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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 February 28, 2021

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 March 31, 2021 was 246,972,393.

---

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

February 28, 2021 and November 30, 2020

(Dollars in thousands, except par value)

(Unaudited)

			February 28, 2021						November 30, 2020
ASSETS
Cash and cash equivalents			$	8,648,961					$	9,055,148
Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations			615,115						604,321
Financial instruments owned, at fair value (including securities pledged of $12,150,880 and $13,065,585)			19,097,153						18,124,577
Loans to and investments in associated companies			1,689,048						1,686,563
Securities borrowed			7,150,657						6,934,762
Securities purchased under agreements to resell			6,680,284						5,096,769
Securities received as collateral, at fair value			—						7,517
Receivables			7,870,542						6,608,767
Property, equipment and leasehold improvements, net			896,317						897,204
Intangible assets, net and goodwill			1,914,322						1,913,467
Other assets			2,306,520						2,189,257
Total assets (1)			$	56,868,919					$	53,118,352
LIABILITIES
Short-term borrowings			$	882,941					$	764,715
Financial instruments sold, not yet purchased, at fair value			12,370,254						10,017,600
Securities loaned			2,519,077						1,810,748
Securities sold under agreements to repurchase			7,207,636						8,316,269
Other secured financings			4,508,425						3,288,384
Obligation to return securities received as collateral, at fair value			—						7,517
Lease liabilities			580,129						584,807
Payables, expense accruals and other liabilities			10,622,970						10,388,072
Long-term debt			8,243,150						8,352,039
Total liabilities (1)			46,934,582						43,530,151
Commitments and contingencies
MEZZANINE EQUITY
Redeemable noncontrolling interests			30,979						24,676
Mandatorily redeemable convertible preferred shares			125,000						125,000
EQUITY
Common shares, par value $1 per share, authorized 600,000,000 shares; 246,703,277 and 249,750,542 shares issued and outstanding, after deducting 69,759,335 and 66,712,070 shares held in treasury			246,703						249,751
Additional paid-in capital			2,804,243						2,911,223
Accumulated other comprehensive income (loss)			(346,544)						(288,917)
Retained earnings			7,041,460						6,531,836
Total Jefferies Financial Group Inc. shareholders' equity			9,745,862						9,403,893
Noncontrolling interests			32,496						34,632
Total equity			9,778,358						9,438,525
Total			$	56,868,919					$	53,118,352

(1)    Total assets include assets related to variable interest entities of $747.1 million and $566.1 million at February 28, 2021 and November 30, 2020, respectively, and Total liabilities include liabilities related to variable interest entities of $4,517.9 million and $3,291.3 million at February 28, 2021 and November 30, 2020, respectively. See Note 7 for additional information related to variable interest entities.

See notes to interim consolidated financial statements.

2

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JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Operations

For the periods ended February 28, 2021 and February 29, 2020

(In thousands, except per share amounts)

(Unaudited)

									For the Three Months Ended
															February 28, 2021						February 29, 2020
Revenues:
Commissions and other fees															$	236,769					$	179,430
Principal transactions															919,901						404,864
Investment banking															1,003,612						592,002
Interest income															240,497						326,366
Manufacturing revenues															137,847						77,607
Other															164,962						111,995
Total revenues															2,703,588						1,692,264
Interest expense of Jefferies Group															216,646						305,936
Net revenues															2,486,942						1,386,328
Expenses:
Compensation and benefits															1,172,543						670,193
Cost of sales															95,559						72,443
Floor brokerage and clearing fees															76,416						59,181
Interest expense															20,367						21,554
Depreciation and amortization															38,767						39,470
Selling, general and other expenses															271,937						297,838
Total expenses															1,675,589						1,160,679
Income before income taxes and loss related to associated companies															811,353						225,649
Loss related to associated companies															(10,568)						(67,855)
Income before income taxes															800,785						157,794
Income tax provision															218,236						45,773
Net income															582,549						112,021
Net loss attributable to the noncontrolling interests															743						2,129
Net loss attributable to the redeemable noncontrolling interests															769						282
Preferred stock dividends															(1,626)						(1,422)
Net income attributable to Jefferies Financial Group Inc. common shareholders															$	582,435					$	113,010
Basic earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:
Net income															$	2.17					$	0.37
Diluted earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:
Net income															$	2.13					$	0.37

See notes to interim consolidated financial statements.

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JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

For the periods ended February 28, 2021 and February 29, 2020

(In thousands)

(Unaudited)

									For the Three Months Ended
															February 28, 2021						February 29, 2020
Net income															$	582,549					$	112,021
Other comprehensive income (loss):
Net unrealized holding gains (losses) on investments arising during the period, net of income tax provision (benefit) of $(19) and $81															(60)						237
Less: reclassification adjustment for net (gains) losses included in net income, net of income tax provision (benefit) of $0 and $0															—						—
Net change in unrealized holding gains (losses) on investments, net of income tax provision (benefit) of $(19) and $81															(60)						237
Net unrealized foreign exchange gains (losses) arising during the period, net of income tax provision (benefit) of $3,253 and $(3,147)															11,083						(9,233)
Less: reclassification adjustment for foreign exchange (gains) losses included in net income, net of income tax provision (benefit) of $0 and $0															—						—
Net change in unrealized foreign exchange gains (losses), net of income tax provision (benefit) of $3,253 and $(3,147)															11,083						(9,233)
Net unrealized gains (losses) on instrument specific credit risk arising during the period, net of income tax provision (benefit) of $(22,182) and $7,939															(69,214)						23,248
Less: reclassification adjustment for instrument specific credit risk (gains) losses included in net income, net of income tax provision (benefit) of $71 and $86															(222)						(252)
Net change in unrealized instrument specific credit risk gains (losses), net of income tax provision (benefit) of $(22,253) and $7,853															(69,436)						22,996
Net pension gains (losses) arising during the period, net of income tax provision (benefit) of $0 and $0															—						—
Reclassification adjustment for pension (gains) losses included in net income, net of income tax provision (benefit) of $(261) and $(224)															786						639
Net change in pension liability, net of income tax provision (benefit) of $261 and $224															786						639
Other comprehensive income (loss), net of income taxes															(57,627)						14,639
Comprehensive income															524,922						126,660
Comprehensive loss attributable to the noncontrolling interests															743						2,129
Comprehensive loss attributable to the redeemable noncontrolling interests															769						282
Preferred stock dividends															(1,626)						(1,422)
Comprehensive income attributable to Jefferies Financial Group Inc. common shareholders															$	524,808					$	127,649

See notes to interim consolidated financial statements.

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JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the three months ended February 28, 2021 and February 29, 2020

(In thousands)

(Unaudited)

			For the Three Months Ended
			February 28, 2021						February 29, 2020
Net cash flows from operating activities:
Net income			$	582,549					$	112,021
Adjustments to reconcile net income to net cash used for operations:
Deferred income tax provision			9,149						12,237
Depreciation and amortization of real estate, property, equipment and leasehold improvements			36,012						36,415
Other amortization			6,321						2,971
Stock-based compensation			20,678						9,947
Provision for doubtful accounts			3,267						10,870
(Income) loss related to associated companies			(77,338)						39,096
Distributions from associated companies			19,345						49,646
Net losses related to property and equipment, and other assets			165						34,193
Net change in:
Securities deposited with clearing and depository organizations			(84,307)						(296,514)
Financial instruments owned, at fair value			(957,696)						(1,526,004)
Securities borrowed			(211,177)						910,494
Securities purchased under agreements to resell			(1,576,329)						(614,635)
Receivables from brokers, dealers and clearing organizations			(581,609)						(1,433,478)
Receivables from customers of securities operations			(575,823)						(48,710)
Other receivables			(101,570)						(28,454)
Other assets			(45,883)						(231,104)
Financial instruments sold, not yet purchased, at fair value			2,339,208						(635,893)
Securities loaned			704,075						371,286
Securities sold under agreements to repurchase			(1,114,857)						909,654
Payables to brokers, dealers and clearing organizations			768,358						1,569,726
Payables to customers of securities operations			(161,557)						(51,154)
Lease liabilities			(12,811)						(17,959)
Trade payables, expense accruals and other liabilities			(387,334)						(199,966)
Other			(96,774)						97,232
Net cash used for operating activities			(1,495,938)						(918,083)
Net cash flows from investing activities:
Acquisitions of property, equipment and leasehold improvements, and other assets			(24,243)						(60,982)
Advances on notes, loans and other receivables			(137,527)						(239,241)
Collections on notes, loans and other receivables			74,573						229,476
Loans to and investments in associated companies			(914,484)						(864,422)
Capital distributions and loan repayments from associated companies			969,817						883,299
Other			(476)						2,560
Net cash used for investing activities			$	(32,340)					$	(49,310)

(continued)

See notes to interim consolidated financial statements.

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JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, continued

For the three months ended February 28, 2021 and February 29, 2020

(In thousands)

(Unaudited)

			For the Three Months Ended
			February 28, 2021						February 29, 2020
Net cash flows from financing activities:
Issuance of debt, net of issuance costs			$	431,811					$	759,478
Repayment of debt			(396,556)						(555,076)
Net change in other secured financings			1,219,585						(150,485)
Net change in bank overdrafts			(4,706)						(34,518)
Contributions from noncontrolling interests			80						17,100
Purchase of common shares for treasury			(130,097)						(310,187)
Dividends paid			(49,768)						(42,793)
Other			(696)						316
Net cash provided by (used for) financing activities			1,069,653						(316,165)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash			3,886						(2,927)
Net decrease in cash, cash equivalents and restricted cash			(454,739)						(1,286,485)
Cash, cash equivalents and restricted cash at beginning of period			9,664,972						8,480,435
Cash, cash equivalents and restricted cash at end of period			$	9,210,233					$	7,193,950

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):

			February 28, 2021						February 29, 2020
Cash and cash equivalents			$	8,648,961					$	6,710,659
Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations			496,571						410,632
Other assets			64,701						72,659
Total cash, cash equivalents and restricted cash			$	9,210,233					$	7,193,950

See notes to interim consolidated financial statements.

