 million, respectively. There were no impairments on these investments during the three and six months ended May 31, 2022 and 2021.

Capitalization of Interest

We capitalize interest on qualifying HomeFed real estate assets. Capitalized interest of $3.3 million and $2.2 million during the three months ended May 31, 2022 and 2021, respectively, $6.5 million and $4.1 million during the six months ended May 31, 2022 and 2021, respectively, was allocated among all of HomeFed's projects that are currently under development.

Payables, expense accruals and other liabilities

At May 31, 2022 and November 30, 2021, Payables, expense accruals and other liabilities include payables to brokers, dealers and clearing organizations of $4.78 billion and $5.82 billion, respectively, and payables to customers of securities operations of $3.72 billion and $4.46 billion, respectively.

Supplemental Cash Flow Information

	For the Six Months Ended May 31,
(In thousands)	2022		2021
Cash paid during the year for:
Interest	$	551,165	$	444,939
Income tax payments (refunds), net	$	101,049	$	337,720

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Note 3.  Fair Value Disclosures

The following is a summary of our financial assets and liabilities that are accounted for at fair value on a recurring basis, excluding Investments at fair value based on net asset value ("NAV") of $1.31 billion and $1.03 billion at May 31, 2022 and November 30, 2021, respectively, by level within the fair value hierarchy (in thousands):

	May 31, 2022
	Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)		Total
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	3,867,049	$	157,414	$	200,961	$	—	$	4,225,424
Corporate debt securities	—		3,231,505		20,813		—		3,252,318
Collateralized debt obligations and collateralized loan obligations	—		323,627		49,858		—		373,485
U.S. government and federal agency securities	2,549,972		32,268		—		—		2,582,240
Municipal securities	—		630,483		—		—		630,483
Sovereign obligations	1,061,291		1,001,175		—		—		2,062,466
Residential mortgage-backed securities	—		1,591,820		1,059		—		1,592,879
Commercial mortgage-backed securities	—		343,744		1,870		—		345,614
Other asset-backed securities	—		202,509		84,778		—		287,287
Loans and other receivables	—		2,824,872		137,752		—		2,962,624
Derivatives	9,495		3,100,255		26,919		(2,728,569)		408,100
Investments at fair value	—		4,311		163,844		—		168,155
FXCM term loan	—		—		51,880		—		51,880
Total financial instruments owned, at fair value, excluding investments at fair value based on NAV	$	7,487,807	$	13,443,983	$	739,734	$	(2,728,569)	$	18,942,955
Loans to and investments in associated  companies	$	—	$	1,795	$	14,795	$	—	$	16,590
Securities received as collateral, at fair value	$	1,322	$	—	$	—	$	—	$	1,322
Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	1,801,924	$	32,488	$	3,749	$	—	$	1,838,161
Corporate debt securities	—		2,308,815		401		—		2,309,216
U.S. government and federal agency securities	3,471,943		—		—		—		3,471,943
Sovereign obligations	1,371,769		902,107		—		—		2,273,876
Residential mortgage-backed securities	—		1,010		—		—		1,010
Commercial mortgage-backed securities	—		—		385		—		385
Loans	—		2,465,974		18,283		—		2,484,257
Derivatives	2,172		4,066,790		101,916		(2,884,689)		1,286,189
Total financial instruments sold, not yet purchased, at fair value	$	6,647,808	$	9,777,184	$	124,734	$	(2,884,689)	$	13,665,037
Other secured financings	$	—	$	—	$	2,362	$	—	$	2,362
Long-term debt	$	—	$	877,667	$	739,353	$	—	$	1,617,020
Obligation to return securities received as collateral, at fair value	$	1,322	$	—	$	—	$	—	$	1,322

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	November 30, 2021
	Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)		Total
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	2,737,255	$	257,318	$	87,647	$	—	$	3,082,220
Corporate debt securities	—		3,836,341		11,803		—		3,848,144
Collateralized debt obligations and collateralized loan obligations	—		579,518		31,946		—		611,464
U.S. government and federal agency securities	3,045,295		68,784		—		—		3,114,079
Municipal securities	—		509,559		—		—		509,559
Sovereign obligations	899,086		654,199		—		—		1,553,285
Residential mortgage-backed securities	—		1,168,246		1,477		—		1,169,723
Commercial mortgage-backed securities	—		196,419		2,333		—		198,752
Other asset-backed securities	—		337,022		93,524		—		430,546
Loans and other receivables	—		3,363,050		135,239		—		3,498,289
Derivatives	4,429		3,861,551		10,248		(3,305,756)		570,472
Investments at fair value	—		11,369		154,373		—		165,742
FXCM term loan	—		—		50,455		—		50,455
Total financial instruments owned, at fair value, excluding investments at fair value based on NAV	$	6,686,065	$	14,843,376	$	579,045	$	(3,305,756)	$	18,802,730
Loans to and investments in associated  companies	$	—	$	—	$	30,842	$	—	$	30,842
Securities received as collateral, at fair value	$	7,289	$	—	$	—	$	—	$	7,289
Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	1,671,696	$	19,654	$	4,635	$	—	$	1,695,985
Corporate debt securities	—		2,111,777		482		—		2,112,259
U.S. government and federal agency securities	2,457,420		—		—		—		2,457,420
Sovereign obligations	935,801		593,040		—		—		1,528,841
Residential mortgage-backed securities	—		719		—		—		719
Commercial mortgage-backed securities	—		—		210		—		210
Loans	—		2,476,087		15,770		—		2,491,857
Derivatives	1,815		5,034,544		78,017		(3,702,200)		1,412,176
Total financial instruments sold, not yet purchased, at fair value	$	5,066,732	$	10,235,821	$	99,114	$	(3,702,200)	$	11,699,467
Other secured financings	$	—	$	76,883	$	25,905	$	—	$	102,788
Long-term debt	$	—	$	961,866	$	881,732	$	—	$	1,843,598
Obligation to return securities received as collateral, at fair value	$	7,289	$	—	$	—	$	—	$	7,289

(1)Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions with the same counterparty.

The following is a description of the valuation basis, including valuation techniques and inputs, used in measuring our financial assets and liabilities that are accounted for at fair value on a recurring basis:

Corporate Equity Securities

•Exchange-Traded Equity Securities:  Exchange-traded equity securities are measured based on quoted closing exchange prices, which are generally obtained from external pricing services, and are categorized within Level 1 of the fair value hierarchy, otherwise they are categorized within Level 2 of the fair value hierarchy. To the extent these securities are

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actively traded, valuation adjustments are not applied.

•Non-Exchange-Traded Equity Securities:  Non-exchange-traded equity securities are measured primarily using broker quotations, pricing data from external pricing services and prices observed from recently executed market transactions and are categorized within Level 2 of the fair value hierarchy. Where such information is not available, non-exchange-traded equity securities are categorized within Level 3 of the fair value hierarchy and measured using valuation techniques involving quoted prices of or market data for comparable companies, similar company ratios and multiples (e.g., price/Earnings before interest, taxes, depreciation and amortization ("EBITDA"), price/book value), discounted cash flow analyses and transaction prices observed from subsequent financing or capital issuance by Jefferies Group. When using pricing data of comparable companies, judgment must be applied to adjust the pricing data to account for differences between the measured security and the comparable security (e.g., issuer market capitalization, yield, dividend rate, geographical concentration).

•Equity Warrants:  Non-exchange-traded equity warrants are measured primarily from observed prices on recently executed market transactions and broker quotations and are categorized within Level 2 of the fair value hierarchy. Where such information is not available, non-exchange-traded equity warrants are generally categorized within Level 3 of the fair value hierarchy and can be measured using third-party valuation services or the Black-Scholes model with key inputs impacting the valuation including the underlying security price, implied volatility, dividend yield, interest rate curve, strike price and maturity date.

Corporate Debt Securities

•Investment Grade Corporate Bonds:  Investment grade corporate bonds are measured primarily using pricing data from external pricing services and broker quotations, where available, prices observed from recently executed market transactions and bond spreads or credit default swap spreads of the issuer adjusted for basis differences between the swap curve and the bond curve. Investment grade corporate bonds measured using these valuation methods are categorized within Level 2 of the fair value hierarchy. If broker quotes, pricing data or spread data is not available, alternative valuation techniques are used including cash flow models incorporating interest rate curves, single name or index credit default swap curves for comparable issuers and recovery rate assumptions. Investment grade corporate bonds measured using alternative valuation techniques are categorized within Level 2 or Level 3 of the fair value hierarchy and are a limited portion of our investment grade corporate bonds.

•High Yield Corporate and Convertible Bonds:  A significant portion of our high yield corporate and convertible bonds are categorized within Level 2 of the fair value hierarchy and are measured primarily using broker quotations and pricing data from external pricing services, where available, and prices observed from recently executed market transactions of institutional size. Where pricing data is less observable, valuations are categorized within Level 3 of the fair value hierarchy and are based on pending transactions involving the issuer or comparable issuers, prices implied from an issuer's subsequent financing or recapitalization, models incorporating financial ratios and projected cash flows of the issuer and market prices for comparable issuers.

Collateralized Debt Obligations and Collateralized Loan Obligations

Collateralized debt obligations ("CDOs") and collateralized loan obligations ("CLOs") are measured based on prices observed from recently executed market transactions of the same or similar security or based on valuations received from third-party brokers or data providers and are categorized within Level 2 or Level 3 of the fair value hierarchy depending on the observability and significance of the pricing inputs. Valuation that is based on recently executed market transactions of similar securities incorporates additional review and analysis of pricing inputs and comparability criteria, including, but not limited to, collateral type, tranche type, rating, origination year, prepayment rates, default rates and loss severity.

U.S. Government and Federal Agency Securities

•U.S. Treasury Securities:  U.S. Treasury securities are measured based on quoted market prices obtained from external pricing services and categorized within Level 1 of the fair value hierarchy.

•U.S. Agency Debt Securities:  Callable and non-callable U.S. agency debt securities are measured primarily based on quoted market prices obtained from external pricing services and are generally categorized within Level 1 or Level 2 of the fair value hierarchy.

Municipal Securities

Municipal securities are measured based on quoted prices obtained from external pricing services, where available, or recently executed independent transactions of comparable size and are generally categorized within Level 2 of the fair value hierarchy.

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Sovereign Obligations

Sovereign government obligations are measured based on quoted market prices obtained from external pricing services, where available, or recently executed independent transactions of comparable size. Sovereign government obligations, with consideration given to the country of issuance, are generally categorized within Level 1 or Level 2 of the fair value hierarchy.

Residential Mortgage-Backed Securities

•Agency Residential Mortgage-Backed Securities:  Agency residential mortgage-backed securities include mortgage pass-through securities (fixed and adjustable rate), collateralized mortgage obligations and principal-only and interest-only (including inverse interest-only) securities. Agency residential mortgage-backed securities are generally measured using recent transactions, pricing data from external pricing services or expected future cash flow techniques that incorporate prepayment models and other prepayment assumptions to amortize the underlying mortgage loan collateral and are categorized within Level 2 or Level 3 of the fair value hierarchy. We use prices observed from recently executed transactions to develop market-clearing spread and yield assumptions. Valuation inputs with regard to the underlying collateral incorporate factors such as weighted average coupon, loan-to-value, credit scores, geographic location, maximum and average loan size, originator, servicer and weighted average loan age.

•Non-Agency Residential Mortgage-Backed Securities:  The fair value of non-agency residential mortgage-backed securities is determined primarily using pricing data from external pricing services, where available, and discounted cash flow methodologies and securities are categorized within Level 2 or Level 3 of the fair value hierarchy based on the observability and significance of the pricing inputs used. Performance attributes of the underlying mortgage loans are evaluated to estimate pricing inputs, such as prepayment rates, default rates and the severity of credit losses. Attributes of the underlying mortgage loans that affect the pricing inputs include, but are not limited to, weighted average coupon; average and maximum loan size; loan-to-value; credit scores; documentation type; geographic location; weighted average loan age; originator; servicer; historical prepayment, default and loss severity experience of the mortgage loan pool; and delinquency rate. Yield curves used in the discounted cash flow models are based on observed market prices for comparable securities and published interest rate data to estimate market yields. In addition, broker quotes, where available, are also referenced to compare prices primarily on interest-only securities.

Commercial Mortgage-Backed Securities

•Agency Commercial Mortgage-Backed Securities:  Government National Mortgage Association ("Ginnie Mae") project loan bonds are measured based on inputs corroborated from and benchmarked to observed prices of recent securitization transactions of similar securities with adjustments incorporating an evaluation of various factors, including prepayment speeds, default rates and cash flow structures. Federal National Mortgage Association ("Fannie Mae") Delegated Underwriting and Servicing ("DUS") mortgage-backed securities are generally measured by using prices observed from recently executed market transactions to estimate market-clearing spread levels for purposes of estimating fair value. Ginnie Mae project loan bonds and Fannie Mae DUS mortgage-backed securities are categorized within Level 2 of the fair value hierarchy.

•Non-Agency Commercial Mortgage-Backed Securities:  Non-agency commercial mortgage-backed securities are measured using pricing data obtained from external pricing services, prices observed from recently executed market transactions or based on expected cash flow models that incorporate underlying loan collateral characteristics and performance. Non-agency commercial mortgage-backed securities are categorized within Level 2 or Level 3 of the fair value hierarchy depending on the observability of the underlying inputs.

Other Asset-Backed Securities

Other asset-backed securities include, but are not limited to, securities backed by automobile loans, credit card receivables, student loans and other consumer loans and are categorized within Level 2 or Level 3 of the fair value hierarchy. Valuations are primarily determined using pricing data obtained from external pricing services, broker quotes and prices observed from recently executed market transactions. In addition, recent transaction data from comparable deals is deployed to develop market clearing yields and cumulative loss assumptions. The cumulative loss assumptions are based on the analysis of the underlying collateral and comparisons to earlier deals from the same issuer to gauge the relative performance of the deal.

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Loans and Other Receivables

•Corporate Loans:  Corporate loans categorized within Level 2 of the fair value hierarchy are measured based on market consensus pricing service quotations. Where available, market price quotations from external pricing services are reviewed to ensure they are supported by transaction data. Corporate loans categorized within Level 3 of the fair value hierarchy are measured based on price quotations that are considered to be less transparent, for example, derived using market prices for debt securities of the same creditor and estimates of future cash flows incorporating assumptions regarding creditor default and recovery rates and consideration of the issuer's capital structure.

•Participation Certificates in Agency Residential Loans: Valuations of participation certificates in agency residential loans are based on observed market prices of recently executed purchases and sales of similar loans and data provider pricing. The loan participation certificates are categorized within Level 2 of the fair value hierarchy given the observability and volume of recently executed transactions and availability of data provider pricing.

•Project Loans and Participation Certificates in Ginnie Mae Project and Construction Loans:  Valuations of participation certificates in Ginnie Mae project and construction loans are based on inputs corroborated from and benchmarked to observed prices of recent securitizations with similar underlying loan collateral to derive an implied spread. Securitization prices are adjusted to estimate the fair value of the loans to account for the arbitrage that is realized at the time of securitization. The measurements are categorized within Level 2 of the fair value hierarchy given the observability and volume of recently executed transactions.

•Consumer Loans and Funding Facilities:  Consumer and small business whole loans and related funding facilities are valued based on observed market transactions and incorporating valuation inputs including, but not limited to, delinquency and default rates, prepayment rates, borrower characteristics, loan risk grades and loan age. These assets are categorized within Level 2 or Level 3 of the fair value hierarchy.

•Escrow and Claim Receivables:  Escrow and claim receivables are categorized within Level 2 of the fair value hierarchy where fair value is based on recent observations in the same receivable. Escrow and claim receivables are categorized within Level 3 of the fair value hierarchy where fair value is estimated based on reference to market prices and implied yields of debt securities of the same or similar issuers. 

Derivatives

•Listed Derivative Contracts:  Listed derivative contracts that are actively traded are measured based on quoted exchange prices, broker quotes or vanilla option valuation models, such as Black-Scholes, using observable valuation inputs from the principal market or consensus pricing services. Exchange quotes and/or valuation inputs are generally obtained from external vendors and pricing services. Broker quotes are validated directly through observable and tradeable quotes. Listed derivative contracts that use exchange close prices are generally categorized within Level 1 of the fair value hierarchy. All other listed derivative contracts are generally categorized within Level 2 of the fair value hierarchy.

•Over-the-Counter ("OTC") Derivative Contracts:  OTC derivative contracts are generally valued using models, whose inputs reflect assumptions that we believe market participants would use in valuing the derivative in a current transaction. Where available, valuation inputs are calibrated from observable market data. For many OTC derivative contracts, the valuation models do not involve material subjectivity as the methodologies do not entail significant judgment and the inputs to valuation models do not involve a high degree of subjectivity as the valuation model inputs are readily observable or can be derived from actively quoted markets. OTC derivative contracts are primarily categorized within Level 2 of the fair value hierarchy given the observability and significance of the inputs to the valuation models. Where significant inputs to the valuation are unobservable, derivative instruments are categorized within Level 3 of the fair value hierarchy.

OTC options include OTC equity, foreign exchange, interest rate and commodity options measured using various valuation models, such as Black-Scholes, with key inputs including the underlying security price, foreign exchange spot rate, commodity price, implied volatility, dividend yield, interest rate curve, strike price and maturity date. Discounted cash flow models are utilized to measure certain OTC derivative contracts including the valuations of our interest rate swaps, which incorporate observable inputs related to interest rate curves, valuations of our foreign exchange forwards and swaps, which incorporate observable inputs related to foreign currency spot rates and forward curves and valuations of our commodity swaps and forwards, which incorporate observable inputs related to commodity spot prices and forward curves. Credit default swaps include both index and single-name credit default swaps. Where available, external data is used in measuring index credit default swaps and single-name credit default swaps. For commodity and equity total return swaps, market prices are generally observable for the underlying asset and used as the basis for measuring the fair value of the derivative contracts. Total return swaps executed on other underlyings are measured based on valuations received from external pricing services.