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JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the three months ended February 28, 2021 and February 29, 2020

(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, 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																					582,435						582,435												582,435
Net loss attributable to the   noncontrolling interests																											—						(743)						(743)
Other comprehensive loss, net of taxes															(57,627)												(57,627)												(57,627)
Contributions from noncontrolling interests																											—						80						80
Distributions to noncontrolling interests																											—						(1,473)						(1,473)
Stock-based compensation expense									20,678																		20,678												20,678
Change in fair value of redeemable noncontrolling interests									(7,058)																		(7,058)												(7,058)
Purchase of common shares for treasury			(5,103)						(124,994)																		(130,097)												(130,097)
Dividends ($0.20 per common share)																					(52,896)						(52,896)												(52,896)
Other			2,055						4,394																		6,449												6,449
Balance, February 28, 2021			$	246,703					$	2,804,243					$	(346,544)					$	7,041,460					$	9,745,862					$	32,496					$	9,778,358

			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, 2019			$	291,644					$	3,627,711					$	(273,039)					$	5,933,389					$	9,579,705					$	21,979					$	9,601,684
Net income attributable to Jefferies   Financial Group Inc. common   shareholders																					113,010						113,010												113,010
Net loss attributable to the   noncontrolling interests																											—						(2,129)						(2,129)
Other comprehensive income, net of taxes															14,639												14,639												14,639
Contributions from noncontrolling interests																											—						17,100						17,100
Stock-based compensation expense									9,947																		9,947												9,947
Change in fair value of redeemable noncontrolling interests									1,564																		1,564												1,564
Purchase of common shares for treasury			(14,738)						(312,763)																		(327,501)												(327,501)
Dividends ($0.15 per common share)																					(45,786)						(45,786)												(45,786)
Other			203						3,174																		3,377												3,377
Balance, February 29, 2020			$	277,109					$	3,329,633					$	(258,400)					$	6,000,613					$	9,348,955					$	36,950					$	9,385,905

See notes to interim consolidated financial statements.

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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, asset management and direct investing. Jefferies Group LLC ("Jefferies Group"), our largest subsidiary, was established in 1962 and is now 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 and Asia. Capital markets businesses operate across the spectrum of equities and fixed income products.

Our Asset Management segment comprises all asset management operations, including those within Jefferies Group. 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.

Merchant Banking is where we own a portfolio of businesses and investments, including Linkem (fixed wireless broadband services in Italy); Vitesse Energy, LLC ("Vitesse Energy Finance") and JETX Energy, LLC ("JETX 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). The structure of each of our investments was tailored to the unique opportunity each transaction presented. Our investments may be reflected in our consolidated results as consolidated subsidiaries, equity investments, securities or in other ways, depending on the structure of our specific holdings.

We own approximately 42% of the common shares of Linkem, as well as convertible preferred shares and warrants. If all of our convertible preferred stock was converted and warrants were exercised, it would increase our ownership to approximately 56% of Linkem's common equity at February 28, 2021. Linkem provides residential broadband services in Italy using LTE technologies deployed over the 3.5 GHz spectrum band. Linkem deployed its first 5G towers in late 2020 and plans to rapidly increase its network coverage and service offerings over the coming years as it upgrades to 5G, adds subscribers and leverages its assets. Linkem is accounted for under the equity method.

Vitesse Energy Finance is our 97% owned consolidated subsidiary that acquires, invests and monetizes non-operated working interests and royalties predominantly in the Bakken Shale of the Williston Basin in North Dakota. JETX Energy is our 98% owned consolidated subsidiary that currently has non-operated working interests and acreage in east Texas.

HomeFed is our 100% owned consolidated subsidiary that owns and develops residential and mixed-use real estate properties.

Idaho Timber is our 100% owned consolidated subsidiary engaged in the manufacture and distribution of various wood products.

Our investment in FXCM and associated companies consists of a senior secured term loan due February 15, 2022 ($71.6 million principal outstanding at February 28, 2021), a 50% voting interest in FXCM and rights to a majority of all distributions in respect of the equity of FXCM.

8

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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, 2020 ("2020 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 three months ended February 28, 2021, other than the following, there were no significant changes made to the Company's significant accounting policies. The accounting policy changes are attributable to the adoption of the Financial Accounting Standards Board ("FASB") guidance on credit losses on financial instruments (the "new credit loss standard") on December 1, 2020. The credit loss policy updates were applied using a modified retrospective approach, through a cumulative-effect adjustment to retained earnings upon adoption. Reported financial information for the historical comparable period was not revised and continues to be reported under the accounting standards in effect during the historical periods.

Credit Losses

Provision for credit losses are charged to income in amounts sufficient to maintain an allowance for credit losses inherent in Foursight Capital's finance receivables held for investment. The allowance for credit losses is established systematically by management based on the determination of the amount of credit losses inherent in the finance receivables held for investment as of the reporting date. All finance receivables held for investment of Foursight Capital are collectively evaluated for impairment. Management's estimate of expected credit losses is based on an evaluation of relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the future collectability of the reported amounts. Foursight Capital uses static pool modeling techniques to determine the allowance for loan losses expected over the remaining life of the receivables, which is supplemented by management judgment. Expected losses are estimated for groups of accounts aggregated by monthly vintage. Generally, the expected losses are projected based on historical loss experience over the last eight years, more heavily weighted toward recent performance when determining the allowance to result in an estimate that is more reflective of the current internal and external environments. Foursight Capital's estimate of expected credit losses includes a reasonable and supportable forecast period of two years and then reverts to an estimate based on historical losses. Foursight Capital reviews charge-off experience factors, contractual delinquency, historical collection rates, the value of underlying collateral and other information to make the necessary judgments as to credit losses expected in the portfolio as of the reporting date. While management utilizes the best information available to make its evaluations, changes in macroeconomic conditions, interest rate environments, or both, may significantly impact the assumptions and inputs used in determining the allowance for credit losses.

Foursight Capital's charge-off policy is based on a loan by loan review of delinquent finance receivables. The charge-off policy requires that balances be charged-off at the earlier of when they are 120 days contractually past due and the automobile has been in Foursight Capital's possession for at least 45 days, the month in which it has been determined in good faith that all amounts it expects to recover on a contract have been received, or at the end of the month in which they are 120 days contractually past due and the vehicle hasn’t been repossessed. The loans may be charged-off earlier than 120 days based upon management review of certain delinquent or impaired loans on an individual basis. Losses on finance receivables secured by automobiles are recognized at the time when anticipated losses are determined for contracts in repossession status. Foursight Capital generally initiates repossession proceedings when an account is three payments contractually past due.

Other financial assets measured at amortized cost are presented at the net amount expected to be collected and the measurement of credit losses and any expected increases or decreases in expected credit losses are recognized in earnings. The estimate of expected credit losses involves judgment and based on an assessment over the life of the financial instrument taking into consideration forecasts of expected future economic conditions. In evaluating secured financing receivables (reverse repurchases agreements, securities borrowing arrangements and margin loans), the underlying collateral maintenance provisions are taken into consideration. The underlying contractual collateral maintenance for significantly all of Jefferies Group's secured financing receivables requires that the counterparty continually adjust the collateralization amount, securing the credit exposure

9

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on these contracts. Collateralization levels for Jefferies Group's secured financing receivables are initially established based upon the counterparty, the type of acceptable collateral that is monitored daily and adjusted to mitigate the potential of any credit losses. Credit losses are not recognized for secured financing receivables where the underlying collateral's fair value is equal to or exceeds the asset's amortized cost basis. In cases where the collateral's fair value does not equal or exceed the amortized cost basis, the allowance for credit losses, if any, is limited to the difference between the fair value of the collateral at the reporting date and the amortized cost basis of the financial assets.

Our receivables from brokers, dealers, and clearing organizations include deposits of cash with exchange clearing organizations to meet margin requirements, amounts due from clearing organizations for daily variation settlements, securities failed-to-deliver or receive, receivables and payables for fees and commissions, and receivables arising from unsettled securities or loans transactions. These receivables generally do not give rise to material credit risk and have a remote probability of default either because of their short-term nature or due to the credit protection framework inherent in the design and operations of brokers, dealers and clearing organizations. As such, generally, no allowance for credit losses is held against these receivables.

For all other financial assets measured at amortized cost, we estimate expected credit losses over the financial assets' life as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts.

Receivables

At February 28, 2021 and November 30, 2020, Receivables include receivables from brokers, dealers and clearing organizations of $4,750.7 million and $4,161.8 million, respectively, and receivables from customers of securities operations of $1,863.5 million and $1,286.9 million, respectively.

Our subsidiary, Foursight Capital, had automobile loan receivables of $713.4 million and $694.2 million at February 28, 2021 and November 30, 2020, respectively. Of these amounts, $686.8 million and $532.4 million at February 28, 2021 and November 30, 2020, respectively, were in securitized vehicles. See Notes 6 and 7 for additional information on Foursight Capital's securitization activities. Based primarily on FICO credit scores, Foursight Capital classifies its finance receivables held for investment as prime, near-prime and sub-prime based on the perceived credit risk at origination and generally considers prime receivables as those with a FICO score of 680 and above, near-prime with scores between 620 and 679 and sub-prime with scores below 620. The credit quality classification at both February 28, 2021 and November 30, 2020 was approximately 14% prime, 54% near-prime and 32% sub-prime, respectively.

A roll forward of the allowance for credit losses for the three months ended February 28, 2021 and February 29, 2020 is as follows (in thousands):

									For the Three Months Ended
															February 28, 2021						February 29, 2020
Beginning balance															$	53,926					$	34,018
Adjustment for change in accounting principle for current expected credit losses															26,519						—
Provision for doubtful accounts															3,267						10,870
Charge-offs, net of recoveries															(7,320)						(10,850)
Ending balance															$	76,392					$	34,038

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Other Investments

At February 28, 2021 and November 30, 2020, 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 $90.2 million, respectively. Impairments recognized on these investments were $20.0 million during the three months ended February 29, 2020. There were no impairments on these investments during the three months ended February 28, 2021.

Capitalization of Interest

We capitalize interest on qualifying HomeFed real estate assets. During the three months ended February 28, 2021 and February 29, 2020, capitalized interest of $1.9 million and $2.3 million, respectively, was allocated among all of HomeFed's projects that are currently under development.

Payables, expense accruals and other liabilities

At February 28, 2021 and November 30, 2020, Payables, expense accruals and other liabilities include payables to brokers, dealers and clearing organizations of $4,098.8 million and $3,325.8 million, respectively, and payables to customers of securities operations of $4,090.0 million and $4,249.7 million, respectively.

Supplemental Cash Flow Information

			For the Three Months Ended
			February 28, 2021						February 29, 2020
			(In thousands)
Cash paid during the year for:
Interest			$	242,027					$	365,842
Income tax payments (refunds), net			$	20,350					$	(10,697)

During the three months ended February 29, 2020, we had $18.5 million in non-cash financing activities related to purchases of common shares for treasury which settled subsequent to February 29, 2020.

Accounting Developments - Accounting Standards Adopted in Current Annual Reporting Period

Financial Instruments - Credit Losses. In June 2016, the FASB issued new guidance which provides for estimating credit losses on financial assets measured at amortized cost by introducing an approach based on expected losses over the financial asset's entire life, recorded at inception or purchase. We adopted the new credit loss guidance on December 1, 2020 and applied a modified retrospective approach through a cumulative-effect adjustment to retained earnings upon adoption. At transition on December 1, 2020, the new accounting guidance's adoption resulted in an increase in the allowance for credit losses of $26.5 million with a corresponding decrease in retained earnings of $19.9 million, net of tax. The increase is primarily attributable to a $30.1 million increase in the allowance for credit losses in Foursight Capital's portfolio of finance receivables held for investment. Foursight Capital estimates expected credit losses on its portfolio using analysis of historical portfolio performance data as well as external economic factors that management considers to be relevant to the credit losses expected in the portfolio. This is partially offset by a $3.6 million decrease in the allowance for credit losses at Jefferies Group that is attributable to applying a revised provisioning methodology based on historical loss experience for its investment banking fee receivables.

We have determined expected credit losses to be immaterial upon adoption for our other financial instruments within the scope of the guidance. A significant portion of our financial instruments within the scope of the guidance represent secured financing receivables (reverse repurchase agreements, secured borrowing arrangements, and margin loans) that are substantially collateralized. For our secured financing receivables, we have concluded that the impact upon adoption was immaterial because the contractual collateral maintenance provisions require that the counterparty continually adjust the amount of collateralization securing the credit exposure on these contracts. Collateralization levels for our secured financing receivables are initially established based upon the counterparty, the type of acceptable collateral that is monitored daily and adjusted to mitigate the potential of any credit losses. For the remaining financial instruments within the guidance's scope, the expected credit losses were also determined to be immaterial considering the counterparty's credit quality, an insignificant history of credit losses, or the short-term nature of the credit exposures.

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Goodwill. In January 2017, the FASB issued new guidance which simplifies goodwill impairment testing. We adopted the guidance in the first quarter of fiscal 2021 and the adoption did not have a material impact on our consolidated financial statements.

Defined Benefit Plans. In August 2018, the FASB issued new guidance to improve the effectiveness of disclosure requirements on defined benefit pension plans and other post-retirement plans. We adopted the guidance in the first quarter of fiscal 2021 and the adoption did not have a material impact on our consolidated financial statements.

Internal-Use Software. In August 2018, the FASB issued new guidance which amends the definition of a hosting arrangement and requires that the customer in a hosting arrangement that is a service contract capitalize certain implementation costs as if the arrangement was an internal-use software project. We adopted the guidance in the first quarter of fiscal 2021 and elected to apply the guidance prospectively to implementation costs incurred after the adoption date. The adoption did not have an impact on our consolidated financial statements on the adoption date.

Consolidation. In October 2018, the FASB issued new guidance which requires indirect interests held through related parties under common control arrangements be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. We adopted the guidance in the first quarter of fiscal 2021 and the adoption did not have a material impact on our consolidated financial statements.

Income Taxes. In December 2019, the FASB issued new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and to provide more consistent application to improve the comparability of financial statements. We adopted the guidance in the first quarter of fiscal 2021 and the adoption did not have a material impact on our consolidated financial statements.

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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 $1,026.4 million and $965.4 million at February 28, 2021 and November 30, 2020, respectively, by level within the fair value hierarchy (in thousands):

			February 28, 2021
			Level 1						Level 2						Level 3						Counterparty and Cash Collateral Netting (1)						Total
Assets:
Financial instruments owned, at fair value:
Corporate equity securities			$	2,873,165					$	58,056					$	102,065					$	—					$	3,033,286
Corporate debt securities			—						3,451,833						6,811						—						3,458,644
Collateralized debt obligations and collateralized loan obligations			—						91,654						33,199						—						124,853
U.S. government and federal agency securities			2,485,813						73,550						—						—						2,559,363
Municipal securities			—						292,604						—						—						292,604
Sovereign obligations			1,668,975						799,239						—						—						2,468,214
Residential mortgage-backed securities			—						1,880,823						21,692						—						1,902,515
Commercial mortgage-backed securities			—						37,013						2,671						—						39,684
Other asset-backed securities			—						63,956						60,594						—						124,550
Loans and other receivables			—						3,099,917						149,084						—						3,249,001
Derivatives			3,346						3,091,787						39,397						(2,604,607)						529,923
Investments at fair value			—						6,399						219,541						—						225,940
FXCM term loan			—						—						62,132						—						62,132
Total financial instruments owned, at fair value, excluding investments at fair value based on NAV			$	7,031,299					$	12,946,831					$	697,186					$	(2,604,607)					$	18,070,709
Loans to and investments in associated  companies			$	—					$	—					$	39,397					$	—					$	39,397
Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities			$	2,124,994					$	1,075					$	4,443					$	—					$	2,130,512
Corporate debt securities			—						1,824,458						1,571						—						1,826,029
U.S. government and federal agency securities			2,618,198						—						—						—						2,618,198
Sovereign obligations			1,343,920						1,016,688						—						—						2,360,608
Commercial mortgage-backed securities			—						—						35						—						35
Loans			—						2,326,306						14,916						—						2,341,222
Derivatives			2,173						3,743,677						344,903						(2,997,103)						1,093,650
Total financial instruments sold, not yet purchased, at fair value			$	6,089,285					$	8,912,204					$	365,868					$	(2,997,103)					$	12,370,254
Other secured financings			$	—					$	—					$	2,168					$	—					$	2,168
Long-term debt			$	—					$	1,061,042					$	723,115					$	—					$	1,784,157

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			November 30, 2020
			Level 1						Level 2						Level 3						Counterparty and Cash Collateral Netting (1)						Total
Assets:
Financial instruments owned, at fair value:
Corporate equity securities			$	2,475,887					$	58,159					$	75,904					$	—					$	2,609,950
Corporate debt securities			—						2,954,236						23,146						—						2,977,382
Collateralized debt obligations and collateralized loan obligations			—						64,155						17,972						—						82,127
U.S. government and federal agency securities			2,840,025						91,653						—						—						2,931,678
Municipal securities			—						453,881						—						—						453,881
Sovereign obligations			1,962,346						591,342						—						—						2,553,688
Residential mortgage-backed securities			—						1,100,849						21,826						—						1,122,675
Commercial mortgage-backed securities			—						736,291						2,003						—						738,294
Other asset-backed securities			—						103,611						79,995						—						183,606
Loans and other receivables			—						2,610,746						134,636						—						2,745,382
Derivatives			1,523						2,013,942						21,678						(1,556,136)						481,007
Investments at fair value			—						6,122						213,946						—						220,068
FXCM term loan			—						—						59,455						—						59,455
Total financial instruments owned, at fair value, excluding investments at fair value based on NAV			$	7,279,781					$	10,784,987					$	650,561					$	(1,556,136)					$	17,159,193
Loans to and investments in associated  companies			$	—					$	8,603					$	40,185					$	—					$	48,788
Securities received as collateral, at fair value			$	7,517					$	—					$	—					$	—					$	7,517
Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities			$	2,046,441					$	9,046					$	4,434					$	—					$	2,059,921
Corporate debt securities			—						1,237,631						141						—						1,237,772
U.S. government and federal agency securities			2,609,660						—						—						—						2,609,660
Sovereign obligations			1,050,771						624,740						—						—						1,675,511
Residential mortgage-backed securities			—						477						—						—						477
Commercial mortgage-backed securities			—						—						35						—						35
Loans			—						1,776,446						16,635						—						1,793,081
Derivatives			551						2,391,556						47,695						(1,798,659)						641,143
Total financial instruments sold, not yet purchased, at fair value			$	5,707,423					$	6,039,896					$	68,940					$	(1,798,659)					$	10,017,600
Short-term borrowings			$	—					$	5,067					$	—					$	—					$	5,067
Other secured financings			$	—					$	—					$	1,543					$	—					$	1,543
Long-term debt			$	—					$	1,036,217					$	676,028					$	—					$	1,712,245
Obligation to return securities received as collateral, at fair value			$	7,517					$	—					$	—					$	—					$	7,517

(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

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hierarchy, otherwise they are categorized within Level 2 of the fair value hierarchy. To the extent these securities are 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 ("GNMA") 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 ("FNMA") 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. GNMA project loan bonds and FNMA 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 auto 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 GNMA Project and Construction Loans:  Valuations of participation certificates in GNMA 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 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. 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.