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•Oil Futures Derivatives: Vitesse Energy uses swaps and put options in order to reduce exposure to future oil price fluctuations. Vitesse Energy accounts for the derivative instruments at fair value, which are classified as either Level 1 or Level 2 within the fair value hierarchy. Fair values classified as Level 1 are measured based on quoted closing exchange prices obtained from external pricing services and Level 2 are determined under the income valuation technique using an option-pricing model that is based on directly or indirectly observable inputs.

Investments at Fair Value

Investments at fair value include investments in hedge funds and private equity funds, which are measured at the NAV of the funds, provided by the fund managers and are excluded from the fair value hierarchy. Investments at fair value also include direct equity investments in private companies, which are measured at fair value using valuation techniques internally or by third-party valuation services involving performance data, company ratios and multiples (e.g., price/EBITDA, price/book value) for comparable companies, discounted cash flow analyses and transaction prices observed for subsequent financing or capital issuance by the company. Direct equity investments in private companies are categorized within Level 2 or Level 3 of the fair value hierarchy.

The following tables present information about our investments in entities that have the characteristics of an investment company (in thousands):

	Fair Value (1)		Unfunded Commitments
May 31, 2022
Equity Long/Short Hedge Funds (2)	$	482,004	$	—
Equity Funds (3)	57,760		41,191
Commodity Fund (4)	25,461		—
Multi-asset Funds (5)	418,397		—
Other Funds (6)	321,378		15,963
Total	$	1,305,000	$	57,154
November 30, 2021
Equity Long/Short Hedge Funds (2)	$	466,231	$	—
Equity Funds (3)	46,030		17,815
Commodity Fund (4)	24,401		—
Multi-asset Funds (5)	390,224		—
Other Funds (6)	99,054		36,090
Total	$	1,025,940	$	53,905

(1)Where fair value is calculated based on NAV, fair value has been derived from each of the funds' capital statements.

(2)This category includes investments in hedge funds that invest, long and short, primarily in both public and private equity securities in domestic and international markets. At May 31, 2022 and November 30, 2021, approximately 63% and 74%, respectively, of the fair value of investments are redeemable quarterly with 90 days prior written notice on December 31, 2021. At May 31, 2022 and November 30, 2021, approximately 32% and 21%, respectively, of the fair value of investments in this category cannot be redeemed because these investments include restrictions that do not allow for redemption before November 30, 2023. The remaining investments are redeemable quarterly with 60 days prior written notice.

(3)The investments in this category include investments in equity funds that invest in the equity of various U.S. and foreign private companies in a broad range of industries. These investments cannot be redeemed; instead distributions are received through the liquidation of the underlying assets of the funds, which are primarily expected to be liquidated in approximately one to thirteen years. 

(4)This category includes investments in a hedge fund that invests, long and short, primarily in commodities. These investments are redeemable quarterly with 60 days prior written notice.

(5)This category includes investments in hedge funds that invest, long and short, primarily in multi-asset securities in domestic and international markets in both the public and private sectors. At May 31, 2022 and November 30, 2021, investments representing approximately 77% and 78%, respectively, of the fair value of investments are redeemable monthly with 60 days prior written notice. At May 31, 2022 and November 30, 2021, approximately 16% and 22%, respectively, of the fair value of investments in this category are redeemable quarterly with 90 days prior written notice. At May 31, 2022, the remaining investments cannot be redeemed because these investments include restrictions that do not allow for redemption before April 1, 2024.

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(6)This category includes investments in a fund that invests in short-term trade receivables and payables that are expected to generally be outstanding between 90 to 120 days and short-term credit instruments. This category also includes investments in a fund that invests in distressed and special situations long and short credit strategies across sectors and asset types. Investments in this category are redeemable quarterly with 90 days prior written notice.

Investment in FXCM

Our investment in FXCM and associated companies consists of a senior secured term loan due May 6, 2023 ($71.6 million principal outstanding at May 31, 2022), a 50% voting interest in FXCM and rights to a majority of all distributions in respect of the equity of FXCM. Our investment in the FXCM term loan is reported within Financial instruments owned, at fair value in the Consolidated Statements of Financial Condition. We classify our equity investment in FXCM in the Consolidated Statements of Financial Condition as Loans to and investments in associated companies, as we have the ability to significantly influence FXCM through our seats on the board of directors.

We estimate the fair value of our term loan by using a valuation model with inputs including management's assumptions concerning the amount and timing of expected cash flows, the loan's implied credit rating and effective yield. Because of these inputs and the degree of judgment involved, we have categorized our term loan within Level 3 of the fair value hierarchy.

Loans to and Investments in Associated Companies

Corporate bonds are measured primarily using pricing data from external pricing services and are categorized within Level 2 of the fair value hierarchy. Non-exchange-traded equity warrants with no pricing from external pricing services are generally categorized within Level 3 of the fair value hierarchy. The warrants are measured using the Black-Scholes model with key inputs impacting the valuation including the underlying security price, implied volatility, interest rate curve, strike price and maturity date.

Other Secured Financings

Other secured financings that are accounted for at fair value are classified within Level 2 or Level 3 of the fair value hierarchy. Fair value is based on estimates of future cash flows incorporating assumptions regarding recovery rates.

Securities Received as Collateral and Obligations to Return Securities Received as Collateral

In connection with securities-for-securities transactions in which we are the lender of securities and are permitted to sell or repledge the securities received as collateral, we report the fair value of the collateral received and the related obligation to return the collateral. Valuation is based on the price of the underlying security and is categorized within the corresponding leveling guidance above. These financial instruments are typically categorized within Level 1 of the fair value hierarchy.

Long-term Debt

Long-term debt includes variable rate, fixed-to-floating rate, equity-linked notes, constant maturity swap, digital and Bermudan structured notes. These are valued using various valuation models that incorporate Jefferies Group's own credit spread, market price quotations from external pricing sources referencing the appropriate interest rate curves, volatilities and other inputs as well as prices for transactions in a given note during the period. Long-term debt notes are generally categorized within Level 2 of the fair value hierarchy, where market trades have been observed during the period or model pricing is available, otherwise the notes are categorized within Level 3.

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Level 3 Rollforwards

The following is a summary of changes in fair value of our financial assets and liabilities that have been categorized within Level 3 of the fair value hierarchy for the three months ended May 31, 2022 (in thousands):

	Balance, February 28, 2022		Total gains/ losses (realized and unrealized) (1)		Purchases		Sales		Settlements		Issuances		Net transfers into (out of) Level 3		Balance, May 31, 2022		Changes in unrealized gains/losses included in earnings relating to instruments still held at May 31, 2022 (1)
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	113,922	$	35,581	$	67,540	$	(13,415)	$	—	$	—	$	(2,667)	$	200,961	$	35,361
Corporate debt securities	42,358		3,550		38,141		(47,025)		(12,604)		—		(3,607)		20,813		(849)
CDOs and CLOs	45,219		877		13,264		(28,037)		(1,466)		—		20,001		49,858		(1,798)
Sovereign obligations	23		—		—		—		—		—		(23)		—		—
Residential mortgage-backed securities	1,186		(47)		—		—		(80)		—		—		1,059		(17)
Commercial mortgage-backed securities	3,732		(439)		—		—		—		—		(1,423)		1,870		—
Other asset-backed securities	62,382		(781)		21,501		(1,688)		(12,296)		—		15,660		84,778		(1,065)
Loans and other receivables	137,942		(3,764)		15,598		(23,603)		(108)		—		11,687		137,752		(4,764)
Investments at fair value	169,508		1,576		37		—		(7,277)		—		—		163,844		1,576
FXCM term loan	50,335		1,545		—		—		—		—		—		51,880		1,545
Loans to and investments in associated companies	22,480		(7,685)		—		—		—		—		—		14,795		—
Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	5,666		(234)		(1,533)		—		—		—		(150)		$	3,749	(350)
Corporate debt securities	7,308		(3,588)		(16,091)		14,584		—		—		(1,812)		401		5
Sovereign obligations	1,159		—		—		—		—		—		(1,159)		—		—
Commercial mortgage-backed securities	315		—		—		70		—		—		—		385		—
Loans	11,541		10		(1,911)		1,089		—		—		7,554		18,283		119
Net derivatives (2)	47,770		(9,100)		(1,559)		—		(8,262)		—		46,148		74,997		9,903
Other secured financings	32,377		—		—		—		(30,015)		—		—		2,362		—
Long-term debt (1)	794,460		(146,261)		—		—		(4,950)		76,443		19,661		739,353		114,362

(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in the Consolidated Statements of Operations. Changes in instrument-specific credit risk related to structured notes within Long-term debt are included in the Consolidated Statements of Comprehensive Income (Loss), net of tax. Changes in unrealized gains/losses included in other comprehensive income (loss) for instruments still held at May 31, 2022 were gains of $31.9 million during the three months ended May 31, 2022.

(2)Net derivatives represent Financial instruments owned, at fair value - Derivatives and Financial instruments sold, not yet purchased, at fair value - Derivatives.

Analysis of Level 3 Assets and Liabilities for the three months ended May 31, 2022

During the three months ended May 31, 2022, transfers of assets of $51.3 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•CDOs and CLOs of $20.0 million, other asset-backed securities of $15.8 million and loans and other receivables of $15.1 million due to reduced pricing transparency.

During the three months ended May 31, 2022, transfers of assets of $11.7 million from Level 3 to Level 2 are primarily attributed to:

•Corporate debt securities of $3.6 million, loans and other receivables of $3.4 million and corporate equity securities of $3.1 million due to greater pricing transparency supporting classification into Level 2.

During the three months ended May 31, 2022, transfers of liabilities of $98.2 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

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•Net derivatives of $66.2 million, structured notes within long-term debt of $23.0 million and loans of $9.1 million due to reduced pricing and market transparency.

During the three months ended May 31, 2022, transfers of liabilities of $28.0 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $20.0 million and structured notes within long-term debt of $3.3 million due to greater market and pricing transparency.

Net gains on Level 3 assets were $30.4 million and net gains on Level 3 liabilities were $159.2 million for the three months ended May 31, 2022. Net gains on Level 3 assets were primarily due to increased market values across corporate equity securities and corporate debt securities, partially offset by decreases in loans to and investments in associated companies and loans and other receivables. Net gains on Level 3 liabilities were primarily due to decreased valuations of structured notes within long-term debt.

The following is a summary of changes in fair value of our financial assets and liabilities that have been categorized within Level 3 of the fair value hierarchy for the three months ended May 31, 2021 (in thousands):

	Balance, February 28, 2021		Total gains/ losses (realized and unrealized) (1)		Purchases		Sales		Settlements		Issuances		Net transfers into (out of) Level 3		Balance, May 31, 2021		Changes in unrealized gains/losses included in earnings relating to instruments still held at May 31, 2021 (1)
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	102,065	$	7,997	$	448	$	(24,561)	$	—	$	—	$	502	$	86,451	$	(4,971)
Corporate debt securities	6,811		1,292		4,116		(5,870)		(132)		—		1,768		7,985		963
CDOs and CLOs	33,199		7,478		4,287		(37,324)		(1,203)		—		20,124		26,561		2,888
Residential mortgage-backed securities	21,692		205		—		—		(612)		—		(15,252)		6,033		(36)
Commercial mortgage-backed securities	2,671		201		—		—		(1,696)		—		—		1,176		(824)
Other asset-backed securities	60,594		3,575		12,835		(1,099)		(14,408)		—		9,058		70,555		819
Loans and other receivables	149,084		2,814		26,948		(8,070)		(156)		—		19,792		190,412		706
Investments at fair value	219,541		26,775		6,634		(17,085)		(5,031)		—		—		230,834		11,318
FXCM term loan	62,132		(2,977)		—		—		—		—		—		59,155		(2,977)
Loans to and investments in associated companies	39,397		(2,110)		—		—		—		—		—		37,287		(2,110)
Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	4,443	$	42	$	(23)	$	—	$	—	$	—	$	—	$	4,462	$	(40)
Corporate debt securities	1,571		(22)		(665)		27		—		—		16		927		(38)
Commercial mortgage-backed securities	35		—		(35)		35		—		—		—		35		—
Loans	14,916		(7)		(637)		6,330		44		—		(257)		20,389		(167)
Net derivatives (2)	305,506		(8,965)		(36)		33,715		593		—		(103,755)		227,058		8,372
Other secured financings	2,168		—		—		—		—		325		—		2,493		—
Long-term debt (1)	723,115		15,986		—		—		—		28,565		27,432		795,098		3,057

(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in the Consolidated Statements of Operations. Changes in instrument specific credit risk related to structured notes within long-term debt are included in the Consolidated Statements of Comprehensive Income (Loss), net of tax. Changes in unrealized gains/losses included in other comprehensive income (loss) for instruments still held at May 31, 2021 were losses of $19.0 million during the three months ended May 31, 2021.

(2)Net derivatives represent Financial instruments owned, at fair value - Derivatives and Financial instruments sold, not yet purchased, at fair value - Derivatives.

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Analysis of Level 3 Assets and Liabilities for the three months ended May 31, 2021

During the three months ended May 31, 2021, transfers of assets of $57.8 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Loans and other receivables of $20.9 million, CDOs and CLOs of $20.1 million and other asset-backed securities of $13.5 million due to reduced pricing transparency.

During the three months ended May 31, 2021, transfers of assets of $21.8 million from Level 3 to Level 2 are primarily attributed to:

•Residential mortgage-backed securities of $15.3 million and other asset-backed securities of $4.4 million due to greater pricing transparency supporting classification into Level 2.

During the three months ended May 31, 2021, transfers of liabilities of $78.1 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $50.5 million and structured notes within long-term debt of $27.4 million due to reduced pricing and market transparency.

During the three months ended May 31, 2021, transfers of liabilities of $154.7 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $154.2 million due to greater pricing transparency.

Net gains on Level 3 assets were $45.3 million and net losses on Level 3 liabilities were $7.0 million for the three months ended May 31, 2021. Net gains on Level 3 assets were primarily due to increased market values across investments at fair value, corporate equity securities, CDOs and CLOs and other asset-backed securities. Net losses on Level 3 liabilities were primarily due to increased valuations of structured notes within long-term debt, partially offset by decreases in certain derivatives.

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The following is a summary of changes in fair value of our financial assets and liabilities that have been categorized within Level 3 of the fair value hierarchy for the six months ended May 31, 2022 (in thousands):

	Balance, November 30, 2021		Total gains/ losses (realized and unrealized) (1)		Purchases		Sales		Settlements		Issuances		Net transfers into (out of) Level 3		Balance, May 31, 2022		Changes in unrealized gains/losses included in earnings relating to instruments still held at May 31, 2022 (1)
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	87,647	$	36,463	$	69,837	$	(13,839)	$	—	$	—	$	20,853	$	200,961	$	36,204
Corporate debt securities	11,803		5,631		9,465		(18,345)		(9)		—		12,268		20,813		2,381
CDOs and CLOs	31,946		254		31,245		(37,305)		(5,033)		—		28,751		49,858		(1,304)
Residential mortgage-backed securities	1,477		(111)		—		(204)		(103)		—		—		1,059		(57)
Commercial mortgage-backed securities	2,333		(463)		—		—		—		—		—		1,870		(29)
Other asset-backed securities	93,524		835		37,795		(17,238)		(22,812)		—		(7,326)		84,778		1,324
Loans and other receivables	135,239		(9,814)		29,962		(25,983)		(229)		—		8,577		137,752		(9,726)
Investments at fair value	154,373		33,310		14,286		—		(14,718)		—		(23,407)		163,844		33,380
FXCM term loan	50,455		1,425		—		—		—		—		—		51,880		1,425
Loans to and investments in associated companies	30,842		(16,047)		—		—		—		—		—		14,795		—
Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	4,635	$	(3,592)	$	(2,344)	$	5,050	$	—	$	—	$	—	$	3,749	$	3,009
Corporate debt securities	482		(11)		(70)		—		—		—		—		401		5
Commercial mortgage-backed securities	210		—		—		175		—		—		—		385		—
Loans	15,770		(15)		(12,315)		10,194		(87)		—		4,736		18,283		104
Net derivatives (2)	67,769		(88,018)		(1,559)		—		—		21,024		75,781		74,997		86,050
Other secured financings	25,905		—		—		—		(23,543)		—		—		2,362		—
Long-term debt (1)	881,732		(240,698)		—		—		—		100,195		(1,876)		739,353		175,615

(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in the Consolidated Statements of Operations. Changes in instrument-specific credit risk related to structured notes within Long-term debt are included in the Consolidated Statements of Comprehensive Income (Loss), net of tax. Changes in unrealized gains/losses included in other comprehensive income (loss) for instruments still held at May 31, 2022 were gains of $65.1 million during the six months ended May 31, 2022.

(2)Net derivatives represent Financial instruments owned, at fair value - Derivatives and Financial instruments sold, not yet purchased, at fair value - Derivatives.

Analysis of Level 3 Assets and Liabilities for the six months ended May 31, 2022

During the six months ended May 31, 2022, transfers of assets of $64.7 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•CDOs and CLOs of $28.8 million, other asset-backed securities of $14.0 million, loans and other receivables of $9.7 million, corporate debt securities of $6.7 million and corporate equity securities of $5.6 million due to reduced pricing transparency.

During the six months ended May 31, 2022, transfers of assets of $25.0 million from Level 3 to Level 2 are primarily attributed to:

•Other asset-backed securities of $21.4 million due to greater pricing transparency supporting classification into Level 2.

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During the six months ended May 31, 2022, transfers of liabilities of $122.6 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $80.8 million, structured notes within long-term debt of $37.0 million and loans of $4.8 million due to reduced pricing and market transparency.

During the six months ended May 31, 2022, transfers of liabilities of $44.0 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

•Structured notes within long-term debt of $38.9 million and net derivatives of $5.0 million due to greater market and pricing transparency.

Net gains on Level 3 assets were $51.5 million and net gains on Level 3 liabilities were $332.3 million for the six months ended May 31, 2022. Net gains on Level 3 assets were primarily due to increased market values across corporate equity securities and investments at fair value, partially offset by decreases in loans to and investments in associated companies and loans and other receivables. Net gains on Level 3 liabilities were primarily due to decreased valuations of structured notes within long-term debt and certain derivatives.

The following is a summary of changes in fair value of our financial assets and liabilities that have been categorized within Level 3 of the fair value hierarchy for the six months ended May 31, 2021 (in thousands):

	Balance, November 30, 2020		Total gains/ losses (realized and unrealized) (1)		Purchases		Sales		Settlements		Issuances		Net transfers into (out of) Level 3		Balance, May 31, 2021		Changes in unrealized gains/ losses included in earnings relating to instruments still held at May 31, 2021 (1)
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	75,904	$	11,299	$	8,288	$	(37,297)	$	—	$	—	$	28,257	$	86,451	$	(3,683)
Corporate debt securities	23,146		2,466		4,370		(5,960)		(132)		—		(15,905)		7,985		1,492
CDOs and CLOs	17,972		10,616		16,510		(35,251)		(1,427)		—		18,141		26,561		6,808
Residential mortgage-backed securities	21,826		33		799		(784)		(1,126)		—		(14,715)		6,033		88
Commercial mortgage-backed securities	2,003		158		1,119		(393)		(1,696)		—		(15)		1,176		(740)
Other asset-backed securities	79,995		6,373		34,476		(27,647)		(26,465)		—		3,823		70,555		1,158
Loans and other receivables	134,636		17,580		37,431		(50,556)		(273)		—		51,594		190,412		14,146
Investments at fair value	213,946		103,032		11,489		(47,244)		(8,573)		—		(41,816)		230,834		80,099
FXCM term loan	59,455		(300)		—		—		—		—		—		59,155		(300)
Loans to and investments in associated companies	40,185		(2,898)		—		—		—		—		—		37,287		(2,898)
Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	4,434	$	64	$	(23)	$	—	$	—	$	—	$	(13)	$	4,462	$	(62)
Corporate debt securities	141		1,349		(563)		—		—		—		—		927		(414)
Commercial mortgage-backed securities	35		—		(35)		35		—		—		—		35		—
Loans	16,635		1,441		(6,872)		8,817		—		—		368		20,389		(884)
Net derivatives (2)	26,017		16,813		(82)		66,304		506		—		117,500		227,058		(17,358)
Other secured financings	1,543		—		—		—		—		950		—		2,493		—
Long-term debt (1)	676,028		41,064		—		—		—		50,295		27,711		795,098		20,565

(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in the Consolidated Statements of Operations. Changes in instrument-specific credit risk related to structured notes within long-term debt are included in the Consolidated Statements of Comprehensive Income (Loss), net of tax. Changes in unrealized gains (losses) included in other comprehensive income (loss) for instruments still held at May 31, 2021 were losses of $61.6 million during the six months ended May 31, 2021.

(2)Net derivatives represent Financial instruments owned, at fair value - Derivatives and Financial instruments sold, not yet purchased, at fair value - Derivatives.

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Analysis of Level 3 Assets and Liabilities for the six months ended May 31, 2021

During the six months ended May 31, 2021, transfers of assets of $99.7 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Loans and other receivables of $58.3 million, CDOs and CLOs of $18.2 million, corporate equity securities of $11.0 million and other asset-backed securities of $10.5 million due to reduced pricing transparency.

During the six months ended May 31, 2021, transfers of assets of $70.3 million from Level 3 to Level 2 or Level 1 are primarily attributed to:

•Investments at fair value of $24.2 million, corporate debt securities of $17.5 million, residential mortgage-backed securities of $14.7 million, other asset-backed securities of $6.7 million and loans and other receivables of $6.7 million due to greater pricing transparency supporting classification into Level 2 or Level 1.

During the six months ended May 31, 2021, transfers of liabilities of $162.9 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $134.8 million and structured notes within long-term debt of $27.7 million due to reduced pricing and market transparency.

During the six months ended May 31, 2021, transfers of liabilities of $17.3 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $17.3 million due to greater pricing transparency.

Net gains on Level 3 assets were $148.4 million and net losses on Level 3 liabilities were $60.7 million for the six months ended May 31, 2021. Net gains on Level 3 assets were primarily due to increased market values across investments at fair value, corporate equity securities, CDOs and CLOs, other asset-backed securities and loans and other receivables. Net losses on Level 3 liabilities were primarily due to increased valuations of structured notes within long-term debt and certain derivatives.

Quantitative Information about Significant Unobservable Inputs used in Level 3 Fair Value Measurements

The tables below present information on the valuation techniques, significant unobservable inputs and their ranges for our financial assets and liabilities, subject to threshold levels related to the market value of the positions held, measured at fair value on a recurring basis with a significant Level 3 balance. The range of unobservable inputs could differ significantly across different firms given the range of products across different firms in the financial services sector. The inputs are not representative of the inputs that could have been used in the valuation of any one financial instrument (i.e., the input used for valuing one financial instrument within a particular class of financial instruments may not be appropriate for valuing other financial instruments within that given class). Additionally, the ranges of inputs presented below should not be construed to represent uncertainty regarding the fair values of our financial instruments; rather, the range of inputs is reflective of the differences in the underlying characteristics of the financial instruments in each category.

For certain categories, we have provided a weighted average of the inputs allocated based on the fair values of the financial instruments comprising the category. We do not believe that the range or weighted average of the inputs is indicative of the reasonableness of uncertainty of our Level 3 fair values. The range and weighted average are driven by the individual financial instruments within each category and their relative distribution in the population. The disclosed inputs when compared with the inputs as disclosed in other periods should not be expected to necessarily be indicative of changes in our estimates of unobservable inputs for a particular financial instrument as the population of financial instruments comprising the category will vary from period to period based on purchases and sales of financial instruments during the period as well as transfers into and out of Level 3 each period.

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May 31, 2022
	Fair Value (in thousands)		Valuation  Technique	Significant Unobservable Input(s)	Input/Range				Weighted Average
Financial instruments owned, at fair value
Corporate equity securities	$	200,961
Non-exchange-traded   securities			Market approach	Price	$1		to	$366	$80
			Volatility benchmarking	Volatility	50	%	to	70%	60	%
Corporate debt securities	$	20,813	Market approach	Price	$23				—
				EBITDA multiple	3.3				—
			Scenario analysis	Estimated recovery percentage	6%				—
CDOs and CLOs	$	49,858	Discounted cash flows	Constant prepayment rate	20%				—
				Constant default rate	2%				—
				Loss severity	70%				—
				Discount rate/yield	10	%	to	22%	19	%
			Market approach	Price	$69		to	$102	$92
Commercial mortgage-   backed securities	$	1,870	Scenario analysis	Estimated recovery percentage	81%				—
Other asset-backed securities	$	66,623	Discounted cash flows	Constant default rate	2%				—
				Loss severity	88%				—
				Discount rate/yield	5	%	to	17%	12	%
				Cumulative loss rate	5	%	to	21%	17	%
				Duration (years)	0.8 years		to	1.6 years	1.3 years
			Market approach	Price	$37				—
Loans and other receivables	$	137,752	Market approach	Price	$7		to	$136	$108
			Scenario analysis	Estimated recovery percentage	5	%	to	94%	35	%
Derivatives	$	18,755
Equity Options			Volatility benchmarking	Volatility	53%				—
Interest rate swaps			Market approach	Basis points upfront	2.8		to	11.1	6.7
Investments at fair value	$	158,312
Private equity securities			Market approach	Price	$1		to	$15,852	$548
				EBITDA multiple	15.7				—
			Discounted cash flows	Discount rate/yield	10	%	to	14%	12	%
			Scenario analysis	Discount rate/yield	12%				—
Investment in FXCM	$	51,880
Term loan			Discounted cash flows	Term based on the pay off (years)	0 months		to	1.7 years	1.7 years
Loans to and investments in associated companies
Non-exchange-traded   warrants	$	14,795	Market approach	Underlying stock price	$723				—
				Underlying stock price	€11		to	€14	€13
				Volatility	25	%	to	49%	30	%
Financial instruments sold, not yet purchased, at fair value
Corporate equity securities	$	3,749
Non-exchange-traded   securities			Market approach	Price	$1				—
Loans	$	18,283	Market approach	Price	$91				—
			Scenario analysis	Estimated recovery percentage	5%				—
Derivatives	$	97,612
Equity options			Volatility benchmarking	Volatility	29	%	to	63%	49	%
Interest rate swaps			Market approach	Basis points upfront	2.8		to	11.1	6.7
Total return swaps				Price	$99				—
Other secured financings	$	2,362	Scenario analysis	Estimated recovery percentage	13	%	to	36%	29	%
Long-term debt
Structured notes	$	739,353	Market approach	Price	$52		to	$108	$75
				Price	€60		to	€102	€80

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November 30, 2021
	Fair Value (in thousands)		Valuation  Technique	Significant Unobservable Input(s)	Input/Range				Weighted Average
Financial instruments owned, at fair value
Corporate equity securities	$	86,961
Non-exchange-traded   securities			Market approach	Price	$1		to	$366	$183
			Volatility benchmarking	Volatility	40	%	to	53%	45	%
Corporate debt securities	$	11,803	Market approach	Price	$13		to	$100	$86
CDOs and CLOs	$	31,944	Discounted cash flows	Constant prepayment rate	20%				—
				Constant default rate	2%				—
				Loss severity	25	%	to	30%	26	%
				Discount rate/yield	8	%	to	19%	16	%
			Market approach	Price	$86		to	$103	$93
Commercial mortgage-   backed securities	$	2,333	Scenario analysis	Estimated recovery percentage	81%				—
Other asset-backed securities	$	86,099	Discounted cash flows	Constant prepayment rate	0	%	to	35%	31	%
				Constant default rate	2	%	to	4%	4	%
				Loss severity	60	%	to	85%	55	%
				Discount rate/yield	3	%	to	16%	10	%
				Cumulative loss rate	7	%	to	20%	14	%
				Duration (years)	0.7 years		to	1.4 years	1.1 years
			Market approach	Price	$37		to	$100	$94
Loans and other receivables	$	134,015	Market approach	Price	$31		to	$101	$54
			Scenario analysis	Estimated recovery percentage	9	%	to	100%	76	%
Derivatives	$	6,501
Equity options			Volatility benchmarking	Volatility	46%				—
Interest rate swaps			Market approach	Basis points upfront	0.1		to	8.7	3.3
Total return swaps				Price	$100				—
Investments at fair value	$	128,152
Private equity securities			Market approach	Price	$1		to	$152	$32
				EBITDA multiple	16.9				—
				Revenue multiple	4.9		to	5.1	5.0
			Scenario analysis	Estimated recovery percentage	7%				—
				Discount rate/yield	13	%	to	21%	17	%
				Revenue growth	0%				—
Investment in FXCM	$	50,455
Term loan			Discounted cash flows	Term based on the pay off (years)	0 months		to	2.2 years	2.2 years
Loans to and investments in associated companies
Non-exchange-traded   warrants	$	30,842	Market approach	Underlying stock price	$662				—
				Underlying stock price	€15		to	€18	€16
				Volatility	25	%	to	59%	31	%
Financial instruments sold, not yet purchased, at fair value
Corporate equity securities	$	4,635
Non-exchange-traded securities			Market approach	Price	$1				—
Loans	$	15,770	Market approach	Price	$31		to	$100	$43
			Scenario analysis	Estimated recovery percentage	50%				—
Derivatives	$	76,533
Equity options			Volatility benchmarking	Volatility	26	%	to	77%	40	%
Interest rate swaps			Market approach	Basis points upfront	0.1		to	8.7	3.1
Total return swaps				Price	$100				—
Other secured financings	$	25,905	Scenario analysis	Estimated recovery percentage	13	%	to	98%	92	%
Long-term debt
Structured notes	$	881,732	Market approach	Price	$76		to	$115	$94
				Price	€81		to	€113	€103

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The fair values of certain Level 3 assets and liabilities that were determined based on third-party pricing information, unadjusted past transaction prices or a percentage of the reported enterprise fair value are excluded from the above tables. At May 31, 2022 and November 30, 2021, asset exclusions consisted of $32.9 million and $40.8 million, respectively, primarily comprised of certain investments at fair value, other asset-backed securities, certain derivatives, corporate equity securities, loans and other receivables and residential mortgage-backed securities. At May 31, 2022 and November 30, 2021, liability exclusions consisted of $5.1 million and $2.2 million, respectively, primarily comprised of certain derivatives, corporate debt securities and commercial mortgage-backed securities.

Uncertainty of Fair Value Measurement from Use of Significant Unobservable Inputs

For recurring fair value measurements categorized within Level 3 of the fair value hierarchy, the uncertainty of the fair value measurement due to the use of significant unobservable inputs and interrelationships between those unobservable inputs (if any) are described below:

•    Non-exchange-traded securities, corporate debt securities, CDOs and CLOs, loans and other receivables, other asset-backed securities, private equity securities, non-exchange-traded warrants, certain derivatives and structured notes using a market approach valuation technique. A significant increase (decrease) in the price of the private equity securities, non-exchange-traded securities, corporate debt securities, CDOs and CLOs, other asset-backed securities, loans and other receivables, total return swaps, and structured notes would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the EBITDA multiple related to corporate debt securities or private equity securities would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the revenue multiple related to private equity securities would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the underlying stock price of non-exchange-traded warrants would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the volatility of the underlying stock price of non-exchange-traded warrants would result in a significantly higher (lower) fair value measurement. Depending on whether we are a receiver or (payer) of basis points upfront, a significant increase in basis points would result in a significant increase (decrease) in the fair value measurement of interest rate swaps.

•Corporate debt securities, loans and other receivables, commercial mortgage-backed securities, private equity securities and other secured financings using scenario analysis. A significant increase (decrease) in the possible recovery rates of the cash flow outcomes underlying the financial instrument would result in a significantly higher (lower) fair value measurement for the financial instrument. A significant increase (decrease) in the discount rate/yield underlying the investment would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in the revenue growth underlying the investment would result in a significantly higher (lower) fair value measurement.

•CDOs and CLOs, other asset-backed securities, private equity securities and the FXCM term loan using a discounted cash flow valuation technique. A significant increase (decrease) in isolation in the constant default rate, loss severity or cumulative loss rate would result in a significantly lower (higher) fair value measurement. The impact of changes in the constant prepayment rate and duration would have differing impacts depending on the capital structure and type of security. A significant increase (decrease) in the discount rate/security yield would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in term based on the time to pay off the loan would result in a lower (higher) fair value measurement.

•Derivative equity options and non-exchange-traded securities using volatility benchmarking. A significant increase (decrease) in volatility would result in a significantly higher (lower) fair value measurement.

Fair Value Option Election

We have elected the fair value option for all loans and loan commitments made by our investment banking and capital markets businesses. These loans and loan commitments include loans entered into by our investment banking division in connection with client bridge financing and loan syndications, loans purchased by our leveraged credit trading desk as part of its bank loan trading activities and mortgage and consumer loan commitments, purchases and fundings in connection with mortgage-backed and other asset-backed securitization activities. Loans and loan commitments originated or purchased by our leveraged credit and mortgage-backed businesses are managed on a fair value basis. Loans are included in Financial instruments owned, at fair value and loan commitments are included in Financial instruments owned, at fair value and Financial instruments sold, not yet purchased, at fair value in the Consolidated Statements of Financial Condition. The fair value option election is not applied to loans made to affiliate entities as such loans are entered into as part of ongoing, strategic business ventures. Loans to affiliate entities are included in Loans to and investments in associated companies in the Consolidated Statements of Financial Condition and are accounted for on an amortized cost basis. We have also elected the fair value option for certain of our structured notes, which are managed by our investment banking and capital markets businesses and are included in Long-term debt in the Consolidated Statements of Financial Condition. We have elected the fair value option for certain financial instruments held by subsidiaries as the investments are risk managed on a fair value basis. The fair value option has been

29

elected for certain other secured financings that arise in connection with our securitization activities and other structured financings. Other secured financings, receivables from brokers, dealers and clearing organizations, receivables from customers of securities operations, other receivables, payables to brokers, dealers and clearing organizations and payables to customers of securities operations, are accounted for at cost plus accrued interest rather than at fair value; however, the recorded amounts approximate fair value due to their liquid or short-term nature, except for our automobile loans.