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 unadjusted 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. Discounted cash flow models are also utilized to measure certain variable funding note swaps, which are backed by CLOs and incorporate constant prepayment rate, constant default rate and loss severity assumptions. 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 Finance uses swaps and call and put options in order to reduce exposure to future oil price fluctuations. Vitesse Energy Finance 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, fund of 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 involving quoted prices of or market data for comparable companies, similar company ratios and multiples (e.g., price/EBITDA, price/book value), discounted cash flow analyses, contingent claims analysis 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
February 28, 2021
Equity Long/Short Hedge Funds (2)			$	345,570					$	—
Equity Funds (3)			32,478						12,150
Commodity Fund (4)			19,217						—
Multi-asset Funds (5)			580,269						—
Other Funds (6)			48,910						21,750
Total			$	1,026,444					$	33,900
November 30, 2020
Equity Long/Short Hedge Funds (2)			$	328,096					$	—
Equity Funds (3)			33,221						12,408
Commodity Fund (4)			17,747						—
Multi-asset Funds (5)			561,236						—
Other Funds (6)			25,084						5,000
Total			$	965,384					$	17,408

 

(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 both February 28, 2021 and November 30, 2020, approximately 94% of the fair value of investments in this category cannot be redeemed because these investments include restrictions that do not allow for redemption before December 31, 2021. At both February 28, 2021 and November 30, 2020, approximately 6% of the fair value of investments in this category 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. 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 eight years. 

(4)This category includes investments in a hedge fund that invests, long and short, primarily in commodities. Investments in this category 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 both February 28, 2021 and November 30, 2020, investments representing approximately 57% of the fair value of investments in this category are redeemable monthly with 60 days prior written notice.

(6)This category primarily 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. These investments are redeemable quarterly with 90 days prior written notice.

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Investment in FXCM

Our investment in FXCM and associated companies consists of a senior secured term loan due February 15, 2022 ($71.6 million principal outstanding at February 28, 2021), 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 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 Level 1 of the fair value hierarchy.

Short-term Borrowings and Long-term Debt

Short-term borrowings that are accounted for at fair value include equity-linked notes, which are generally categorized within Level 2 of the fair value hierarchy, as the fair value is based on the price of the underlying equity security. 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.

Nonrecurring Fair Value Measurements

HomeFed has a 49% membership interest in the RedSky JZ Fulton Investors ("RedSky JZ Fulton Mall") joint venture, which owns a property in Brooklyn, New York. The property consists of 14 separate tax lots, divided into two development sites which may be redeveloped with buildings consisting of up to 540,000 square feet of floor area development rights. During the three months ended February 29, 2020, difficulties were encountered with attempts to refinance debt within the investment. We viewed this, combined with a softening of the Brooklyn, New York real estate market during the quarter, as a triggering event and evaluated HomeFed's equity method investment in RedSky JZ Fulton Mall to determine if there was an impairment. In connection with this evaluation, we obtained an appraisal which reflected a reduction in the value of the investment in comparison to an earlier appraisal obtained shortly before the beginning of the quarter. The appraisal was based off of Level 3 inputs consisting of prices of comparable properties and the appraisal indicated that the value of the property was worth less than the debt outstanding. HomeFed recorded an impairment charge of $55.6 million within Income (loss) related to associated companies during the three months ended February 29, 2020, which represented all of its carrying value in the joint venture.

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Due to a decline in oil and gas prices during the first quarter of 2020, JETX Energy performed an impairment analysis for its oil and gas properties in the East Eagle Ford. JETX Energy first determined the estimated undiscounted cash flows based on the reserves and costs utilized in its reserve report and then updated those cash flows based on strip pricing as of February 29, 2020. The expected undiscounted future net cash flows were then compared to the end of quarter net carrying value of the proven properties. As the undiscounted future net cash flows were lower than the carrying value, JETX Energy then determined the estimated fair value of the proven properties. To measure the estimated fair value of its proven properties, JETX Energy used unobservable Level 3 inputs, including a 10.0% discount rate and estimated future cash flows from its reserve report. The estimated fair value of JETX Energy's proven oil and gas properties in the East Eagle Ford totaled $9.6 million, which was $33.0 million lower than the carrying value as of the end of first quarter of 2020. As a result, an impairment charge of $33.0 million was recorded in Selling, general and other expenses during the three months ended February 29, 2020.

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 February 28, 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, February 28, 2021						Changes in unrealized gains/losses included in earnings relating to instruments still held at February 28, 2021 (1)
Assets:
Financial instruments owned, at fair value:
Corporate equity securities			$	75,904					$	2,339					$	4,805					$	(4,647)					$	—					$	—					$	23,664					$	102,065					$	1,165
Corporate debt securities			23,146						266						130						(6)						—						—						(16,725)						6,811						297
CDOs and CLOs			17,972						3,840						11,427						(8,007)						(5,806)						—						13,773						33,199						3,214
Residential mortgage-backed securities			21,826						1,327						791						(627)						(514)						—						(1,111)						21,692						1,347
Commercial mortgage-backed securities			2,003						(29)						1,105						(393)						—						—						(15)						2,671						97
Other asset-backed securities			79,995						2,361						14,604						(20,909)						(8,449)						—						(7,008)						60,594						1,721
Loans and other receivables			134,636						14,077						8,758						(44,427)						(66)						—						36,106						149,084						14,091
Investments at fair value			213,946						76,257						4,855						(30,159)						(3,542)						—						(41,816)						219,541						72,173
FXCM term loan			59,455						2,677						—						—						—						—						—						62,132						2,677
Loans to and investments in associated companies			40,185						(788)						—						—						—						—						—						39,397						(788)
Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities			$	4,434					$	9					$	—					$	—					$	—					$	—					$	—					$	4,443					$	(22)
Corporate debt securities			141						1,430						—						—						—						—						—						1,571						(1,430)
Commercial mortgage-backed securities			35						—						(35)						35						—						—						—						35						—
Loans			16,635						1,559						(6,821)						3,358						—						—						185						14,916						(1,559)
Net derivatives (2)			26,017						43,727						—						12,670						(92)						—						223,184						305,506						(43,727)
Other secured financings			1,543						—						—						—						—						625						—						2,168						—
Long-term debt (1)			676,028						25,357						—						—						—						21,730						—						723,115						15,501

(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 February 28, 2021 were losses of $40.9 million during the three months ended February 28, 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 February 28, 2021

During the three months ended February 28, 2021, transfers of assets of $75.8 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Loans and other receivables of $42.9 million, CDOs and CLOs of $14.6 million, corporate equity securities of $9.9 million and other asset-backed securities of $7.5 million due to reduced pricing transparency.

During the three months ended February 28, 2021, transfers of assets of $68.9 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, other asset-backed securities of $14.5 million and loans and other receivables of $6.8 million due to greater pricing transparency supporting classification into Level 2 or Level 1.

During the three months ended February 28, 2021, transfers of liabilities of $236.7 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $236.5 million due to reduced pricing transparency.

During the three months ended February 28, 2021, transfers of liabilities of $13.3 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $13.3 million due to greater market and pricing transparency.

Net gains on Level 3 assets were $102.2 million and net losses on Level 3 liabilities were $72.1 million for the three months ended February 28, 2021. Net gains on Level 3 assets were primarily due to increased market values across investments at fair value, CDOs and CLOs, other asset-backed securities, loans and other receivables, residential mortgage-backed securities, corporate equity securities and the FXCM term loan. Net losses on Level 3 liabilities were primarily due to increased valuations of certain derivatives and structured note 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 February 29, 2020 (in thousands):

			Balance, November 30, 2019						Total gains/ losses (realized and unrealized) (1)						Purchases						Sales						Settlements						Issuances						Net transfers into (out of) Level 3						Balance, February 29, 2020						Changes in unrealized gains/ losses included in earnings relating to instruments still held at February 29, 2020 (1)
Assets:
Financial instruments owned, at fair value:
Corporate equity securities			$	58,426					$	(8,280)					$	2,792					$	(1,934)					$	—					$	—					$	52,679					$	103,683					$	(8,291)
Corporate debt securities			7,490						1,269						1,478						(503)						(601)						—						15,957						25,090						879
CDOs and CLOs			28,788						(1,940)						17,594						(17,833)						(4)						—						3,179						29,784						(1,698)
Residential mortgage-backed securities			17,740						(280)						—						—						(3)						—						(487)						16,970						(250)
Commercial mortgage-backed securities			6,110						(306)						—						—						(1,401)						—						(139)						4,264						571
Other asset-backed securities			42,563						(4,159)						81,323						(72,032)						(1,974)						—						(3,818)						41,903						(3,797)
Loans and other receivables			114,080						(4,307)						62,940						(13,042)						(57,479)						—						1,051						103,243						(6,187)
Investments at fair value			205,412						(27,333)						6,504						(76)						—						—						—						184,507						(27,333)
FXCM term loan			59,120						2,508						—						—						—						—						—						61,628						2,508
Securities purchased under   agreements to resell			25,000						—						—						—						(25,000)						—						—						—						—
Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities			$	4,487					$	291					$	(513)					$	—					$	—					$	—					$	10					$	4,275					$	65
Corporate debt securities			340						(189)						(13,832)						14,079						369						—						—						767						(35)
Commercial mortgage-backed securities			35						—						—						—						—						—						—						35						—
Loans			9,463						1						(9,872)						2,781						—						—						5,486						7,859						(1)
Net derivatives (2)			77,168						(17,528)						(278)						5,627						192						—						45,662						110,843						17,460
Long-term debt (1)			480,069						(9,016)						—						—						—						128,475						(56,065)						543,463						(5,590)

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(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 February 29, 2020 were gains of $14.6 million during the three months ended February 29, 2020.