The following is a summary of gains (losses) due to changes in instrument-specific credit risk on loans, other receivables and debt instruments and gains (losses) due to other changes in fair value on long-term debt measured at fair value under the fair value option (in thousands):

	For the Three Months Ended May 31,				For the Six Months Ended May 31,
	2022		2021		2022		2021
Financial instruments owned, at fair value:
Loans and other receivables	$	(1,478)	$	15,520	$	(1,294)	$	23,259
Financial instruments sold, not yet purchased, at fair value:
Loans	$	(882)	$	(363)	$	(4,889)	$	(363)
Long-term debt:
Changes in instrument-specific credit risk (1)	$	42,886	$	(32,247)	$	94,133	$	(122,898)
Other changes in fair value (2)	161,381		6,846		255,932		86,113

(1)    Changes in instrument-specific credit risk related to structured notes are included in the Consolidated Statements of Comprehensive Income (Loss), net of taxes.

(2)    Other changes in fair value are included in Principal transactions revenues in the Consolidated Statements of Operations.

The following is a summary of the amounts by which contractual principal is greater than (less than) fair value for loans and other receivables, long-term debt and other secured financings measured at fair value under the fair value option (in thousands):

	May 31, 2022		November 30, 2021
Financial instruments owned, at fair value:
Loans and other receivables (1)	$	5,703,268	$	5,600,648
Loans and other receivables on nonaccrual status and/or 90 days or greater past due (1) (2)	143,521		64,203
Long-term debt	$	317,452	$	(38,391)
Other secured financings	$	2,913	$	3,432

(1)    Interest income is recognized separately from other changes in fair value and is included in Interest income in the Consolidated Statements of Operations.

(2)    Amounts include loans and other receivables 90 days or greater past due by which contractual principal exceeds fair value of $109.7 million and $19.7 million at May 31, 2022 and November 30, 2021, respectively.

The aggregate fair value of loans and other receivables on nonaccrual status and/or 90 days or greater past due was $164.4 million and $56.9 million at May 31, 2022 and November 30, 2021, respectively, which includes loans and other receivables 90 days or greater past due of $33.3 million and $23.5 million at May 31, 2022 and November 30, 2021, respectively.

At May 31, 2022, Jefferies Group owned shares which represent a 38% economic interest in ApiJect Systems, Corp. ("ApiJect"). The investment in ApiJect is accounted for at fair value by electing the fair value option available under GAAP and is included within corporate equity securities in Financial instruments owned, at fair value, in the Consolidated Statement of Financial Condition. During the three months ended May 31, 2022, in connection with ApiJect's issuance of additional equity to third party investors, Jefferies Group purchased additional common shares of ApiJect and obtained a right to 1.125% of ApiJect's future revenues for cash consideration of $25.0 million. In addition, Jefferies Group converted its $25.0 million term loan agreement into additional common shares. At May 31, 2022, the total fair value of Jefferies Group's equity investment in common shares of ApiJect is $100.1 million, which is calibrated based on this last funding round during the three months ended

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May 31, 2022 and included within Level 3 of the fair value hierarchy. Additionally, Jefferies Group received warrants to purchase up to 950,000 shares of common stock at any time or from time to time on or before April 15, 2032. For both the three and six months ended May 31, 2022, the change in fair value of Jefferies Group's equity investments in ApiJect was a mark-to-market gain of $37.3 million.

Jefferies Group also has a term loan agreement with a principal of ApiJect of $25.0 million maturing on July 30, 2022. The loan is accounted for at cost plus accrued interest and is reported within Other assets in the Consolidated Statement of Financial Condition. Interest income of $0.6 million and $0.4 million for the three months ended May 31, 2022 and 2021, respectively, and $1.1 million and $0.6 million for the six months ended May 31, 2022 and 2021, respectively, was recognized related to the loan and is included in Interest income in the Consolidated Statements of Operations. The loan has a fair value of $27.7 million at May 31, 2022, which would be classified as Level 3 in the fair value hierarchy.

Financial Instruments Not Measured at Fair Value

Certain of our financial instruments are not carried at fair value but are recorded at amounts that approximate fair value due to their liquid or short-term nature and generally negligible credit risk. These financial assets include Cash and cash equivalents and Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations and would generally be presented within Level 1 of the fair value hierarchy.

Note 4.  Derivative Financial Instruments

Derivative Financial Instruments

Derivative activities are recorded at fair value in the Consolidated Statements of Financial Condition in Financial instruments owned, at fair value and Financial instruments sold, not yet purchased, at fair value, net of cash paid or received under credit support agreements and on a net counterparty basis when a legally enforceable right to offset exists under a master netting agreement. Predominantly, we enter into derivative transactions to satisfy the needs of our clients and to manage our own exposure to market and credit risks resulting from our trading activities. In addition, we apply hedge accounting to (1) interest rate swaps that have been designated as fair value hedges of the changes in fair value due to the benchmark interest rate for certain fixed rate senior long-term debt and (2) forward foreign exchange contracts designated as hedges to offset the change in the value of certain net investments in foreign operations. See Notes 3 and 18 for additional disclosures about derivative financial instruments.

Derivatives are subject to various risks similar to other financial instruments, including market, credit and operational risk. The risks of derivatives should not be viewed in isolation, but rather should be considered on an aggregate basis along with our other trading-related activities. We manage the risks associated with derivatives on an aggregate basis along with the risks associated with proprietary trading as part of our firm wide risk management policies.

In connection with our derivative activities, we may enter into International Swaps and Derivatives Association, Inc. master netting agreements or similar agreements with counterparties.

The following tables present the fair value and related number of derivative contracts at May 31, 2022 and November 30, 2021 categorized by type of derivative contract and the platform on which these derivatives are transacted. The fair value of assets/liabilities represents our receivable/payable for derivative financial instruments, gross of counterparty netting and cash collateral received and pledged. The following tables also provide information regarding (1) the extent to which, under enforceable master netting arrangements, such balances are presented net in the Consolidated Statements of Financial Condition as appropriate under GAAP and (2) the extent to which other rights of setoff associated with these arrangements exist and could have an effect on our financial position (in thousands, except contract amounts).

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	Assets			Liabilities
	Fair Value		Number of Contracts (2)	Fair Value		Number of Contracts (2)
May 31, 2022 (1)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC	$	—	—	$	152,090	3
Foreign exchange contracts:
Bilateral OTC	51,845		5	—		—
Total derivatives designated as accounting hedges	51,845			152,090
Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded	9,052		76,999	2,015		41,098
Cleared OTC	691,397		3,974	541,001		3,875
Bilateral OTC	528,364		819	944,289		851
Foreign exchange contracts:
Bilateral OTC	500,922		11,847	512,817		11,879
Equity contracts:
Exchange-traded	1,005,732		1,363,436	766,134		1,397,278
Bilateral OTC	281,493		4,656	1,122,597		5,305
Commodity contracts:
Exchange-traded	66		1,365	36		1,534
Bilateral OTC	153		165	50,715		2,325
Credit contracts:
Cleared OTC	32,646		95	41,949		95
Bilateral OTC	34,999		14	37,235		13
Total derivatives not designated as accounting hedges	3,084,824			4,018,788
Total gross derivative assets/liabilities:
Exchange-traded	1,014,850			768,185
Cleared OTC	724,043			735,040
Bilateral OTC	1,397,776			2,667,653
Amounts offset in the Consolidated Statement of Financial Condition (3):
Exchange-traded	(764,932)			(764,932)
Cleared OTC	(719,960)			(735,040)
Bilateral OTC	(1,243,677)			(1,384,717)
Net amounts in the Consolidated Statement of Financial Condition (4)	$	408,100		$	1,286,189

(continued)

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	Assets			Liabilities
	Fair Value		Number of Contracts (2)	Fair Value		Number of Contracts (2)
November 30, 2021 (1)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC	$	35,726	2	$	32,200	1
Foreign exchange contracts:
Bilateral OTC	30,462		4	—		—
Total derivatives designated as accounting hedges	66,188			32,200
Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded	1,262		23,888	756		39,195
Cleared OTC	373,355		4,505	367,134		4,467
Bilateral OTC	322,353		1,037	283,481		967
Foreign exchange contracts:
Bilateral OTC	1,428,712		17,792	1,437,116		17,576
Equity contracts:
Exchange-traded	1,206,606		1,582,713	1,036,019		1,450,624
Bilateral OTC	377,132		2,888	1,824,418		2,682
Commodity contracts:
Exchange-traded	448		1,394	223		1,457
Bilateral OTC	2,703		616	9,862		825
Credit contracts:
Cleared OTC	84,180		132	108,999		128
Bilateral OTC	13,289		14	14,168		17
Total derivatives not designated as accounting hedges	3,810,040			5,082,176
Total gross derivative assets/liabilities:
Exchange-traded	1,208,316			1,036,998
Cleared OTC	493,261			508,333
Bilateral OTC	2,174,651			3,569,045
Amounts offset in the Consolidated Statement of Financial Condition (3):
Exchange-traded	(1,008,091)			(1,008,091)
Cleared OTC	(483,339)			(508,333)
Bilateral OTC	(1,814,326)			(2,185,776)
Net amounts in the Consolidated Statement of Financial Condition (4)	$	570,472		$	1,412,176

(1)    Exchange-traded derivatives include derivatives executed on an organized exchange. Cleared OTC derivatives include derivatives executed bilaterally and subsequently novated to and cleared through central clearing counterparties. Bilateral OTC derivatives include derivatives executed and settled bilaterally without the use of an organized exchange or central clearing counterparty.

(2)    Number of exchange-traded contracts may include open futures contracts. The unsettled fair value of these futures contracts is included in Receivables and Payables, expense accruals and other liabilities in the Consolidated Statements of Financial Condition.

(3)    Amounts netted include both netting by counterparty and for cash collateral paid or received.

(4)    We have not received or pledged additional collateral under master netting agreements and/or other credit support agreements that is eligible to be offset beyond what has been offset in the Consolidated Statements of Financial Condition.

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The following table provides information related to gains (losses) recognized in Interest expense of Jefferies Group in the Consolidated Statements of Operations related to fair value hedges (in thousands):

	For the Three Months Ended May 31,				For the Six Months Ended May 31,
	2022		2021		2022		2021
Interest rate swaps	$	(100,415)	$	(1,671)	$	(144,413)	$	(45,462)
Long-term debt	105,041		5,215		155,583		52,026
Total	$	4,626	$	3,544	$	11,170	$	6,564

The following table provides information related to gains (losses) on net investment hedges recognized in Net foreign currency translation adjustments, a component of Other comprehensive income (loss), in the Consolidated Statements of Comprehensive Income (Loss) (in thousands):

	For the Three Months Ended May 31,				For the Six Months Ended May 31,
	2022		2021		2022		2021
Foreign exchange contracts	$	73,498	$	(21,906)	$	62,560	$	(63,406)
Total	$	73,498	$	(21,906)	$	62,560	$	(63,406)

The following table presents unrealized and realized gains (losses) on derivative contracts which are primarily recognized in Principal transactions revenues in the Consolidated Statements of Operations, which are utilized in connection with our client activities and our economic risk management activities (in thousands):

	For the Three Months Ended May 31,				For the Six Months Ended May 31,
	2022		2021		2022		2021
Interest rate contracts	$	(87,871)	$	21,364	$	(129,463)	$	(20,760)
Foreign exchange contracts	(112,157)		24,243		(109,533)		71,072
Equity contracts	(16,776)		(3,315)		194,161		(93,012)
Commodity contracts	(34,173)		(6,720)		(68,478)		(25,069)
Credit contracts	7,013		(2,864)		11,445		(2,043)
Total	$	(243,964)	$	32,708	$	(101,868)	$	(69,812)

The net gains (losses) on derivative contracts in the table above are one of a number of activities comprising our business activities and are before consideration of economic hedging transactions, which generally offset the net gains (losses) included above. We substantially mitigate our exposure to market risk on our cash instruments through derivative contracts, which generally provide offsetting revenues, and we manage the risk associated with these contracts in the context of our overall risk management framework.

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OTC Derivatives.  The following tables set forth by remaining contract maturity the fair value of OTC derivative assets and liabilities as reflected in the Consolidated Statement of Financial Condition at May 31, 2022 (in thousands):

	OTC Derivative Assets (1) (2) (3)
	0-12 Months		1-5 Years		Greater Than 5 Years		Cross- Maturity Netting (4)		Total
Commodity swaps, options and forwards	$	—	$	153	$	—	$	(153)	$	—
Equity options and forwards	15,292		3,514		—		(14,945)		3,861
Credit default swaps	—		8		4,177		(8)		4,177
Total return swaps	69,436		39,246		46		(9,812)		98,916
Foreign currency forwards, swaps and options	120,957		3,836		284		(3,128)		121,949
Fixed income forwards	30,634		—		—		—		30,634
Interest rate swaps, options and forwards	67,393		351,584		29,597		(114,610)		333,964
Total	$	303,712	$	398,341	$	34,104	$	(142,656)	593,501
Cross product counterparty netting									(19,797)
Total OTC derivative assets included in Financial instruments owned, at fair value									$	573,704

(1)At May 31, 2022, we held net exchange-traded derivative assets and other credit agreements with a fair value of $249.9 million, which are not included in this table.

(2)OTC derivative assets in the table above are gross of collateral received. OTC derivative assets are recorded net of collateral received in the Consolidated Statements of Financial Condition. At May 31, 2022, cash collateral received was $415.5 million.

(3)Derivative fair values include counterparty netting within product category.

(4)Amounts represent the netting of receivable balances with payable balances for the same counterparty within product category across maturity categories.

	OTC Derivative Liabilities (1) (2) (3)
	0-12 Months		1-5 Years		Greater Than 5 Years		Cross-Maturity Netting (4)		Total
Commodity swaps, options and forwards	$	41,566	$	9,149	$	—	$	(153)	$	50,562
Equity options and forwards	78,364		393,463		22,849		(14,945)		479,731
Credit default swaps	—		594		8,717		(8)		9,303
Total return swaps	387,018		122,606		100		(9,812)		499,912
Foreign currency forwards, swaps and options	81,886		3,192		49		(3,128)		81,999
Fixed income forwards	845		—		—		—		845
Interest rate swaps, options and forwards	64,166		351,796		428,428		(114,610)		729,780
Total	$	653,845	$	880,800	$	460,143	$	(142,656)	1,852,132
Cross product counterparty netting									(19,797)
Total OTC derivative liabilities included in Financial instruments sold, not yet purchased, at fair value									$	1,832,335

(1)At May 31, 2022, we held net exchange-traded derivative liabilities and other credit agreements with a fair value of $25.5 million, which are not included in this table.

(2)OTC derivative liabilities in the table above are gross of collateral pledged. OTC derivative liabilities are recorded net of collateral pledged in the Consolidated Statements of Financial Condition. At May 31, 2022, cash collateral pledged was $571.6 million.

(3)Derivative fair values include counterparty netting within product category.

(4)    Amounts represent the netting of receivable balances with payable balances for the same counterparty within product category across maturity categories.

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At May 31, 2022, the counterparty credit quality with respect to the fair value of our OTC derivative assets was as follows (in thousands):

Counterparty credit quality (1):
A- or higher	$	371,914
BBB- to BBB+	36,799
BB+ or lower	73,680
Unrated	91,311
Total	$	573,704

(1)    We utilize internal credit ratings determined by the Jefferies Group's Risk Management department. Credit ratings determined by Jefferies Group Risk Management use methodologies that produce ratings generally consistent with those produced by external rating agencies.

Credit Related Derivative Contracts

The external credit ratings of the underlyings or referenced assets for our written credit related derivative contracts are as follows (in millions):

	External Credit Rating
	Investment Grade		Non-investment grade		Unrated		Total Notional
May 31, 2022
Credit protection sold:
Index credit default swaps	$	2,428.4	$	898.9	$	—	$	3,327.3
Single name credit default swaps	—		—		0.2		0.2
November 30, 2021
Credit protection sold:
Index credit default swaps	$	2,612.0	$	1,298.8	$	—	$	3,910.8
Single name credit default swaps	—		17.6		0.2		17.8

Contingent Features

Certain of Jefferies Group's derivative instruments contain provisions that require its debt to maintain an investment grade credit rating from each of the major credit rating agencies. If Jefferies Group's debt was to fall below investment grade, it would be in violation of these provisions and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full overnight collateralization on the derivative instruments in liability positions. The following table presents the aggregate fair value of all derivative instruments with such credit-risk-related contingent features that are in a liability position, the collateral amounts posted or received in the normal course of business and the potential collateral we would have been required to return and/or post additionally to our counterparties if the credit-risk-related contingent features underlying these agreements were triggered (in millions).

	May 31, 2022		November 30, 2021
Derivative instrument liabilities with credit-risk-related contingent features	$	411.7	$	821.5
Collateral posted	(112.6)		(160.5)
Collateral received	138.0		369.3
Return of and additional collateral required in the event of a credit rating downgrade below investment grade (1)	437.1		1,030.4

(1)    These potential outflows include initial margin received from counterparties at the execution of the derivative contract. The initial margin will be returned if counterparties elect to terminate the contract after a downgrade.

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Other Derivatives

Vitesse Energy uses swaps and put options in order to reduce exposure to future oil price fluctuations. Vitesse Energy accounts for the derivative instruments at fair value. The gains and losses associated with the change in fair value of the derivatives are recorded in Other revenues.

Note 5.  Collateralized Transactions

Our repurchase agreements and securities borrowing and lending arrangements are generally recorded at cost in the Consolidated Statements of Financial Condition, which is a reasonable approximation of their fair values due to their short-term nature. We enter into secured borrowing and lending arrangements to obtain collateral necessary to effect settlement, finance inventory positions, meet customer needs or re-lend as part of dealer operations. We monitor the fair value of the securities loaned and borrowed on a daily basis as compared with the related payable or receivable, and request additional collateral or return excess collateral, as appropriate. We pledge financial instruments as collateral under repurchase agreements, securities lending agreements and other secured arrangements, including clearing arrangements. Our agreements with counterparties generally contain contractual provisions allowing the counterparty the right to sell or repledge the collateral. Pledged securities owned that can be sold or repledged by the counterparty are included in Financial instruments owned, at fair value, and noted parenthetically as Securities pledged in the Consolidated Statements of Financial Condition.

In instances where we receive securities as collateral in connection with securities-for-securities transactions in which we are the lender of securities and are permitted to sell or repledge the securities received as collateral, we report the fair value of the collateral received and the related obligation to return the collateral in the Consolidated Statements of Financial Condition.

The following tables set forth the carrying value of securities lending arrangements, repurchase agreements and obligation to return securities received as collateral, at fair value, by class of collateral pledged and remaining contractual maturity (in thousands):

Collateral Pledged	Securities Lending Arrangements		Repurchase Agreements		Obligation to Return Securities Received as Collateral, at Fair Value		Total
May 31, 2022
Cash	$	2,360	$	—	$	—	$	2,360
Corporate equity securities	1,548,640		420,284		1,322		1,970,246
Corporate debt securities	264,308		2,072,975		—		2,337,283
Mortgage-backed and asset-backed securities	—		1,585,022		—		1,585,022
U.S. government and federal agency securities	55,398		8,680,828		—		8,736,226
Municipal securities	—		444,268		—		444,268
Sovereign obligations	5,728		3,256,207		—		3,261,935
Loans and other receivables	—		1,228,714		—		1,228,714
Total	$	1,876,434	$	17,688,298	$	1,322	$	19,566,054
November 30, 2021
Corporate equity securities	$	1,160,916	$	150,602	$	7,289	$	1,318,807
Corporate debt securities	321,356		2,684,458		—		3,005,814
Mortgage-backed and asset-backed securities	—		1,209,442		—		1,209,442
U.S. government and federal agency securities	6,348		8,426,536		—		8,432,884
Municipal securities	—		413,073		—		413,073
Sovereign obligations	37,101		2,422,901		—		2,460,002
Loans and other receivables	—		712,388		—		712,388
Total	$	1,525,721	$	16,019,400	$	7,289	$	17,552,410

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	Contractual Maturity
	Overnight and Continuous		Up to 30 Days		31 to 90 Days		Greater than 90 Days		Total
May 31, 2022
Securities lending arrangements	$	1,088,631	$	107,370	$	285,165	$	395,268	$	1,876,434
Repurchase agreements	9,267,240		2,549,573		2,363,392		3,508,093		17,688,298
Obligation to return securities received as collateral, at fair value	1,322		—		—		—		1,322
Total	$	10,357,193	$	2,656,943	$	2,648,557	$	3,903,361	$	19,566,054
November 30, 2021
Securities lending arrangements	$	595,628	$	1,318	$	539,623	$	389,152	$	1,525,721
Repurchase agreements	6,551,934		1,798,716		4,361,993		3,306,757		16,019,400
Obligation to return securities received as collateral, at fair value	7,289		—		—		—		7,289
Total	$	7,154,851	$	1,800,034	$	4,901,616	$	3,695,909	$	17,552,410

We receive securities as collateral under resale agreements, securities borrowing transactions and customer margin loans. We also receive securities as collateral in connection with securities-for-securities transactions in which we are the lender of securities. In many instances, we are permitted by contract to rehypothecate the securities received as collateral. These securities may be used to secure repurchase agreements, enter into securities lending transactions, satisfy margin requirements on derivative transactions or cover short positions. At May 31, 2022 and November 30, 2021, the approximate fair value of securities received as collateral by us that may be sold or repledged was $30.16 billion and $31.97 billion, respectively. At May 31, 2022 and November 30, 2021, a substantial portion of the securities received have been sold or repledged.

Offsetting of Securities Financing Agreements

To manage our exposure to credit risk associated with securities financing transactions, we may enter into master netting agreements and collateral arrangements with counterparties. Generally, transactions are executed under standard industry agreements, including, but not limited to, master securities lending agreements (securities lending transactions) and master repurchase agreements (repurchase transactions).

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The following table provides information regarding repurchase agreements, securities borrowing and lending arrangements and securities received as collateral, at fair value, and obligation to return securities received as collateral, at fair value, that are recognized in the Consolidated Statements of Financial Condition and (1) the extent to which, under enforceable master netting arrangements, such balances are presented net in the Consolidated Statements of Financial Condition as appropriate under GAAP and (2) the extent to which other rights of setoff associated with these arrangements exist and could have an effect on our consolidated financial position.

(In thousands)	Gross Amounts		Netting in Consolidated Statements of Financial Condition		Net Amounts in Consolidated Statements of Financial Condition		Additional Amounts Available for Setoff (1)		Available Collateral (2)		Net Amount (3)
Assets at May 31, 2022
Securities borrowing arrangements	$	6,312,320	$	—	$	6,312,320	$	(416,770)	$	(1,328,320)	$	4,567,230
Reverse repurchase agreements	14,269,387		(9,524,408)		4,744,979		(469,355)		(4,140,956)		134,668
Securities received as collateral, at fair value	1,322		—		1,322		—		(1,322)		—
Liabilities at May 31, 2022
Securities lending arrangements	$	1,876,434	$	—	$	1,876,434	$	(416,770)	$	(1,433,026)	$	26,638
Repurchase agreements	17,688,298		(9,524,408)		8,163,890		(469,355)		(7,318,621)		375,914
Obligation to return securities received as collateral, at fair value	1,322		—		1,322		—		(1,322)		—
Assets at November 30, 2021
Securities borrowing arrangements	$	6,409,420	$	—	$	6,409,420	$	(271,475)	$	(1,528,206)	$	4,609,739
Reverse repurchase agreements	15,215,785		(7,573,301)		7,642,484		(540,312)		(7,048,823)		53,349
Securities received as collateral, at fair value	7,289		—		7,289		—		(7,289)		—
Liabilities at November 30, 2021
Securities lending arrangements	$	1,525,721	$	—	$	1,525,721	$	(271,475)	$	(1,213,563)	$	40,683
Repurchase agreements (4)	16,019,400		(7,573,301)		8,446,099		(540,312)		(7,136,585)		769,202
Obligation to return securities received as collateral, at fair value	7,289		—		7,289		—		(7,289)		—

(1)Under master netting agreements with our counterparties, we have the legal right of offset with a counterparty, which incorporates all of the counterparty's outstanding rights and obligations under the arrangement. These balances reflect additional credit risk mitigation that is available by a counterparty in the event of a counterparty's default, but which are not netted in the Consolidated Statements of Financial Condition because other netting provisions of GAAP are not met. 

(2)Includes securities received or paid under collateral arrangements with counterparties that could be liquidated in the event of a counterparty default and thus offset against a counterparty's rights and obligations under the respective repurchase agreements or securities borrowing or lending arrangements.

(3)At May 31, 2022, amounts include $4.50 billion of securities borrowing arrangements, for which we have received securities collateral of $4.32 billion, and $360.0 million of repurchase agreements, for which we have pledged securities collateral of $371.8 million, which are subject to master netting agreements, but we have not determined the agreements to be legally enforceable. At November 30, 2021, amounts include $4.51 billion of securities borrowing arrangements, for which we have received securities collateral of $4.35 billion, and $765.0 million of repurchase agreements, for which we have pledged securities collateral of $781.8 million, which are subject to master netting agreements, but we have not determined the agreements to be legally enforceable.

(4)There was an immaterial correction in the amount of available collateral, which resulted in a $200 million decrease in the available collateral and a $200 million increase in the net amount related to repurchase agreements at November 30, 2021.

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Cash and Securities Segregated and on Deposit for Regulatory Purposes or Deposited with Clearing and Depository Organizations

Cash and securities segregated in accordance with regulatory regulations and deposited with clearing and depository organizations totaled $962.6 million and $1.02 billion at May 31, 2022 and November 30, 2021, respectively. Segregated cash and securities consist of deposits in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, which subjects Jefferies LLC as a broker-dealer carrying customer accounts to requirements related to maintaining cash or qualified securities in segregated special reserve bank accounts for the exclusive benefit of its customers.

Other Assets

Restricted cash, which is comprised of cash reserve balances required by securitization agreements and cash collections associated with automobile loans pledged to warehouse credit facilities, is included in Other assets in the Consolidated Statements of Financial Condition. These restricted cash balances are held by trustees and are distributed monthly by the trustees per the various securitization and warehouse credit facility agreements. Restricted cash may also include amounts related to pre-funding arrangements put in place for securitizations, which are funds that remain in an escrow account managed by a trustee until we pledge additional automobile loans to meet the collateral requirements of the related notes, at which time the funds become available for our use.

Note 6.  Securitization Activities

We engage in securitization activities related to corporate loans, mortgage loans, consumer loans and mortgage-backed and other asset-backed securities. In our securitization transactions, we transfer these assets to special purpose entities ("SPEs") and act as the placement or structuring agent for the beneficial interests sold to investors by the SPE. A significant portion of our securitization transactions are the securitization of assets issued or guaranteed by U.S. government agencies. These SPEs generally meet the criteria of variable interest entities ("VIEs"); however, we generally do not consolidate the SPEs as we are not considered the primary beneficiary for these SPEs. 

We account for our securitization transactions as sales, provided we have relinquished control over the transferred assets. Transferred assets are carried at fair value with unrealized gains and losses reflected in Principal transactions revenues in the Consolidated Statements of Operations prior to the identification and isolation for securitization. Subsequently, revenues recognized upon securitization are reflected as net underwriting revenues. We generally receive cash proceeds in connection with the transfer of assets to an SPE. We may, however, have continuing involvement with the transferred assets, which is limited to retaining one or more tranches of the securitization (primarily senior and subordinated debt securities in the form of mortgage-backed and other asset-backed securities or CLOs). These securities are included in Financial instruments owned, at fair value in the Consolidated Statements of Financial Condition and are generally initially categorized as Level 2 within the fair value hierarchy.  

The following table presents activity related to our securitizations that were accounted for as sales in which we had continuing involvement (in millions):

	For the Three Months Ended May 31,				For the Six Months Ended May 31,
	2022		2021		2022		2021
Transferred assets	$	2,462.0	$	3,146.5	$	3,542.6	$	6,730.0
Proceeds on new securitizations	2,513.4		3,146.5		3,594.0		6,729.6
Cash flows received on retained interests	6.5		5.1		15.4		11.1

We have no explicit or implicit arrangements to provide additional financial support to these SPEs, have no liabilities related to these SPEs and do not have any outstanding derivative contracts executed in connection with these securitization activities at May 31, 2022 and November 30, 2021.

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The following table summarizes our retained interests in SPEs where we transferred assets and have continuing involvement and received sale accounting treatment (in millions):

	May 31, 2022				November 30, 2021
Securitization Type	Total Assets		Retained Interests		Total Assets		Retained Interests
U.S. government agency residential mortgage-backed securities	$	255.2	$	3.7	$	330.2	$	4.9
U.S. government agency commercial mortgage-backed securities	2,549.5		180.1		2,201.8		69.2
CLOs	4,676.1		37.0		3,382.3		31.0
Consumer and other loans	2,626.9		142.0		2,271.4		136.4

Total assets represent the unpaid principal amount of assets in the SPEs in which we have continuing involvement and are presented solely to provide information regarding the size of the transactions and the size of the underlying assets supporting our retained interests, and are not considered representative of the risk of potential loss. Assets retained in connection with a securitization transaction represent the fair value of the securities of one or more tranches issued by an SPE, including senior and subordinated tranches. Our risk of loss is limited to this fair value amount, which is included in total Financial instruments owned, at fair value in the Consolidated Statements of Financial Condition.

Although not obligated, in connection with secondary market-making activities we may make a market in the securities issued by these SPEs. In these market-making transactions, we buy these securities from and sell these securities to investors. Securities purchased through these market-making activities are not considered to be continuing involvement in these SPEs. To the extent we purchased securities through these market-making activities and we are not deemed to be the primary beneficiary of the VIE, these securities are included in agency and non-agency mortgage-backed and asset-backed securitizations in the nonconsolidated VIEs section presented in Note 7.

Note 7.  Variable Interest Entities

VIEs are entities in which equity investors lack the characteristics of a controlling financial interest. VIEs are consolidated by the primary beneficiary. The primary beneficiary is the party who has both (1) the power to direct the activities of a VIE that most significantly impact the entity's economic performance and (2) an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity.

Our variable interests in VIEs include debt and equity interests, equity interests in associated companies, commitments, guarantees and certain fees. Our involvement with VIEs arises primarily from the following activities, but also includes other activities discussed below:

•Purchases of securities in connection with our trading and secondary market-making activities;

•Retained interests held as a result of securitization activities;

•Acting as placement agent and/or underwriter in connection with client-sponsored securitizations;

•Financing of agency and non-agency mortgage-backed and other asset-backed securities;

•Acting as servicer for a fee to automobile loan financing vehicles;

•Warehouse funding arrangements for client-sponsored consumer and mortgage loan vehicles and CLOs through participation agreements, forward sale agreements, reverse repurchase agreements and revolving loan and note commitments; and

•Loans to, investments in and fees from various investment vehicles.

We determine whether we are the primary beneficiary of a VIE upon our initial involvement with the VIE and we reassess whether we are the primary beneficiary of a VIE on an ongoing basis. Our determination of whether we are the primary beneficiary of a VIE is based upon the facts and circumstances for each VIE and requires judgment. Our considerations in determining the VIE's most significant activities and whether we have power to direct those activities include, but are not limited to, the VIE's purpose and design and the risks passed through to investors, the voting interests of the VIE, management, service and/or other agreements of the VIE, involvement in the VIE's initial design and the existence of explicit or implicit financial guarantees. In situations where we have determined that the power over the VIE's significant activities is shared, we assess whether we are the party with the power over the most significant activities. If we are the party with the power over the most significant activities, we meet the "power" criteria of the primary beneficiary. If we do not have the power over the most significant activities or we determine that decisions require consent of each sharing party, we do not meet the "power" criteria of the primary beneficiary.

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We assess our variable interests in a VIE both individually and in aggregate to determine whether we have an obligation to absorb losses of or a right to receive benefits from the VIE that could potentially be significant to the VIE. The determination of whether our variable interest is significant to the VIE requires judgment. In determining the significance of our variable interest, we consider the terms, characteristics and size of the variable interests, the design and characteristics of the VIE, our involvement in the VIE and our market-making activities related to the variable interests.

Consolidated VIEs

The following table presents information about our consolidated VIEs (in millions). The assets and liabilities in the table below are presented prior to consolidation and thus a portion of these assets and liabilities are eliminated in consolidation.

	May 31, 2022				November 30, 2021
	Secured Funding Vehicles		Other		Secured Funding Vehicles		Other
Cash	$	—	$	0.1	$	3.8	$	—
Financial instruments owned, at fair value	—		37.8		173.1		146.4
Securities purchased under agreements to resell (1)	2,172.6		—		3,697.1		—
Receivables (2)	668.2		30.5		626.8		40.6
Other assets (3)	117.4		67.8		114.6		—
Total assets	$	2,958.2	$	136.2	$	4,615.4	$	187.0
Financial instruments sold, not yet purchased, at fair   value	$	—	$	6.9	$	—	$	109.1
Other secured financings (4)	2,916.3		—		4,521.6		—
Other liabilities (5)	3.5		90.1		46.6		75.3
Total liabilities	$	2,919.8	$	97.0	$	4,568.2	$	184.4
Noncontrolling interests	$	—	$	34.6	$	—	$	—

(1)Securities purchased under agreements to resell primarily represent amounts due under collateralized transactions on related consolidated entities, which are eliminated in consolidation.

(2)Approximately $1.4 million and $1.2 million of the receivables at May 31, 2022 and November 30, 2021, respectively, are with related consolidated entities, which are eliminated in consolidation.

(3)Approximately $65.5 million and $56.5 million of the other assets at May 31, 2022 and November 30, 2021, respectively, represent intercompany receivables with related consolidated entities, which are eliminated in consolidation.

(4)Approximately $252.6 million and $36.7 million of the other secured financings at May 31, 2022 and November 30, 2021, respectively, are with related consolidated entities, which are eliminated in consolidation.

(5)Approximately $85.0 million and $75.3 million of the other liabilities at May 31, 2022 and November 30, 2021, respectively, are with related consolidated entities, which are eliminated in consolidation.

Secured Funding Vehicles.  We are the primary beneficiary of asset-backed financing vehicles to which we sell agency and non-agency residential and commercial mortgage loans and asset-backed securities pursuant to the terms of a master repurchase agreement. Our variable interests in these vehicles consist of our collateral margin maintenance obligations under the master repurchase agreement, which we manage, and retained interests in securities issued. The assets of these VIEs consist of reverse repurchase agreements, which are available for the benefit of the vehicle's debt holders. 

At May 31, 2022 and November 30, 2021, Foursight is the primary beneficiary of automobile loan financing vehicles to which we transfer automobile loans, act as servicer of the automobile loans for a fee and retain equity interests in the vehicles. The assets of these VIEs consist primarily of automobile loans, which are accounted for as loans held for investment at amortized cost and included within Receivables in the Consolidated Statements of Financial Condition. The liabilities of these VIEs consist of notes issued by the VIEs, which are accounted for at amortized cost and included within Other secured financings in the Consolidated Statements of Financial Condition and do not have recourse to our general credit. The automobile loans are pledged as collateral for the related notes and available only for the benefit of the note holders.