(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 February 29, 2020

During the three months ended February 29, 2020, transfers of assets of $85.3 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Corporate equity securities of $55.4 million, corporate debt securities of $16.5 million and loans and other receivables of $6.0 million due to reduced pricing transparency.

During the three months ended February 29, 2020, transfers of assets of $16.8 million from Level 3 to Level 2 are primarily attributed to:

•Other asset-backed securities of $6.3 million, loans and other receivables of $4.9 million and corporate equity securities of $2.7 million due to greater pricing transparency supporting classification into Level 2.

During the three months ended February 29, 2020, transfers of liabilities of $102.5 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $83.0 million and structured notes within long-term debt of $13.1 million due to reduced market and pricing transparency.

During the three months ended February 29, 2020, transfers of liabilities of $107.4 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

•Structured notes within long-term debt of $69.1 million and net derivatives of $37.3 million due to greater market and pricing transparency.

Net losses on Level 3 assets were $42.8 million and net gains on Level 3 liabilities were $26.4 million for the three months ended February 29, 2020. Net losses on Level 3 assets were primarily due to decreased market values across investments at fair value, corporate equity securities, other asset-backed securities and loans and other receivables, partially offset by increased market values of the FXCM term loan. Net gains on Level 3 liabilities were primarily due to decreased market values across derivatives and valuations of certain structured notes within long-term debt.

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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February 28, 2021
						Fair Value (in thousands)						Valuation  Technique						Significant Unobservable Input(s)						Input/Range												Weighted Average
Financial instruments owned, at fair value
Corporate equity securities						$	101,958
Non-exchange-traded   securities												Market approach						Price						$1			to			$213						$62
																		EBITDA multiple						8.0												—
Corporate debt securities						$	6,811					Scenario analysis						Estimated recovery percentage						20		%	to			44%						30		%
CDOs and CLOs						$	31,885					Discounted cash flows						Constant prepayment rate						8		%	to			20%						19		%
																		Constant default rate						2%												—
																		Loss severity						25		%	to			35%						26		%
																		Discount rate/yield						4		%	to			21%						16		%
												Scenario analysis						Estimated recovery percentage						16		%	to			33%						23		%
Residential mortgage-   backed securities						$	21,692					Discounted cash flows						Discount rate/yield						3		%	to			4%						3		%
																		Cumulative loss rate						3%												—
																		Duration (years)						3.0 years			to			5.5 years						4.9 years
																		Loss severity						35%												—
Commercial mortgage-   backed securities						$	2,671					Discounted cash flows						Loss severity						65%												—
																		Discount rate/yield						16%												—
																		Cumulative loss rate						10%												—
																		Duration (years)						0.2 years												—
Other asset-backed securities						$	60,594					Discounted cash flows						Discount rate/yield						3		%	to			14%						9		%
																		Cumulative loss rate						8		%	to			19%						13		%
																		Duration (years)						0.9 years			to			2.0 years						1.5 years
												Market approach						Price						$100												—
Loans and other receivables						$	79,055					Market approach						Price						$31			to			$101						$83
												Scenario analysis						Estimated recovery percentage						0		%	to			100%						41		%
Derivatives						$	38,014
Equity Options												Volatility benchmarking						Volatility						41		%	to			57%						54		%
Interest rate swaps												Market approach						Basis points upfront						0.7			to			6.4						3.3
Investments at fair value						$	89,889
Private equity securities												Market approach						Price						$3			to			$169						$38
												Scenario analysis						Estimated recovery percentage						17%												—
																		Discount rate/yield						19		%	to			21%						20		%
																		Revenue growth						0%												—
Investment in FXCM						$	62,132
Term loan												Discounted cash flows						Term based on the pay off (years)						0 months			to			1.0 year						1.0 year
Loans to and investments in associated companies
Non-exchange-traded   warrants						$	39,397					Market approach						Underlying stock price						$675												—
																		Underlying stock price						€16			to			€18						€17
																		Volatility						25		%	to			60%						30		%
Financial instruments sold, not yet purchased, at fair value
Corporate equity securities						$	4,443					Market approach						Price						$1												—
Corporate debt securities						$	1,571					Scenario analysis						Estimated recovery percentage						20%												—
Loans						$	14,916					Market approach						Price						$31			to			$50						$35
												Scenario analysis						Estimated recovery percentage						5%												—
Derivatives						$	344,903
Equity options												Volatility benchmarking						Volatility						29		%	to			62%						46		%
Interest rate swaps												Market approach						Basis points upfront						0.7			to			6.4						3.5
Other secured financings						$	2,168					Scenario analysis						Estimated recovery percentage						19		%	to			100%						61		%
Long-term debt
Structured notes						$	723,115					Market approach						Price						$104												—
																		Price						€82			to			€112						€102

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November 30, 2020
						Fair Value (in thousands)						Valuation  Technique						Significant Unobservable Input(s)						Input/Range												Weighted Average
Financial instruments owned, at fair value
Corporate equity securities						$	75,409
Non-exchange-traded   securities												Market approach						Price						$1			to			$213						$86
																		EBITDA multiple						4.0			to			8.0						5.7
Corporate debt securities						$	23,146					Market approach						Price						$69												—
												Scenario analysis						Estimated recovery percentage						20		%	to			44%						30		%
CDOs and CLOs						$	17,972					Discounted cash flows						Constant prepayment rate						20%												—
																		Constant default rate						2%												—
																		Loss severity						25		%	to			30%						26		%
																		Discount rate/yield						14		%	to			28%						20		%
												Scenario analysis						Estimated recovery percentage						2		%	to			34%						23		%
Residential mortgage-   backed securities						$	21,826					Discounted cash flows						Cumulative loss rate						2		%	to			3%						3		%
																		Loss severity						35		%	to			50%						36		%
																		Duration (years)						2.0 years			to			12.9 years						5.1 years
																		Discount rate/yield						3		%	to			12%						4		%
Other asset-backed securities						$	67,816					Discounted cash flows						Cumulative loss rate						1		%	to			28%						11		%
																		Loss severity						50		%	to			85%						54		%
																		Duration (years)						0.2 years			to			2.1 years						1.3 years
																		Discount rate/yield						1		%	to			16%						9		%
												Market approach						Price						$100												—
Loans and other receivables						$	76,049					Market approach						Price						$31			to			$100						$84
												Scenario analysis						Estimated recovery percentage						19		%	to			100%						52		%
Derivatives						$	19,951
Equity options												Volatility benchmarking						Volatility						47%												—
Interest rate swaps												Market approach						Basis points upfront						1.2			to			8.0						4.8
Investments at fair value						$	96,906
Private equity securities												Market approach						Price						$1			to			$169						$29
												Scenario analysis						Estimated recovery percentage						17%												—
																		Discount rate/yield						19		%	to			21%						20		%
																		Revenue growth						0%												—
Investment in FXCM						$	59,455
Term loan												Discounted cash flows						Term based on the pay off (years)						0 months			to			1.2 years						1.2 years
Loans to and investments in associated companies
Non-exchange-traded   warrants						$	40,185					Market approach						Underlying stock price						$778			to			$805						$792
																		Underlying stock price						€15			to			€19						€16
																		Volatility						25		%	to			55%						30		%
Financial instruments sold, not yet purchased, at fair value
Corporate equity securities						$	4,434					Market approach						Price						$1												—
Corporate debt securities						$	141					Scenario analysis						Estimated recovery percentage						20%												—
Loans						$	16,635					Market approach						Price						$31			to			$99						$55
Derivatives						$	46,971
Equity options												Volatility benchmarking						Volatility						33		%	to			50%						42		%
Interest rate swaps												Market approach						Basis points upfront						1.2			to			8.0						5.4
Other secured financings						$	1,543					Scenario analysis						Estimated recovery percentage						19		%	to			55%						45		%
Long-term debt
Structured notes						$	676,028					Market approach						Price						$100												—
																		Price						€76			to			€113						€99

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

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February 28, 2021 and November 30, 2020, asset exclusions consisted of $202.3 million and $192.0 million, respectively, primarily comprised of certain investments at fair value, CDOs and CLOs, other asset-backed securities, commercial mortgage-backed securities, certain derivatives, loans and other receivables and corporate equity securities. At November 30, 2020, liability exclusions consisted of $0.8 million primarily comprised of certain derivatives and commercial mortgage-backed securities.

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:

•Corporate equity securities, corporate debt securities, loans and other receivables, other asset-backed securities, private equity securities, certain derivatives, loans to and investments in associated companies 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 equity securities, corporate debt securities, other asset-backed securities, loans and other receivables or structured notes would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the EBITDA multiple related to corporate 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.

•Loans and other receivables, CDOs and CLOs, corporate debt 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, residential mortgage-backed securities, commercial mortgage-backed securities, other asset-backed 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 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 our 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 and Short-term borrowings 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 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.

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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 short-term borrowings and long-term debt measured at fair value under the fair value option (in thousands):

									For the Three Months Ended
															February 28, 2021						February 29, 2020
Financial instruments owned, at fair value:
Loans and other receivables															$	10,696					$	1,739
Financial instruments sold, not yet purchased, at fair value:
Loans															$	—					$	(610)
Loan commitments															—						(661)
Short-term borrowings:
Changes in instrument specific credit risk (1)															$	—					$	57
Other changes in fair value (2)															—						12
Long-term debt:
Changes in instrument specific credit risk (1)															$	(91,982)					$	29,432
Other changes in fair value (2)															80,819						(37,642)

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

(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 short-term borrowings and other secured financings measured at fair value under the fair value option (in thousands):

						February 28, 2021						November 30, 2020
Financial instruments owned, at fair value:
Loans and other receivables (1)						$	5,826,957					$	1,662,647
Loans and other receivables on nonaccrual status and/or 90 days or greater past due (1) (2)						252,790						287,889
Long-term debt and short-term borrowings						$	(53,138)					$	(42,819)
Other secured financings						$	2,782					$	2,782

(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 $30.2 million and $30.0 million at February 28, 2021 and November 30, 2020, respectively.

The aggregate fair value of loans and other receivables on nonaccrual status and/or 90 days or greater past due was $5.4 million and $69.7 million at February 28, 2021 and November 30, 2020, respectively, which includes loans and other receivables 90 days or greater past due of $4.1 million and $3.8 million at February 28, 2021 and November 30, 2020, respectively.

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. Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations includes U.S. Treasury securities with a fair value of $118.5 million and $34.2 million at February 28, 2021 and November 30, 2020, respectively.

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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 February 28, 2021 and November 30, 2020 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)
February 28, 2021 (1)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC			$	45,638					1						$	32,653					1
Foreign exchange contracts:
Bilateral OTC			—						—						45,420						18
Total derivatives designated as accounting hedges			45,638												78,073
Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded			2,626						46,454						2,305						16,056
Cleared OTC			404,775						4,746						305,691						4,364
Bilateral OTC			489,918						660						450,254						1,491
Foreign exchange contracts:
Exchange-traded			—						—						—						195
Bilateral OTC			470,949						18,733						450,054						18,609
Equity contracts:
Exchange-traded			1,185,344						951,246						1,220,922						845,486
Bilateral OTC			495,951						2,435						1,529,978						2,487
Commodity contracts:
Exchange-traded			304						3,057						—						2,070
Bilateral OTC			—						1						8,712						1,515
Credit contracts:
Cleared OTC			34,377						80						36,129						56
Bilateral OTC			4,648						13						8,635						15
Total derivatives not designated as accounting hedges			3,088,892												4,012,680
Total gross derivative assets/liabilities:
Exchange-traded			1,188,274												1,223,227
Cleared OTC			484,790												374,473
Bilateral OTC			1,461,466												2,493,053
Amounts offset in the Consolidated Statement of Financial Condition (3):
Exchange-traded			(1,137,116)												(1,137,116)
Cleared OTC			(372,819)												(374,358)
Bilateral OTC			(1,094,672)												(1,485,629)
Net amounts in the Consolidated Statement of Financial Condition (4)			$	529,923											$	1,093,650

(continued)

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			Assets												Liabilities
			Fair Value						Number of Contracts (2)						Fair Value						Number of Contracts (2)
November 30, 2020 (1)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC			$	67,381					1						$	6,891					—
Foreign exchange contracts:
Bilateral OTC			—						—						3,306						1
Total derivatives designated as accounting hedges			67,381												10,197
Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded			2,442						52,620						439						42,611
Cleared OTC			17,379						3,785						114,524						4,307
Bilateral OTC			626,210						1,493						317,534						466
Foreign exchange contracts:
Exchange-traded			—						—						—						180
Bilateral OTC			297,165						15,005						277,706						15,050
Equity contracts:
Exchange-traded			558,304						1,147,486						564,951						971,938
Bilateral OTC			429,304						2,374						1,125,944						2,421
Commodity contracts:
Exchange-traded			64						3,207						—						2,654
Bilateral OTC			13,190						1,556						—						—
Credit contracts:
Cleared OTC			24,696						39						26,298						31
Bilateral OTC			1,008						11						2,209						11
Total derivatives not designated as accounting hedges			1,969,762												2,429,605
Total gross derivative assets/liabilities:
Exchange-traded			560,810												565,390
Cleared OTC			109,456												147,713
Bilateral OTC			1,366,877												1,726,699
Amounts offset in the Consolidated Statement of Financial Condition (3):
Exchange-traded			(546,989)												(546,989)
Cleared OTC			(109,228)												(111,654)
Bilateral OTC			(899,919)												(1,140,016)
Net amounts in the Consolidated Statement of Financial Condition (4)			$	481,007											$	641,143

(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
															February 28, 2021						February 29, 2020
Interest rate swaps															$	(43,791)					$	24,465
Long-term debt															46,811						(24,867)
Total															$	3,020					$	(402)

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

									For the Three Months Ended
															February 28, 2021						February 29, 2020
Foreign exchange contracts															$	(41,500)					$	—
Total															$	(41,500)					$	—

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
															February 28, 2021						February 29, 2020
Interest rate contracts															$	(42,124)					$	(1,089)
Foreign exchange contracts															46,829						(2,321)
Equity contracts															(89,697)						136,888
Commodity contracts															(18,349)						16,593
Credit contracts															821						1,830
Total															$	(102,520)					$	151,901

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.

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 February 28, 2021 (in thousands):

			OTC Derivative Assets (1) (2) (3)
			0-12 Months						1-5 Years						Greater Than 5 Years						Cross- Maturity Netting (4)						Total
Equity options and forwards			$	29,936					$	1,526					$	13,544					$	(20,365)					$	24,641
Credit default swaps			2						759						—						—						761
Total return swaps			130,651						16,711						—						(4,147)						143,215
Foreign currency forwards, swaps and options			85,919						13,318						—						(5,524)						93,713
Interest rate swaps, options and forwards			163,707						138,245						154,279						(29,567)						426,664
Total			$	410,215					$	170,559					$	167,823					$	(59,603)					688,994
Cross product counterparty netting																											(24,263)
Total OTC derivative assets included in Financial instruments owned, at fair value																											$	664,731

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(1)At February 28, 2021, we held net exchange-traded derivative assets, other derivative assets and other credit agreements with a fair value of $61.4 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 February 28, 2021, cash collateral received was $196.2 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			$	6,604					$	2,108					$	—					$	—					$	8,712
Equity options and forwards			19,834						522,218						143,586						(20,365)						665,273
Credit default swaps			20						3,530						—						—						3,550
Total return swaps			152,604						382,556						1,641						(4,147)						532,654
Foreign currency forwards, swaps and options			114,279						8,811						—						(5,524)						117,566
Fixed income forwards			5,359						—						—						—						5,359
Interest rate swaps, options and forwards			140,177						56,586						114,364						(29,567)						281,560
Total			$	438,877					$	975,809					$	259,591					$	(59,603)					1,614,674
Cross product counterparty netting																											(24,263)
Total OTC derivative liabilities included in Financial instruments sold, not yet purchased, at fair value																											$	1,590,411

 

(1)At February 28, 2021, we held net exchange-traded derivative liabilities, other derivative liabilities and other credit agreements with a fair value of $91.9 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 February 28, 2021, cash collateral pledged was $588.7 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.

At February 28, 2021, 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			$	162,505
BBB- to BBB+			38,774
BB+ or lower			201,073
Unrated			262,379
Total			$	664,731

 

(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.

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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
February 28, 2021
Credit protection sold:
Index credit default swaps						$	921.0					$	459.0					$	—					$	1,380.0
Single name credit default swaps						87.2						6.2						0.2						93.6
November 30, 2020
Credit protection sold:
Index credit default swaps						$	62.0					$	262.8					$	—					$	324.8
Single name credit default swaps						—						6.2						0.2						6.4

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).

			February 28, 2021						November 30, 2020
Derivative instrument liabilities with credit-risk-related contingent features			$	464.6					$	284.6
Collateral posted			(33.0)						(129.8)
Collateral received			244.1						141.4
Return of and additional collateral required in the event of a credit rating downgrade below investment grade (1)			675.7						296.2

(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.