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Other. We are the primary beneficiary of certain investment vehicles set up for the benefit of our employees. We manage and invest alongside our employees in these vehicles. The assets of these VIEs consist of private equity securities and are available for the benefit of the entities' equity holders. Our variable interests in these vehicles consist of equity securities. The creditors of these VIEs do not have recourse to our general credit and each such VIE's assets are not available to satisfy any other debt.

Additionally, HomeFed is the primary beneficiary of a real estate syndication entity that is developing a multi-family residential property. HomeFed invested in this property, together with other third-party investors that have noncontrolling interests, and manages the property. Its assets consist primarily of the real estate being developed and its liabilities consist primarily of accrued capital expenditures and other payables. Our variable interests in the VIE consist primarily of our equity ownership interest, a sponsor promote, and development and asset management fees earned for managing the project.

Nonconsolidated VIEs

The following table presents information about our variable interests in nonconsolidated VIEs (in millions):

	Carrying Amount				Maximum Exposure to Loss		VIE Assets
	Assets		Liabilities
May 31, 2022
CLOs	$	367.6	$	0.8	$	2,731.9	$	7,954.0
Asset-backed vehicles	472.8		—		579.1		4,871.8
Related party private equity vehicles	28.4		—		39.1		81.7
Other investment vehicles	1,392.4		—		1,494.7		15,888.7
Total	$	2,261.2	$	0.8	$	4,844.8	$	28,796.2
November 30, 2021
CLOs	$	582.2	$	2.0	$	2,557.1	$	10,277.5
Asset-backed vehicles	281.9		—		359.3		3,474.6
Related party private equity vehicles	27.1		—		37.8		78.9
Other investment vehicles	1,111.5		—		1,201.6		15,101.4
Total	$	2,002.7	$	2.0	$	4,155.8	$	28,932.4

Our maximum exposure to loss often differs from the carrying value of the variable interests. The maximum exposure to loss is dependent on the nature of the variable interests in our VIEs and is limited to the notional amounts of certain loan and equity commitments and guarantees. Our maximum exposure to loss does not include the offsetting benefit of any financial instruments that may be utilized to hedge the risks associated with our variable interests and is not reduced by the amount of collateral held as part of a transaction with a VIE.

Collateralized Loan Obligations. Assets collateralizing the CLOs include bank loans, participation interests, sub-investment grade and senior secured U.S. loans and senior secured Euro denominated corporate leveraged loans and bonds. We underwrite securities issued in CLO transactions on behalf of sponsors and provide advisory services to the sponsors. We may also sell corporate loans to the CLOs. Our variable interests in connection with CLOs where we have been involved in providing underwriting and/or advisory services consist of the following:

•Forward sale agreements whereby we commit to sell, at a fixed price, corporate loans and ownership interests in an entity holding such corporate loans to CLOs;

•Warehouse funding arrangements in the form of:

◦Participation interests in corporate loans held by CLOs and commitments to fund such participation interests;

◦Reverse repurchase agreements with collateral margin maintenance obligations and commitments to fund such reverse repurchase agreements; and

◦Senior and subordinated notes issued in connection with CLO warehousing activities.

•Trading positions in securities issued in CLO transactions; and

•Investments in variable funding notes issued by CLOs.

Asset-Backed Vehicles. We provide financing and lending related services to certain client-sponsored VIEs in the form of revolving funding note agreements, revolving credit facilities, forward purchase agreements and reverse repurchase

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agreements. The underlying assets, which are collateralizing the vehicles, are primarily composed of unsecured consumer loans and mortgage loans. In addition, we may provide structuring and advisory services and act as an underwriter or placement agent for securities issued by the vehicles. We do not control the activities of these entities.

Related Party Private Equity Vehicles. We committed to invest in private equity funds (the "JCP Funds", including Jefferies Group's interests in Jefferies Capital Partners V L.P. and the Jefferies SBI USA Fund L.P. (together, "JCP Fund V")) managed by Jefferies Capital Partners, LLC (the "JCP Manager"). Additionally, we committed to invest in the general partners of the JCP Funds (the "JCP General Partners") and the JCP Manager. Our variable interests in the JCP Funds, JCP General Partners and JCP Manager (collectively, the "JCP Entities") consist of equity interests that, in total, provide us with limited and general partner investment returns of the JCP Funds, a portion of the carried interest earned by the JCP General Partners and a portion of the management fees earned by the JCP Manager. At both May 31, 2022 and November 30, 2021, our total equity commitment in the JCP Entities was $133.0 million, of which $122.3 million and $122.3 million, respectively, had been funded. The carrying value of our equity investments in the JCP Entities was $28.4 million and $27.1 million at May 31, 2022 and November 30, 2021, respectively. Our exposure to loss is limited to the total of our carrying value and unfunded equity commitment. The assets of the JCP Entities primarily consist of private equity and equity related investments.

Other Investment Vehicles.  The carrying amount of our equity investment was $1.39 billion and $1.11 billion at May 31, 2022 and November 30, 2021, respectively. Our unfunded equity commitment related to these investments totaled $102.3 million and $90.0 million at May 31, 2022 and November 30, 2021, respectively. Our exposure to loss is limited to the total of our carrying value and unfunded equity commitment. These investment vehicles have assets primarily consisting of private and public equity investments, debt instruments, trade and insurance claims and various oil and gas assets.

Mortgage-Backed and Other Asset-Backed Secured Funding Vehicles.  In connection with our secondary trading and market-making activities, we buy and sell agency and non-agency mortgage-backed securities and other asset-backed securities, which are issued by third-party securitization SPEs and are generally considered variable interests in VIEs. Securities issued by securitization SPEs are backed by residential mortgage loans, U.S. agency collateralized mortgage obligations, commercial mortgage loans, CDOs and CLOs and other consumer loans, such as installment receivables, automobile loans and student loans. These securities are accounted for at fair value and included in Financial instruments owned, at fair value in the Consolidated Statements of Financial Condition. We have no other involvement with the related SPEs and therefore do not consolidate these entities.

We also engage in underwriting, placement and structuring activities for third-party-sponsored securitization trusts generally through agency (Fannie Mae, Federal Home Loan Mortgage Corporation ("Freddie Mac") or Ginnie Mae) or non-agency-sponsored SPEs and may purchase loans or mortgage-backed securities from third-parties that are subsequently transferred into the securitization trusts. The securitizations are backed by residential and commercial mortgage, home equity and automobile loans. We do not consolidate agency-sponsored securitizations as we do not have the power to direct the activities of the SPEs that most significantly impact their economic performance. Further, we are not the servicer of non-agency-sponsored securitizations and therefore do not have power to direct the most significant activities of the SPEs and accordingly, do not consolidate these entities. We may retain unsold senior and/or subordinated interests at the time of securitization in the form of securities issued by the SPEs.

At May 31, 2022 and November 30, 2021, we held $1.58 billion and $1.31 billion of agency mortgage-backed securities, respectively, and $205.8 million and $253.9 million of non-agency mortgage-backed and other asset-backed securities, respectively, as a result of our secondary trading and market-making activities, and underwriting, placement and structuring activities. Our maximum exposure to loss on these securities is limited to the carrying value of our investments in these securities. These mortgage-backed and other asset-backed secured funding vehicles discussed are not included in the above table containing information about our variable interests in nonconsolidated VIEs.

FXCM is considered a VIE and our term loan and equity ownership are variable interests. We have determined that we are not the primary beneficiary of FXCM because we do not have the power to direct the activities that most significantly impact FXCM's performance. Therefore, we do not consolidate FXCM and we account for our equity interest under the equity method as an investment in an associated company. FXCM reported total assets of $398.8 million in its latest financial statements. Our maximum exposure to loss as a result of our involvement with FXCM is limited to the total of the carrying value of the term loan ($51.9 million) and the investment in associated company ($51.2 million) at May 31, 2022. FXCM is not included in the above table containing information about our variable interests in nonconsolidated VIEs.

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Note 8.  Loans to and Investments in Associated Companies

A summary of Loans to and investments in associated companies accounted for under the equity method of accounting during the six months ended May 31, 2022 and 2021 is as follows (in thousands):

	Loans to and investments in associated companies as of beginning of period		Income (losses) related to associated companies		Other income (losses) related to associated companies (1)		Contributions to (distributions from) associated companies, net		Other		Loans to and investments in associated companies as of end of period
2022
Jefferies Finance	$	776,162	$	—	$	4,796	$	25,370	$	(3)	$	806,325
Berkadia	373,417				77,484		(22,224)		(811)		427,866
FXCM (2)	48,986		(6,969)				10,000		(786)		51,231
Linkem (3)	133,778		(44,972)		—		8,739		—		97,545
Asset Management companies (4)	183,076		—		6,447		(3,250)		2		186,275
Real estate companies	122,720		710		—		10,257		—		133,687
Other (3) (4)	107,651		(454)		(142)		(3,983)		(2,459)		100,613
Total	$	1,745,790	$	(51,685)	$	88,585	$	24,909	$	(4,057)	$	1,803,542
2021
Jefferies Finance	$	693,201	$	—	$	60,835	$	(21,817)	$	—	$	732,219
Berkadia	301,152		—		60,672		(505)		(57)		361,262
FXCM (2)	73,920		(10,120)		—		—		328		64,128
Linkem	198,991		(19,943)		—		(8,783)		—		170,265
Asset Management companies (4)	139,707		—		31,297		(31,591)		—		139,413
Real estate companies	168,678		(3,117)		—		(11,854)		—		153,707
Other (4)	110,914		(914)		240		(3,118)		(1)		107,121
Total	$	1,686,563	$	(34,094)	$	153,044	$	(77,668)	$	270	$	1,728,115

(1)Primarily related to Jefferies Group and classified in Other revenues.

(2)As further described in Note 3, our investment in FXCM includes both our equity method investment in FXCM and our term loan with FXCM. Our equity method investment is included in Loans to and investments in associated companies and our term loan is included in Financial instruments owned, at fair value in the Consolidated Statements of Financial Condition.

(3)Loans to and investments in associated companies at May 31, 2022 include loans and debt securities aggregating $24.5 million related to Linkem and other, and $15.3 million at November 30, 2021 related to other.

(4)Certain prior year amounts have been reclassified to conform to the current year presentation.

Income (losses) related to associated companies includes the following (in thousands):

	For the Three Months Ended May 31,				For the Six Months Ended May 31,
	2022		2021		2022		2021
FXCM	$	2,578	$	(4,658)	$	(6,969)	$	(10,120)
Linkem	(22,001)		(10,836)		(44,972)		(19,943)
Real estate companies	(1,290)		(9,168)		710		(3,117)
Other	(987)		1,136		(454)		(914)
Total	$	(21,700)	$	(23,526)	$	(51,685)	$	(34,094)

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Other income (losses) related to associated companies (primarily related to Jefferies Group and classified in Other revenues) includes the following (in thousands):

	For the Three Months Ended May 31,				For the Six Months Ended May 31,
	2022		2021		2022		2021
Jefferies Finance	$	(14,215)	$	33,250	$	4,796	$	60,835
Berkadia	38,584		30,654		77,484		60,672
Asset Management companies (1)	6,316		1,113		6,447		31,297
Other (1)	(118)		121		(142)		240
Total	$	30,567	$	65,138	$	88,585	$	153,044

(1)Certain prior year amounts have been reclassified to conform to the current year presentation.

Jefferies Finance

Through Jefferies Group, we own a 50% equity interest in JFIN Parent LLC ("Jefferies Finance") and Jefferies Finance LLC is a direct subsidiary of JFIN Parent LLC. Jefferies Finance is a joint venture entity pursuant to an agreement with Massachusetts Mutual Life Insurance Company ("MassMutual"). Jefferies Finance is a commercial finance company that structures, underwrites and syndicates primarily senior secured loans to corporate borrowers; and manages proprietary and third-party investments for both broadly syndicated and direct lending loans. Jefferies Finance conducts its operations primarily through two business lines, Leveraged Finance Arrangement, and Portfolio and Asset Management. Loans are originated primarily through Jefferies Group's investment banking efforts and Jefferies Finance typically syndicates to third-party investors substantially all of its arranged volume through Jefferies Group. The Portfolio and Asset Management business lines, collectively referred to as Jefferies Credit Partners, manages a broad portfolio of assets under management comprised of portions of loans it has arranged, as well as loan positions that it has purchased in the primary and secondary markets. Jefferies Credit Partners is comprised of three registered Investment Advisors: Jefferies Finance, Apex Credit Partners LLC and JFIN Asset Management LLC, which serve as a private credit platform managing proprietary and third-party capital across comingled funds, separately managed accounts and collateralized loan obligations.

At May 31, 2022, Jefferies Group and MassMutual each had equity commitments to Jefferies Finance of $750.0 million. The equity commitment is reduced quarterly based on Jefferies Group's share of any undistributed earnings from Jefferies Finance and the commitment is increased only to the extent the share of such earnings are distributed. At May 31, 2022, Jefferies Group's remaining commitment to Jefferies Finance was $15.4 million. The investment commitment is scheduled to expire on March 1, 2023 with automatic one year extensions absent a 60 day termination notice by either party.

Jefferies Finance has executed a Secured Revolving Credit Facility with Jefferies Group 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 May 31, 2022. Advances are shared equally between Jefferies Group and MassMutual. The facility is scheduled to mature on March 1, 2023 with automatic one year extensions absent a 60 day termination notice by either party. At May 31, 2022, Jefferies Group had funded $0.0 million of its $250.0 million commitment. Jefferies Group recognized interest income and unfunded commitment fees related to the facility of $0.6 million and $1.3 million during the three months ended May 31, 2022 and 2021, respectively, and $1.0 million and $1.9 million during the six months ended May 31, 2022 and 2021, respectively.

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

	For the Three Months Ended May 31,				For the Six Months Ended May 31,
	2022		2021		2022		2021
Origination and syndication fee revenues (1)	$	41.9	$	145.4	$	156.8	$	215.7
Origination fee expenses (1)	11.4		20.5		27.3		32.8
CLO placement fee revenues (2)	1.2		1.3		1.9		3.7
Underwriting fees (3)	—		—		—		0.5
Service fees (4)	15.8		14.0		65.8		45.5

(1)    Jefferies Group engages in the origination and syndication of loans underwritten by Jefferies Finance. In connection with such services, Jefferies Group earned fees, which are recognized in Investment banking revenues in the Consolidated Statements of Operations. In addition, Jefferies Group paid fees to Jefferies Finance in respect of certain loans originated by Jefferies Finance, which are recognized in Selling, general and other expenses in the Consolidated Statements of Operations.

(2)    Jefferies Group acts as a placement agent for CLOs managed by Jefferies Finance, for which Jefferies Group recognized fees, which are included in Investment banking revenues in the Consolidated Statements of Operations. At May 31, 2022 and November 30, 2021, Jefferies Group held securities issued by CLOs managed by Jefferies Finance, which are included in Financial instruments owned, at fair value.

(3)    Jefferies Group acted as underwriter in connection with term loans issued by Jefferies Finance.

(4)    Under a service agreement, Jefferies Group charges Jefferies Finance for services provided.

In connection with non-U.S. dollar loans originated by Jefferies Finance to borrowers who are investment banking clients of Jefferies Group, Jefferies Group has entered into an agreement to indemnify Jefferies Finance with respect to any foreign currency exposure.

At May 31, 2022 and November 30, 2021, we had receivables from Jefferies Finance, included in Other assets in the Consolidated Statements of Financial Condition of $3.0 million and $26.2 million, respectively. At May 31, 2022 and November 30, 2021, we had payables to Jefferies Finance, related to cash deposited with Jefferies Group, included in Payables, expense accruals and other liabilities in the Consolidated Statements of Financial Condition of $0.8 million and $8.5 million, respectively.

Berkadia

Berkadia is a commercial mortgage banking and servicing joint venture that was formed in 2009 with Berkshire Hathaway Inc. We and Berkshire Hathaway each contributed $217.2 million of equity capital to the joint venture and each have a 50% membership interest in Berkadia. We are entitled to receive 45% of the profits. Berkadia originates commercial/multifamily real estate loans that are sold to U.S. government agencies, or other investors. Berkadia also is an investment sales advisor focused on the multifamily industry. Berkadia is a servicer of commercial real estate loans in the U.S., performing primary, master and special servicing functions for U.S. government agency programs, commercial mortgage-backed securities transactions, banks, insurance companies and other financial institutions.

Berkadia uses all of the proceeds from the commercial paper sales of an affiliate of Berkadia to fund new mortgage loans, servicer advances, investments and other working capital requirements. Repayment of the commercial paper is supported by a $1.5 billion surety policy issued by a Berkshire Hathaway insurance subsidiary and corporate guaranty, and we have agreed to reimburse Berkshire Hathaway for one-half of any losses incurred thereunder. At May 31, 2022, the aggregate amount of commercial paper outstanding was $1.47 billion.

FXCM

We have a 50% voting interest in FXCM, a provider of online foreign exchange trading services. We account for our equity interest in FXCM on a one month lag. We are amortizing our basis difference between the estimated fair value and the underlying book value of FXCM customer relationships, technology and tradename over their respective useful lives (weighted average life of 11 years).

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FXCM is considered a VIE and our term loan and equity interest are variable interests. We have determined that we are not the primary beneficiary of FXCM because we do not have the power to direct the activities that most significantly impact FXCM's performance. Therefore, we do not consolidate FXCM.