Other Derivatives

Vitesse Energy Finance uses swaps and call and put options in order to reduce exposure to future oil price fluctuations. Vitesse Energy Finance 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

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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
February 28, 2021
Corporate equity securities						$	2,067,474					$	245,823					$	—					$	2,313,297
Corporate debt securities						372,966						2,113,427						—						2,486,393
Mortgage-backed and asset-backed securities						—						1,378,273						—						1,378,273
U.S. government and federal agency securities						20,353						9,417,370						—						9,437,723
Municipal securities						—						138,344						—						138,344
Sovereign obligations						58,284						2,584,304						—						2,642,588
Loans and other receivables						—						981,487						—						981,487
Total						$	2,519,077					$	16,859,028					$	—					$	19,378,105
November 30, 2020
Corporate equity securities						$	1,371,978					$	157,912					$	7,517					$	1,537,407
Corporate debt securities						369,218						1,869,844						—						2,239,062
Mortgage-backed and asset-backed securities						—						1,547,140						—						1,547,140
U.S. government and federal agency securities						14,789						7,149,992						—						7,164,781
Municipal securities						—						278,470						—						278,470
Sovereign obligations						54,763						2,763,032						—						2,817,795
Loans and other receivables						—						1,392,883						—						1,392,883
Total						$	1,810,748					$	15,159,273					$	7,517					$	16,977,538

						Contractual Maturity
						Overnight and Continuous						Up to 30 Days						31 to 90 Days						Greater than 90 Days						Total
February 28, 2021
Securities lending arrangements						$	1,080,237					$	—					$	482,281					$	956,559					$	2,519,077
Repurchase agreements						7,711,109						3,146,550						3,313,696						2,687,673						16,859,028
Total						$	8,791,346					$	3,146,550					$	3,795,977					$	3,644,232					$	19,378,105
November 30, 2020
Securities lending arrangements						$	636,256					$	59,735					$	459,455					$	655,302					$	1,810,748
Repurchase agreements						5,510,476						1,747,526						5,019,885						2,881,386						15,159,273
Obligation to return securities received as collateral, at fair value						7,517						—						—						—						7,517
Total						$	6,154,249					$	1,807,261					$	5,479,340					$	3,536,688					$	16,977,538

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

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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 February 28, 2021 and November 30, 2020, the approximate fair value of securities received as collateral by us that may be sold or repledged was $32.8 billion and $25.9 billion, respectively. At February 28, 2021 and November 30, 2020, 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).

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 February 28, 2021
Securities borrowing arrangements			$	7,150,657					$	—					$	7,150,657					$	(567,061)					$	(1,984,216)					$	4,599,380
Reverse repurchase agreements			16,331,676						(9,651,392)						6,680,284						(283,889)						(6,328,407)						67,988
Liabilities at February 28, 2021
Securities lending arrangements			$	2,519,077					$	—					$	2,519,077					$	(567,061)					$	(1,908,973)					$	43,043
Repurchase agreements			16,859,028						(9,651,392)						7,207,636						(283,889)						(6,408,994)						514,753
Assets at November 30, 2020
Securities borrowing arrangements			$	6,934,762					$	—					$	6,934,762					$	(395,342)					$	(1,706,046)					$	4,833,374
Reverse repurchase agreements			11,939,773						(6,843,004)						5,096,769						(412,327)						(4,578,560)						105,882
Securities received as collateral, at fair value			7,517						—						7,517						—						—						7,517
Liabilities at November 30, 2020
Securities lending arrangements			$	1,810,748					$	—					$	1,810,748					$	(395,342)					$	(1,397,550)					$	17,856
Repurchase agreements			15,159,273						(6,843,004)						8,316,269						(412,327)						(7,122,422)						781,520
Obligation to return securities received as collateral, at fair value			7,517						—						7,517						—						—						7,517

(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 February 28, 2021, amounts include $4,511.4 million of securities borrowing arrangements, for which we have received securities collateral of $4,383.8 million, and $505.0 million of repurchase agreements, for which we have pledged securities collateral of $520.2 million, which are subject to master netting agreements, but we have not determined the agreements to be legally enforceable. At November 30, 2020, amounts include $4,757.8 million of securities borrowing arrangements, for which we have received securities collateral of $4,617.0 million, and $720.0 million of repurchase

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agreements, for which we have pledged securities collateral of $733.9 million, which are subject to master netting agreements, but we have not determined the agreements to be legally enforceable.

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 $615.1 million and $604.3 million at February 28, 2021 and November 30, 2020, 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.

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
															February 28, 2021						February 29, 2020
Transferred assets															$	3,583.5					$	2,334.6
Proceeds on new securitizations															3,583.1						2,334.7
Cash flows received on retained interests															6.3						7.0

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 February 28, 2021 and November 30, 2020.

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

			February 28, 2021												November 30, 2020
Securitization Type			Total Assets						Retained Interests						Total Assets						Retained Interests
U.S. government agency residential mortgage-backed securities			$	505.5					$	6.8					$	562.5					$	7.8
U.S. government agency commercial mortgage-backed securities			2,051.0						102.3						2,461.2						205.2
CLOs			5,712.5						70.2						3,345.5						39.5
Consumer and other loans			1,428.9						77.8						1,290.6						56.6

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

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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.

Foursight Capital also utilizes SPEs to securitize automobile loans receivable. These SPEs are VIEs and our subsidiary is the primary beneficiary; the related assets and the secured borrowings are recognized in the Consolidated Statements of Financial Condition. These secured borrowings do not have recourse to our subsidiary's general credit. See Note 7 for further information on securitization activities and VIEs.

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;

•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.

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.

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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.

			February 28, 2021												November 30, 2020
			Secured Funding Vehicles						Other						Secured Funding Vehicles						Other
Cash (1)			$	—					$	1.2					$	—					$	1.2
Financial instruments owned, at fair value			—						12.6						—						5.2
Securities purchased under agreements to resell (2)			3,934.3						—						2,908.9						—
Receivables			636.5						31.2						510.6						12.9
Other (3)			66.5						0.2						46.4						0.1
Total assets			$	4,637.3					$	45.2					$	3,465.9					$	19.4
Financial instruments sold, not yet purchased, at fair   value			$	—					$	9.4					$	—					$	2.5
Other secured financings (4)			4,637.4						—						3,425.0						—
Other liabilities (5)			3.7						0.5						1.8						0.4
Total liabilities			$	4,641.1					$	9.9					$	3,426.8					$	2.9

(1)Approximately $1.2 million and $0.7 million of the cash amounts at February 28, 2021 and November 30, 2020, respectively, represent cash on deposit with related consolidated entities and are eliminated in consolidation.

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

(3)Approximately $9.7 million of the other assets amount at November 30, 2020 represents intercompany receivables with related consolidated entities, which are eliminated in consolidation.

(4)Approximately $131.2 million and $138.2 million of the other secured financings amounts at February 28, 2021 and November 30, 2020, respectively, are with related consolidated entities, which are eliminated in consolidation.

(5)Approximately $2.1 million and $0.3 million of the other liabilities amounts at February 28, 2021 and November 30, 2020, respectively, represent intercompany payables 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 February 28, 2021 and November 30, 2020, Foursight Capital is the primary beneficiary of SPEs it utilized to securitize automobile loans receivable. Foursight Capital acts as the servicer for which it receives a fee, and owns an equity interest in the SPEs. The notes issued by the SPEs are secured solely by the assets of the SPEs and do not have recourse to Foursight Capital's general credit and the assets of the VIEs are not available to satisfy any other debt. During the three months ended February 28, 2021, automobile loan receivables aggregating $228.6 million were securitized by Foursight Capital in connection with a secured borrowing offering. The majority of the proceeds from issuance of the secured borrowing were used to pay down Foursight Capital's two credit facilities.

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.

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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
February 28, 2021
CLOs			$	163.4					$	5.4					$	1,343.5					$	9,595.0
Consumer loan and other asset-backed vehicles			266.9						—						363.3						2,580.5
Related party private equity vehicles			18.7						—						29.5						52.3
Other investment vehicles			909.7						—						1,050.0						14,167.7
Total			$	1,358.7					$	5.4					$	2,786.3					$	26,395.5
November 30, 2020
CLOs			$	60.7					$	0.2					$	642.7					$	6,849.1
Consumer loan and other asset-backed vehicles			251.6						—						377.2						2,462.7
Related party private equity vehicles			19.0						—						30.0						53.0
Other investment vehicles			899.9						—						1,042.9						15,735.5
Total			$	1,231.2					$	0.2					$	2,092.8					$	25,100.3

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; and

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

•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 agreements. The underlying assets, which are collateralizing the vehicles, are primarily composed of unsecured consumer loans, mortgage loans and trade claims. 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 February 28, 2021 and November 30, 2020, our total equity commitment in the JCP Entities was $133.0 million, of which $122.1 million and $122.0 million, respectively, had been funded. The carrying value of our equity investments in the JCP Entities was $18.7 million and $19.0 million at February 28,

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2021 and November 30, 2020, 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 $909.7 million and $899.9 million at February 28, 2021 and November 30, 2020, respectively. Our unfunded equity commitment related to these investments totaled $140.3 million and $143.0 million at February 28, 2021 and November 30, 2020, 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, auto 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 (FNMA ("Fannie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac") or GNMA ("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 auto 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 February 28, 2021 and November 30, 2020, we held $1,642.6 million and $1,571.6 million of agency mortgage-backed securities, respectively, and $193.8 million and $252.0 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 $411.9 million in its latest financial statements. Our maximum exposure to loss as a result of our involvement with FXCM is limited to the carrying value of the term loan ($62.1 million) and the investment in associated company ($68.8 million), which totaled $130.9 million at February 28, 2021. 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 three months ended February 28, 2021 and February 29, 2020 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
2021
Jefferies Finance			$	693,201					$	—					$	27,585					$	(40,542)					$	—					$	680,244
Berkadia			301,152						—						30,018						(316)						(61)						330,793
FXCM (2)			73,920						(5,462)						—						—						327						68,785
Linkem (3)			198,991						(9,107)						—						(8,783)						—						181,101
Real estate associated companies			168,678						6,051						—						(10,954)						—						163,775
Other (3)			250,621						(2,050)						30,303						(14,524)						—						264,350
Total			$	1,686,563					$	(10,568)					$	87,906					$	(75,119)					$	266					$	1,689,048
2020
Jefferies Finance			$	673,867					$	—					$	5,119					$	4,871					$	—					$	683,857
Berkadia			268,949						—						21,894						(36,165)						305						254,983
FXCM (2)			70,223						(1,638)						—						—						(144)						68,441
Linkem			194,847						(13,185)						—						(359)						(113)						181,190
Real estate associated companies (4)			255,309						(53,014)						—						(29,415)						—						172,880
Other			189,762						(18)						1,746						551						9,236						201,277
Total			$	1,652,957					$	(67,855)					$	28,759					$	(60,517)					$	9,284					$	1,562,628

(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 February 28, 2021 and November 30, 2020 include loans and debt securities aggregating $100.0 million and $104.1 million, respectively, related to Linkem and Other.