Linkem

We own approximately 42% of the common shares of Linkem, the largest fixed wireless broadband services provider in Italy. In addition, we own convertible preferred stock, which is automatically convertible to common shares in 2026, redeemable preferred stock with a redemption value of $103.9 million at May 31, 2022, and warrants. If all of our convertible preferred stock was converted and warrants were exercised, it would increase our ownership to approximately 57% of Linkem's common equity at May 31, 2022. We have approximately 48% of the total voting securities of Linkem. Additionally, we have made shareholder loans to Linkem with principal outstanding of $7.1 million at May 31, 2022. Subsequent to quarter end in June 2022, we made an additional shareholder loan to Linkem of $39.5 million. We account for our equity interest in Linkem on a two month lag.

Asset Management Companies

Through Jefferies Group, we have asset management equity method investments that consist of our shares in Monashee Holdings LLC ("Monashee") and Oak Hill Capital Management LLC, OHCP GenPar Holdco, LP, Oak Hill Capital Management Partners III, LP and Oak Hill Capital Partners IV (Management), LP (collectively the "Oak Hill entities"). Monashee, an investment management company, a registered investment advisor and general partner of various investment management funds, provides us with a 50% voting rights interest and the rights to distribution of 47.5% of the annual net profits of Monashee's operations if certain thresholds are met. The Asset Management companies investments also consist of membership interests and limited partnership interests of approximately 15% in the Oak Hill investment management company and registered investment advisor and the Oak Hill general partner entity, which is entitled to carried interest from certain Oak Hill managed funds. A portion of the carrying amount of these investments relates to contract and customer relationship and client relationship intangible assets and goodwill. The intangible assets are amortized over their useful life and the goodwill is not amortized.

Real Estate Companies

Real estate equity method investments primarily consist of HomeFed's interests in Brooklyn Renaissance Plaza and Hotel and 54 Madison. These equity interests are accounted for on a two month lag.

Brooklyn Renaissance Plaza is comprised of a hotel operated by Marriott, an office building complex and a parking garage located in Brooklyn, New York. HomeFed owns a 25.4% equity interest in the hotel and a 61.25% equity interest in the office building and garage. Although HomeFed has a majority interest in the office building and garage, it does not have control, but only has the ability to exercise significant influence on this investment. As such, HomeFed accounts for the office building and garage under the equity method of accounting. We are amortizing our basis difference between the estimated fair value and the underlying book value of Brooklyn Renaissance office building and garage over the respective useful lives (weighted average life of 39 years).

We own approximately 48.1% of 54 Madison, a fund that owns interests in three real estate projects and is in the process of being liquidated.

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Note 9.  Intangible Assets, Net and Goodwill

A summary of Intangible assets, net and goodwill is as follows (in thousands):

	May 31, 2022		November 30, 2021
Indefinite-lived intangibles:
Exchange and clearing organization membership interests and registrations	$	7,554	$	7,732
Amortizable intangibles:
Customer and other relationships, net of accumulated amortization of $130,699 and $128,012	39,347		42,808
Trademarks and tradenames, net of accumulated amortization of $33,855 and $32,244	94,030		96,509
Other, net of accumulated amortization of $12,328 and $11,329	4,354		5,353
Total intangible assets, net	145,285		152,402
Goodwill:
Investment Banking and Capital Markets (1)	1,556,588		1,561,928
Asset Management	143,000		143,000
Real estate	36,711		36,711
Other operations	3,459		3,459
Total goodwill	1,739,758		1,745,098
Total intangible assets, net and goodwill	$	1,885,043	$	1,897,500

(1)    The decrease in Investment Banking and Capital Markets goodwill during the six months ended May 31, 2022, primarily relates to translation adjustments.

Amortization expense on intangible assets was $2.5 million and $3.6 million for the three months ended May 31, 2022 and 2021, respectively, and $6.0 million and $7.2 million for the six months ended May 31, 2022 and 2021, respectively.

The estimated aggregate future amortization expense for the intangible assets for each of the next five fiscal years is as follows (in thousands): 

Remainder of current year	$	5,034
2023	9,900
2024	9,143
2025	8,633
2026	8,606

Note 10.  Short-Term Borrowings

Our short-term borrowings, which mature in one year or less, are as follows (in thousands):

	May 31, 2022		November 30, 2021
Bank loans (1)	$	347,381	$	215,063
Floating rate puttable notes (1)	6,800		6,800
Total short-term borrowings	$	354,181	$	221,863

(1)    These short-term borrowings are recorded at cost in the Consolidated Statements of Financial Condition, which is a reasonable approximation of their fair values due to their liquid and short-term nature.

At May 31, 2022 and November 30, 2021, the weighted average interest rate on short-term borrowings outstanding was 2.17% and 1.41% per annum, respectively.

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At May 31, 2022 and November 30, 2021, Jefferies Group's borrowings under credit facilities classified within bank loans in Short-term borrowings in the Consolidated Statements of Financial Condition were $345.0 million and $200.0 million, respectively. Jefferies Group's borrowings include credit facilities that contain certain covenants that, among other things, require it to maintain a specified level of tangible net worth, require a minimum regulatory net capital requirement for its U.S. broker-dealer, Jefferies LLC, and impose certain restrictions on the future indebtedness of certain of its subsidiaries that are borrowers. Interest is based on rates at spreads over the federal funds rate or other adjusted rates, as defined in the various credit agreements, or at a rate as agreed between the bank and Jefferies Group in reference to the bank's cost of funding. At May 31, 2022, Jefferies Group was in compliance with all covenants under these credit facilities.

Note 11.  Long-Term Debt

Principal amounts included in the table below are shown net of unamortized discounts, premiums and debt issuance costs (dollars in thousands).

	May 31, 2022		November 30, 2021
Parent Company Debt:
Senior Notes:
5.50% Senior Notes due October 18, 2023, $441,748 principal	$	440,536	$	440,120
6.625% Senior Notes due October 23, 2043, $250,000 principal	246,921		246,888
Total long-term debt – Parent Company	687,457		687,008
Subsidiary Debt (non-recourse to Parent Company):
Jefferies Group Unsecured Long-term Debt:
1.00% Euro Medium Term Notes, due July 19, 2024, $536,850 and $566,150 principal	535,932		564,985
4.85% Senior Notes, due January 15, 2027, $750,000 principal (1)	728,582		775,550
6.45% Senior Debentures, due June 8, 2027, $350,000 principal	365,253		366,556
4.15% Senior Notes, due January 23, 2030, $1,000,000 principal	991,016		990,525
2.625% Senior Notes due October 15, 2031, $1,000,000 principal (1)	932,107		988,059
2.75% Senior Notes, due October 15, 2032, $500,000 principal (1)	409,167		460,724
6.25% Senior Debentures, due January 15, 2036, $495,000 principal	505,033		505,267
6.50% Senior Notes, due January 20, 2043, $391,000 principal	409,702		409,926
Floating Rate Senior Notes, due October 29, 2071	61,709		61,703
Jefferies Group Unsecured Revolving Credit Facility	349,263		348,951
Structured Notes (2)	1,617,020		1,843,598
Jefferies Group Secured Long-term Debt:
Jefferies Group Secured Credit Facilities (3)	822,035		706,608
Jefferies Group Secured Bank Loan	100,000		100,000
HomeFed EB-5 Program debt	207,987		203,132
HomeFed construction loans	77,847		45,581
Vitesse Energy Revolving Credit Facility	81,985		67,572
Total long-term debt – subsidiaries	8,194,638		8,438,737
Long-term debt	$	8,882,095	$	9,125,745

(1)    Amounts include net gains of $155.6 million and $52.0 million during the six months ended May 31, 2022 and 2021, respectively, associated with interest rate swaps based on designation as fair value hedges. See Note 4 for further information.

(2)    These structured notes contain various interest rate payment terms and are accounted for at fair value, with changes in fair value resulting from a change in the instrument-specific credit risk presented in Accumulated other comprehensive income (loss) and changes in fair value resulting from non-credit components recognized in Principal transactions revenues. Gains and losses in the fair value of structured notes resulting from non-credit components are recognized within Other operating activities in the Consolidated Statements of Cash Flow.

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(3) Amounts include $82.6 million at November 30, 2021 related to Foursight credit facilities. In the first quarter of 2022, Foursight was transferred to Jefferies Group.

Subsidiary Debt:

During the six months ended May 31, 2022, structured notes with a total principal amount of approximately $170.5 million, net of retirements, were issued by Jefferies Group.

At May 31, 2022 and November 30, 2021, borrowings under several of Jefferies Group's credit facilities classified within Long-term debt amounted to $1.17 billion and $972.9 million, respectively. Interest on these credit facilities is based on adjusted London Interbank Offered Rate ("LIBOR") rates or other adjusted rates, as defined in the various credit agreements. The credit facility agreements contain certain covenants that, among other things, require Jefferies Group to maintain specified levels of tangible net worth and liquidity amounts, and impose certain restrictions on future indebtedness of and require specified levels of regulated capital and cash reserves for certain of its subsidiaries. At May 31, 2022, Jefferies Group was in compliance with all covenants under theses credit facilities.

In addition, one of Jefferies Group's subsidiaries has a Loan and Security Agreement with a bank for a term loan ("Jefferies Group Secured Bank Loan"). At both May 31, 2022 and November 30, 2021, borrowings under the Jefferies Group Secured Bank Loan amounted to $100.0 million and are also classified within Long-term debt. The Jefferies Group Secured Bank Loan matures on September 13, 2024 and is collateralized by certain trading securities with an interest rate of 1.25% plus LIBOR. The agreement contains certain covenants that, among other things, restricts lien or encumbrance upon any of the pledged collateral. At May 31, 2022, Jefferies Group was in compliance with all covenants under the Jefferies Group Secured Bank Loan.

HomeFed funds certain of its real estate projects in part by raising funds under the Immigrant Investor Program administered by the U.S. Citizenship and Immigration Services pursuant to the Immigration and Nationality Act ("EB-5 Program"). This program was created to stimulate the U.S. economy through the creation of jobs and capital investments in U.S. companies by foreign investors. This debt is secured by certain real estate of HomeFed. At May 31, 2022, HomeFed was in compliance with all debt covenants which include, among other requirements, limitations on incurrence of debt, collateral requirements and restricted use of proceeds. Primarily all of HomeFed's EB-5 Program debt matures in 2024 and 2025.

At May 31, 2022, HomeFed has construction loans with an aggregate committed amount of $148.6 million. The proceeds are being used for construction at certain of its real estate projects. The outstanding principal amount of the loans bear interest based on the 30 day LIBOR or the Secured Overnight Financing Rate ("SOFR"), plus spreads of 2.15% to 3.15%, subject to adjustment on the first of each calendar month. At May 31, 2022, the weighted average interest rate on these loans was 3.30%. The loans mature between September 2022 and May 2024 and are collateralized by the property underlying the related project with a guarantee by HomeFed. At May 31, 2022 and November 30, 2021, $78.8 million and $46.8 million, respectively, was outstanding under the construction loan agreements.

Vitesse Energy has a revolving credit facility with a syndicate of banks that matures in April 2026 and has a maximum borrowing base of $200.0 million at May 31, 2022. At May 31, 2022, $84.0 million was outstanding under the facility. Borrowings under the facility have been made as SOFR loans that bear interest at SOFR plus a spread ranging from 2.75% to 3.75% based on the borrowing base utilization percentage. The credit facility is guaranteed by Vitesse Energy's subsidiaries and is collateralized with a minimum of 85% of Vitesse Energy's proved reserve value of its oil and gas properties. Vitesse Energy's borrowing base is subject to regular re-determination on or about April 1 and October 1 of each year based on proved oil and gas reserves, hedge positions and estimated future cash flows from these reserves calculated using future commodity pricing provided by Vitesse Energy's lenders. At November 30, 2021, $68.0 million was outstanding under the prior revolving credit facility.

Note 12.  Mezzanine Equity

Redeemable Noncontrolling Interests

At May 31, 2022 and November 30, 2021, redeemable noncontrolling interests include other redeemable noncontrolling interests of $18.8 million and $25.4 million, respectively, primarily related to our oil and gas exploration and development businesses.

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Mandatorily Redeemable Convertible Preferred Shares

We have one series of callable mandatorily redeemable cumulative convertible preferred shares ("Preferred Shares"). Our 125,000 Preferred Shares are callable beginning January 2023 at a price of $1,000 per share, plus accrued interest and are mandatorily redeemable in 2038 for $125.0 million. The Preferred Shares have a dividend rate equal to the sum of 3.25% annual, cumulative cash dividend, plus an additional quarterly payment based on the amount by which our common stock dividends exceed $0.0625 per common share. The Preferred Shares are currently convertible into 4,440,863 common shares, an effective conversion price of $28.15 per share. Based on the quarterly dividend of $0.30 per common share, the effective rate on these Preferred Shares is approximately 6.6%.

Note 13.  Compensation Plans

Restricted Stock and Restricted Stock Units. Restricted stock and restricted stock units ("RSUs") may be granted to new employees as "sign-on" awards, to existing employees as "retention" awards and to certain executive officers as incentive awards. Sign-on and retention awards are generally subject to annual ratable vesting over a multi-year service period and are amortized as compensation expense on a straight-line basis over the service period. Restricted stock and RSUs are granted to certain senior executives and may contain market, performance and/or service conditions. Market conditions are incorporated into the grant-date fair value of senior executive awards using a Monte Carlo valuation model. Compensation expense for awards with market conditions is recognized over the service period and is not reversed if the market conditions are not met. Awards with performance conditions are amortized over the service period if, and to the extent, it is determined to be probable that the performance condition will be achieved. If awards are forfeited due to failure to achieve performance conditions or failure to satisfy service conditions, any previously recognized expense for such awards is reversed.

Senior Executive Compensation Plan.

In December 2021, our senior executives were granted RSUs containing service conditions, including a special leadership continuity grant, as well as RSUs that contain both service and performance conditions. For the three and six months ended May 31, 2022, we recorded $6.6 million and $11.9 million, respectively, of stock-based compensation related to these awards.

In December 2020, our senior executives were granted nonqualified stock options and stock appreciation rights ("SARs"). The total initial fair value of the stock options and SARs were recorded as expense at the time of the grant, as both awards have no future service requirements. For the three and six months ended May 31, 2021, we recorded $2.2 million and $48.6 million, respectively, of total Compensation and benefits expense relating to the stock options and SARs, of which $0.0 million and $12.9 million, respectively, was stock-based compensation and $2.2 million and $35.7 million, respectively, related to the SAR awards.

Share-Based Compensation Expense. Share-based compensation expense relating to grants made under our share-based compensation plans was $13.3 million and $10.1 million (including $2.2 million related to the senior executive stock option and SAR awards, as discussed above) for the three months ended May 31, 2022 and 2021, respectively, and $23.0 million and $64.3 million (including $48.6 million related to the senior executive stock option award and SAR awards, as discussed above) for the six months ended May 31, 2022 and 2021, respectively. Total compensation cost includes the amortization of sign-on, retention and senior executive awards, less forfeitures and clawbacks. At May 31, 2022, total unrecognized compensation cost related to nonvested share-based compensation plans was $107.0 million; this cost is expected to be recognized over a weighted average period of 3.6 years.

At May 31, 2022, there were 836,000 shares of restricted stock outstanding with future service required, 4,205,000 RSUs outstanding with future service required (including target RSUs that may be issued under the senior executive compensation plan), 12,424,000 RSUs outstanding with no future service required, 5,061,000 stock options outstanding and 1,141,000 shares issuable under other plans. Additionally, the Preferred Shares are currently convertible into 4,440,863 common shares at an effective conversion price of $28.15 per share. The maximum potential increase to common shares outstanding resulting from these outstanding awards and the Preferred Shares is 27,272,000 at May 31, 2022.

Restricted Cash Awards. Jefferies Group provides compensation to certain new and existing employees in the form of loans and/or other cash awards that are subject to ratable vesting terms with service requirements. These awards are amortized as compensation expense over the relevant service period, which is generally considered to start at the beginning of the annual compensation year. At May 31, 2022, the remaining unamortized amount of the restricted cash awards was $279.8 million and is included within Other assets in the Consolidated Statement of Financial Condition; this cost is expected to be recognized over a weighted average period of 3 years.

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Note 14.  Accumulated Other Comprehensive Income (Loss)

Activity in accumulated other comprehensive income (loss) is reflected in the Consolidated Statements of Comprehensive Income (Loss) and Consolidated Statements of Changes in Equity but not in the Consolidated Statements of Operations. A summary of accumulated other comprehensive income (loss), net of taxes is as follows (in thousands):

	May 31, 2022		November 30, 2021
Net unrealized gains (losses) on available for sale securities	$	(277)	$	269
Net foreign currency translation adjustments	(189,188)		(166,499)
Net changes in instrument-specific credit risk	(76,472)		(153,672)
Net minimum pension liability	(51,040)		(52,241)
Total accumulated other comprehensive income (loss)	$	(316,977)	$	(372,143)

Amounts reclassified out of accumulated other comprehensive income (loss) to net income are as follows (in thousands):

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from  Accumulated Other  Comprehensive Income (Loss)				Affected Line Item in the Consolidated Statements of Operations
	For the Six Months Ended May 31,
	2022		2021
Net changes in instrument-specific credit risk, net of income tax provision (benefit) of $(8) and $920	$	(24)	$	2,859	Principal transactions revenues
Amortization of defined benefit pension plan actuarial losses, net of income tax benefit of $(412) and $(525)	(1,201)		(1,551)		Selling, general and other expenses, which includes pension expense
Total reclassifications for the period, net of tax	$	(1,225)	$	1,308

Note 15. Revenues from Contracts with Customers

The following table presents our total revenues separated for our revenues from contracts with customers and our other sources of revenues (in thousands):

	For the Three Months Ended May 31,				For the Six Months Ended May 31,
	2022		2021		2022		2021
Revenues from contracts with customers:
Commissions and other fees	$	254,706	$	222,624	$	484,022	$	459,393
Investment banking	600,859		1,000,700		1,545,907		2,004,312
Other	277,392		269,029		510,070		461,291
Total revenues from contracts with customers	1,132,957		1,492,353		2,539,999		2,924,996
Other sources of revenue:
Principal transactions	204,589		361,023		453,744		1,280,924
Interest income	244,699		230,448		458,680		470,945
Other	35,902		82,505		108,524		193,052
Total revenues from other sources	485,190		673,976		1,020,948		1,944,921
Total revenues	$	1,618,147	$	2,166,329	$	3,560,947	$	4,869,917

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Revenues from contracts with customers are recognized when, or as, we satisfy our performance obligations by transferring the promised goods or services to the customers. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring our progress in satisfying the performance obligation in a manner that depicts the transfer of the goods or services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that we determine the customer obtains control over the promised good or service. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for those promised goods or services (the "transaction price"). In determining the transaction price, we consider multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, we consider the range of possible outcomes, the predictive value of our past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of our influence, such as market volatility or the judgment and actions of third-parties.

The following provides detailed information on the recognition of our revenues from contracts with customers:

Commissions and Other Fees. We earn commission and other fee revenue by executing, settling and clearing transactions for clients primarily in equity, equity-related and futures products. Trade execution and clearing services, when provided together, represent a single performance obligation as the services are not separately identifiable in the context of the contract. Commission revenues associated with combined trade execution and clearing services, as well as trade execution services on a standalone basis, are recognized at a point in time on trade-date. Commission revenues are generally paid on settlement date and we record a receivable between trade-date and payment on settlement date. We permit institutional customers to allocate a portion of their gross commissions to pay for research products and other services provided by third-parties. The amounts allocated for those purposes are commonly referred to as soft dollar arrangements. We act as an agent in the soft dollar arrangements as the customer controls the use of the soft dollars and directs our payments to third-party service providers on its behalf. Accordingly, amounts allocated to soft dollar arrangements are netted against commission revenues in the Consolidated Statements of Operations. We also earn investment research fees for the sales of our proprietary investment research when a contract with a client has been identified. The delivery of investment research services represents a distinct performance obligation that is satisfied over time when the performance obligation is to provide ongoing access to a research platform or research analysts, with fees recognized on a straight-line basis over the period in which the performance obligation is satisfied. The performance obligation is satisfied at a point in time when the performance obligation is to provide individual interactions with research analysts or research events, with fees recognized on the interaction date.

We earn account advisory and distribution fees in connection with wealth management services. Account advisory fees are recognized over time using the time-elapsed method as we determined that the customer simultaneously receives and consumes the benefits of investment advisory services as they are provided. Account advisory fees may be paid in advance of a specified service period or in arrears at the end of the specified service period (e.g., quarterly). Account advisory fees paid in advance are initially deferred within Payables, expense accruals and other liabilities in the Consolidated Statements of Financial Condition. Distribution fees are variable and recognized when the uncertainties with respect to the amounts are resolved.

Investment Banking. We provide our clients with a full range of financial advisory and underwriting services. Revenues from financial advisory services primarily consist of fees generated in connection with merger, acquisition and restructuring transactions. Advisory fees from mergers and acquisitions engagements are recognized at a point in time when the related transaction is completed, as the performance obligation is to successfully broker a specific transaction. Fees received prior to the completion of the transaction are deferred within Payables, expense accruals and other liabilities in the Consolidated Statements of Financial Condition. Advisory fees from restructuring engagements are recognized over time using a time elapsed measure of progress as our clients simultaneously receive and consume the benefits of those services as they are provided. A significant portion of the fees we receive for our advisory services are considered variable as they are contingent upon a future event (e.g., completion of a transaction or third-party emergence from bankruptcy) and are excluded from the transaction price until the uncertainty associated with the variable consideration is subsequently resolved, which is expected to occur upon achievement of the specified milestone. Payment for advisory services are generally due promptly upon completion of a specified milestone or, for retainer fees, periodically over the course of the engagement. We recognize a receivable between the date of completion of the milestone and payment by the customer. Expenses associated with investment banking advisory engagements are deferred only to the extent they are explicitly reimbursable by the client and the related revenue is recognized at a point in time. All other investment banking advisory related expenses, including expenses incurred related to restructuring assignments, are expensed as incurred. All investment banking advisory expenses are recognized within their respective

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expense category in the Consolidated Statements of Operations and any expenses reimbursed by our clients are recognized as Investment banking revenues.

Underwriting services include underwriting and placement agent services in both the equity and debt capital markets, including private equity placements, initial public offerings, follow-on offerings and equity-linked securities transactions and structuring, underwriting and distributing public and private debt, including investment grade debt, high yield bonds, leveraged loans, municipal bonds and mortgage-backed and asset-backed securities. Underwriting and placement agent revenues are recognized at a point in time on trade-date, as the client obtains the control and benefit of the underwriting offering at that point. Costs associated with underwriting transactions are deferred until the related revenue is recognized or the engagement is otherwise concluded, and are recorded on a gross basis within underwriting costs in the Consolidated Statements of Operations as we are acting as a principal in the arrangement. Any expenses reimbursed by our clients are recognized as Investment banking revenues.

Asset Management Fees. We earn management and performance fees, recorded in Other revenues, in connection with investment advisory services provided to various funds and accounts, which are satisfied over time and measured using a time elapsed measure of progress as the customer receives the benefits of the services evenly throughout the term of the contract. Management and performance fees are considered variable as they are subject to fluctuation (e.g., changes in assets under management, market performance) and/or are contingent on a future event during the measurement period (e.g., meeting a specified benchmark) and are recognized only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved. Management fees are generally based on month-end assets under management or an agreed upon notional amount and are included in the transaction price at the end of each month when the assets under management or notional amount is known. Performance fees are received when the return on assets under management for a specified performance period exceed certain benchmark returns, "high-water marks" or other performance targets. The performance period related to our performance fees is annual or semi-annual. Accordingly, performance fee revenue will generally be recognized only at the end of the performance period to the extent that the benchmark return has been met.

Manufacturing Revenues. Idaho Timber's primary business consists of the sale of lumber that is manufactured or remanufactured at one of its locations. Agreements with customers for these sales specify the type, quantity and price of products to be delivered as well as the delivery date and payment terms. The transaction price is fixed at the time of sale and revenue is generally recognized when the customer takes control of the product. Manufacturing revenues are included in Other revenues.

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Disaggregation of Revenue

The following presents our revenues from contracts with customers disaggregated by major business activity and primary geographic regions (in thousands):

	Reportable Segments (1)
	Investment Banking and Capital Markets		Asset Management		Merchant Banking		Corporate		Reconciling Items -Consolidation Adjustments		Total
Three months ended May 31, 2022
Major Business Activity:
Investment Banking - Advisory	$	371,760	$	—	$	—	$	—	$	—	$	371,760
Investment Banking - Underwriting	229,455		—		—		—		(356)		229,099
Equities (2)	251,433		—		—		—		(155)		251,278
Fixed Income (2)	3,428		—		—		—		—		3,428
Asset Management	—		3,300		—		—		—		3,300
Manufacturing revenues	—		—		166,028		—		—		166,028
Oil and gas revenues	—		—		83,240		—		—		83,240
Other revenues	—		—		24,824		—		—		24,824
Total revenues from contracts with customers	$	856,076	$	3,300	$	274,092	$	—	$	(511)	$	1,132,957
Primary Geographic Region:
Americas	$	683,804	$	3,300	$	273,030	$	—	$	(511)	$	959,623
Europe	106,392		—		649		—		—		107,041
Asia Pacific	65,880		—		413		—		—		66,293
Total revenues from contracts with customers	$	856,076	$	3,300	$	274,092	$	—	$	(511)	$	1,132,957
Three months ended May 31, 2021
Major Business Activity:
Investment Banking - Advisory	$	390,508	$	—	$	—	$	—	$	—	$	390,508
Investment Banking - Underwriting	610,192		—		—		—		—		610,192
Equities (2)	219,855		—		—		—		(19)		219,836
Fixed Income (2)	2,788		—		—		—		—		2,788
Asset Management	—		2,315		—		—		—		2,315
Manufacturing revenues	—		—		184,092		—		—		184,092
Oil and gas revenues	—		—		45,032		—		—		45,032
Other revenues	—		—		37,590		—		—		37,590
Total revenues from contracts with customers	$	1,223,343	$	2,315	$	266,714	$	—	$	(19)	$	1,492,353
Primary Geographic Region:
Americas	$	962,556	$	2,011	$	265,972	$	—	$	(19)	$	1,230,520
Europe	196,891		304		537		—		—		197,732
Asia Pacific	63,896		—		205		—		—		64,101
Total revenues from contracts with customers	$	1,223,343	$	2,315	$	266,714	$	—	$	(19)	$	1,492,353

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	Reportable Segments (1)
	Investment Banking and Capital Markets		Asset Management		Merchant Banking		Corporate		Reconciling Items -Consolidation Adjustments		Total
Six months ended May 31, 2022
Major Business Activity:
Investment Banking - Advisory	$	915,529	$	—	$	—	$	—	$	—	$	915,529
Investment Banking - Underwriting	630,734		—		—		—		(356)		630,378
Equities (2)	477,501		—		—		—		(292)		477,209
Fixed Income (2)	6,813		—		—		—		—		6,813
Asset Management	—		15,869		—		—		—		15,869
Manufacturing revenues	—		—		307,136		—		—		307,136
Oil and gas revenues	—		—		141,159		—		—		141,159
Other revenues	—		—		45,906		—		—		45,906
Total revenues from contracts with customers	$	2,030,577	$	15,869	$	494,201	$	—	$	(648)	$	2,539,999
Primary Geographic Region:
Americas	$	1,620,874	$	15,869	$	492,259	$	—	$	(648)	$	2,128,354
Europe	272,564		—		1,207		—		—		273,771
Asia Pacific	137,139		—		735		—		—		137,874
Total revenues from contracts with customers	$	2,030,577	$	15,869	$	494,201	$	—	$	(648)	$	2,539,999
Six months ended May 31, 2021
Major Business Activity:
Investment Banking - Advisory	$	701,947	$	—	$	—	$	—	$	—	$	701,947
Investment Banking - Underwriting	1,302,365		—		—		—		—		1,302,365
Equities (2)	453,394		—		—		—		(188)		453,206
Fixed Income (2)	6,187		—		—		—		—		6,187
Asset Management	—		9,741		—		—		—		9,741
Manufacturing revenues	—		—		321,939		—		—		321,939
Oil and gas revenues	—		—		77,041		—		—		77,041
Other revenues	—		—		52,570		—		—		52,570
Total revenues from contracts with customers	$	2,463,893	$	9,741	$	451,550	$	—	$	(188)	$	2,924,996
Primary Geographic Region:
Americas	$	1,989,422	$	9,108	$	450,310	$	—	$	(188)	$	2,448,652
Europe	360,628		633		906		—		—		362,167
Asia Pacific	113,843		—		334		—		—		114,177
Total revenues from contracts with customers	$	2,463,893	$	9,741	$	451,550	$	—	$	(188)	$	2,924,996

(1)    In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets, and Asset Management segments. Prior year amounts have been reclassified to conform to current segment reporting.

(2) Revenues from contracts with customers associated with the equities and fixed income businesses primarily represent commissions and other fee revenue.

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Information on Remaining Performance Obligations and Revenue Recognized from Past Performance

We do not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less. The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material at May 31, 2022. Investment banking advisory fees that are contingent upon completion of a specific milestone and fees associated with certain distribution services are also excluded as the fees are considered variable and not included in the transaction price at May 31, 2022.

We recognized $18.9 million and $20.9 million during the three months ended May 31, 2022 and 2021, respectively, and $52.6 million and $41.4 million during the six months ended May 31, 2022 and 2021, respectively, of revenues related to performance obligations satisfied (or partially satisfied) in previous periods, mainly due to resolving uncertainties in variable consideration that was constrained in prior periods. In addition, we recognized $6.6 million and $5.6 million during the three months ended May 31, 2022 and 2021, respectively, and $10.1 million and $8.5 million during the six months ended May 31, 2022 and 2021, respectively, of revenues primarily associated with distribution services, a portion of which relates to prior periods.

Contract Balances

The timing of our revenue recognition may differ from the timing of payment by customers. We record a receivable when revenue is recognized prior to payment and we have an unconditional right to payment, and we record a contract asset when we have transferred goods, services or assets to a customer, but payment is contingent upon additional performance obligations. Alternatively, when payment precedes the provision of the related services, we record deferred revenue until the performance obligations are satisfied.

We had receivables related to revenues from contracts with customers of $248.5 million and $298.7 million at May 31, 2022 and November 30, 2021, respectively, and we had contract assets related to revenues from contracts with customers of $16.7 million and $25.2 million at May 31, 2022 and November 30, 2021, respectively. We had no significant impairments related to these receivables or contract assets during the three and six months ended May 31, 2022 and 2021.

Our deferred revenue primarily includes deferred revenue related to our real estate operations and retainer and milestone fees received in investment banking advisory engagements where the performance obligations have not yet been satisfied. Deferred revenues were $30.3 million and $49.7 million at May 31, 2022 and November 30, 2021, respectively, which are recorded in Payables, expense accruals and other liabilities in the Consolidated Statements of Financial Condition. During the three months ended May 31, 2022, we recognized $8.1 million of deferred revenue from the balance at February 28, 2022. During the three months ended May 31, 2021, we recognized $4.1 million of deferred revenue from the balance at February 28, 2021. During the six months ended May 31, 2022, we recognized $20.8 million of deferred revenue from the balance at November 30, 2021. During the six months ended May 31, 2021, we recognized $9.4 million of deferred revenue from the balance at November 30, 2020.

Contract Costs

We capitalize costs to fulfill contracts associated with investment banking advisory engagements where the revenue is recognized at a point in time and the costs are determined to be recoverable. Capitalized costs to fulfill a contract are recognized at the point in time that the related revenue is recognized.

At May 31, 2022 and November 30, 2021, capitalized costs to fulfill a contract were $1.5 million and $1.6 million, respectively, which are recorded in Receivables in the Consolidated Statements of Financial Condition. We recognized expenses of $0.7 million and $0.8 million during the three months ended May 31, 2022 and 2021, respectively, and $1.5 million and $1.8 million during the six months ended May 31, 2022 and 2021, respectively, related to costs to fulfill a contract that were capitalized as of the beginning of the period. There were no significant impairment charges recognized in relation to these capitalized costs during the three and six months ended May 31, 2022 and 2021.

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Note 16.  Income Taxes

The aggregate amount of gross unrecognized tax benefits related to uncertain tax positions was $455.6 million (including $105.8 million for interest) at May 31, 2022, of which $290.7 million related to Jefferies Group, and was $436.9 million (including $97.9 million for interest) at November 30, 2021, of which $273.2 million related to Jefferies Group. If recognized, such amounts would lower our effective tax rate. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

The net deferred tax asset was $401.3 million and $327.5 million at May 31, 2022 and November 30, 2021, respectively. The deferred tax asset is predominately attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, the largest component of which relates to compensation and benefits. The deferred tax asset is included in Other assets in the Consolidated Statements of Financial Condition.

We are currently under examination by a number of taxing jurisdictions. Though we do not expect that resolution of these examinations will have a material effect on our consolidated financial position, they may have a material impact on our consolidated results of operations for the period in which resolution occurs.

The table below summarizes the earliest tax years that remain subject to examination in the major tax jurisdictions in which we operate:

Jurisdiction	Tax Year
United States	2018
New York State	2001
New York City	2006
United Kingdom	2020
Hong Kong	2016
Germany	2017

Our provision for income taxes for the six months ended May 31, 2022 was $114.0 million, representing an effective tax rate of 20.4%. The provision for income taxes for the six months ended May 31, 2022 includes the recognition of an excess tax benefit relating to the conversion of RSUs to common shares. Our provision for income taxes for the six months ended May 31, 2021 was $339.1 million, representing an effective tax rate of 26.6%.

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Note 17.  Common Share and Earnings Per Common Share

Basic and diluted earnings per share amounts were calculated by dividing net income by the weighted average number of common shares outstanding. The numerators and denominators used to calculate basic and diluted earnings per share are as follows (in thousands):

	For the Three Months Ended May 31,				For the Six Months Ended May 31,
	2022		2021		2022		2021
Numerator for earnings per share:
Net income attributable to Jefferies Financial Group Inc. common shareholders	$	114,014	$	352,596	$	441,461	$	935,031
Allocation of earnings to participating securities (1)	(365)		(2,178)		(2,116)		(5,470)
Net income attributable to Jefferies Financial Group Inc. common shareholders for basic earnings per share	113,649		350,418		439,345		929,561
Adjustment to allocation of earnings to participating securities related to diluted shares (1)	(4)		43		25		107
Mandatorily redeemable convertible preferred share dividends (2)	—		1,626		4,141		3,252
Net income attributable to Jefferies Financial Group Inc. common shareholders for diluted earnings per share	$	113,645	$	352,087	$	443,511	$	932,920
Denominator for earnings per share:
Weighted average common shares outstanding	236,687		246,937		239,325		248,144
Weighted average shares of restricted stock outstanding with future service required	(967)		(1,618)		(1,259)		(1,540)
Weighted average RSUs outstanding with no future service required	13,422