(4)Income (loss) related to Real estate associated companies for the three months ended February 29, 2020 includes a non-cash charge of $55.6 million to fully write-off the value of HomeFed's RedSky JZ Fulton Mall joint venture investment related to a softening of the Brooklyn real estate market.

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

									For the Three Months Ended
															February 28, 2021						February 29, 2020
FXCM															$	(5,462)					$	(1,638)
Linkem															(9,107)						(13,185)
Real estate associated companies															6,051						(53,014)
Other															(2,050)						(18)
Total															$	(10,568)					$	(67,855)

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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
															February 28, 2021						February 29, 2020
Jefferies Finance															$	27,585					$	5,119
Berkadia															30,018						21,894
Other															30,303						1,746
Total															$	87,906					$	28,759

Jefferies Finance

Through Jefferies Group, we own 50% of Jefferies Finance LLC ("Jefferies Finance"), 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 arranges primarily senior secured loans to corporate borrowers, as well as manages loan funds and CLOs. Loans are originated primarily through the investment banking efforts of Jefferies LLC. Jefferies Finance may also underwrite and arrange other debt products such as second lien term, bridge and mezzanine loans, as well as related equity co-investments. In addition, Jefferies Finance is a registered investment advisor under the Investment Advisers Act of 1940 and, through two of its wholly-owned subsidiaries, Apex Credit Partners LLC and JFIN Asset Management LLC, acts as an investment advisor for various loan funds and CLOs managing direct lending and broadly syndicated loan products.

At February 28, 2021, Jefferies Group and MassMutual each had equity commitments to Jefferies Finance of $750.0 million. At February 28, 2021, $652.4 million of Jefferies Group's commitment was funded. The investment commitment is scheduled to expire on March 1, 2022 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 February 28, 2021. Advances are shared equally between Jefferies Group and MassMutual. The facility is scheduled to mature on March 1, 2022 with automatic one year extensions absent a 60-day termination notice by either party. At February 28, 2021, $0.0 million of Jefferies Group's $250.0 million commitment was funded. Jefferies Group recognized interest income and unfunded commitment fees related to the facility of $0.6 million and $1.1 million during the three months ended February 28, 2021 and February 29, 2020, respectively.

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

									For the Three Months Ended
															February 28, 2021						February 29, 2020
Origination and syndication fee revenues (1)															$	70.3					$	37.7
Origination fee expenses (1)															12.3						5.6
CLO placement fee revenues (2)															2.4						0.4
Underwriting fees (3)															0.5						0.3
Service fees (4)															31.5						25.2

(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 February 28, 2021 and November 30, 2020, 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.

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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 February 28, 2021 and November 30, 2020, we had receivables from Jefferies Finance, included in Other assets in the Consolidated Statements of Financial Condition of $12.4 million and $24.2 million, respectively. At both February 28, 2021 and November 30, 2020, 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 $13.7 million.

Berkadia

Berkadia is a commercial mortgage banking and servicing joint venture 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, and 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 February 28, 2021, 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).

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 2022, and warrants. If all of our convertible preferred stock was converted and warrants were exercised, it would increase our ownership to approximately 56% of Linkem's common equity at February 28, 2021. We have approximately 48% of the total voting securities of Linkem. Additionally, we have made shareholder loans to Linkem with principal outstanding of $103.6 million at February 28, 2021. We account for our equity interest in Linkem on a two month lag.

Real Estate Associated 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 25.8% 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).

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We own approximately 48.1% of 54 Madison, a fund that seeks long-term capital appreciation through investment in real estate development and similar projects. 54 Madison invests both in projects which they consolidate and projects where they have significant influence and utilize the equity method of accounting. Based on total committed capital of the 54 Madison fund, all projects of this fund have already been identified and launched.

Note 9.  Intangible Assets, Net and Goodwill

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

			February 28, 2021						November 30, 2020
Indefinite-lived intangibles:
Exchange and clearing organization membership interests and registrations			$	7,923					$	7,884
Amortizable intangibles:
Customer and other relationships, net of accumulated amortization of $122,163 and $119,694			49,344						51,285
Trademarks and tradenames, net of accumulated amortization of $29,680 and $28,585			99,924						100,255
Other, net of accumulated amortization of $9,574 and $8,953			7,108						7,729
Total intangible assets, net			164,299						167,153
Goodwill:
Investment Banking and Capital Markets (1)			1,566,853						1,563,144
Asset Management			143,000						143,000
Real estate			36,711						36,711
Other operations			3,459						3,459
Total goodwill			1,750,023						1,746,314
Total intangible assets, net and goodwill			$	1,914,322					$	1,913,467

(1)    The increase in Investment Banking and Capital Markets goodwill during the three months ended February 28, 2021, primarily relates to translation adjustments.

Amortization expense on intangible assets was $3.6 million and $3.8 million for the three months ended February 28, 2021 and February 29, 2020, respectively. 

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

Remainder of current year			$	10,789
2022			11,134
2023			9,900
2024			9,143
2025			8,632

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Note 10.  Short-Term Borrowings

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

			February 28, 2021						November 30, 2020
Bank loans (1)			$	876,141					$	752,848
Floating rate puttable notes (1)			6,800						6,800
Equity-linked notes (2)			—						5,067
Total short-term borrowings			$	882,941					$	764,715

(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.

(2)    See Note 3 for further information on these notes.

At February 28, 2021 and November 30, 2020, the weighted average interest rate on short-term borrowings outstanding was 1.82% and 1.87% per annum, respectively.

Our bank loans include facilities that contain certain covenants that, among other things, require us to maintain a specified level of tangible net worth and impose certain restrictions on the future indebtedness of certain of our subsidiaries that are borrowers. At February 28, 2021, we were in compliance with all covenants under these facilities. Our facilities included within bank loans are as follows (in thousands):

			February 28, 2021						November 30, 2020
Bank of New York Mellon Master Loan Agreement (1)			$	300,000					$	300,000
JPMorgan Chase Bank, N.A. Credit Facility (2)			274,000						246,000
Royal Bank of Canada Credit Facility (3)			200,000						200,000
Bank of New York Mellon Credit Facility (4)			100,000						—
Total			$	874,000					$	746,000

(1)    Interest is generally based at spreads over the Federal Funds Rate as defined in this master loan agreement.

(2)    Interest is based on an annual alternative base rate or an adjusted London Interbank Offered Rate ("LIBOR"), as defined in this credit facility agreement.

(3)    Interest is based on a rate per annum equal to LIBOR plus an applicable margin of 2.05%.

(4)    Interest is based on a rate per annum equal to the Federal Funds Rate plus 2%.

In addition, the Bank of New York Mellon has agreed to make revolving intraday credit advances to Jefferies Group ("Intraday Credit Facility") for an aggregate committed amount of $150.0 million. The Intraday Credit Facility is structured so that advances are generally repaid before the end of each business day. However, if an advance is not repaid by the end of any business day, the advance is converted to an overnight loan. Intraday loans accrue interest at a rate of 0.12%. Interest is charged based on the number of minutes in a day the advance is outstanding. Overnight loans are charged interest at the base rate plus 3% on a daily basis. The base rate is the higher of the federal funds rate plus 0.50% or the prime rate in effect at that time. The Intraday Credit Facility contains financial covenants, which include a minimum regulatory net capital requirement for Jefferies Group's U.S. broker-dealer, Jefferies LLC. At February 28, 2021, Jefferies Group was in compliance with all debt covenants under the Intraday Credit Facility.

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Note 11.  Long-Term Debt

The principal amount (net of unamortized discounts, premiums and debt issuance costs), stated interest rate and maturity date of outstanding debt are as follows (dollars in thousands):

			February 28, 2021						November 30, 2020
Parent Company Debt:
Senior Notes:
5.50% Senior Notes due October 18, 2023, $750,000 principal			$	746,215					$	745,883
6.625% Senior Notes due October 23, 2043, $250,000 principal			246,843						246,828
Total long-term debt – Parent Company			993,058						992,711
Subsidiary Debt (non-recourse to Parent Company):
Jefferies Group:
2.25% Euro Medium Term Notes, due July 13, 2022, $0 and $4,779 principal			—						4,638
5.125% Senior Notes, due January 20, 2023, $750,000 principal			758,792						759,901
1.00% Euro Medium Term Notes, due July 19, 2024, $603,950 and $597,350 principal			602,401						595,700
4.85% Senior Notes, due January 15, 2027, $750,000 principal (1)			790,942						809,039
6.45% Senior Debentures, due June 8, 2027, $350,000 principal			368,445						369,057
4.15% Senior Notes, due January 23, 2030, $1,000,000 principal			989,807						989,574
2.75% Senior Notes, due October 15, 2032, $500,000 principal (1)			456,828						485,134
6.25% Senior Debentures, due January 15, 2036, $500,000 principal			510,724						510,834
6.50% Senior Notes, due January 20, 2043, $400,000 principal			419,719						419,826
Structured Notes (2)			1,784,157						1,712,245
Jefferies Group Revolving Credit Facility			189,893						189,732
Jefferies Group Secured Bank Loan			50,000						50,000
HomeFed EB-5 Program debt			191,486						191,294
HomeFed construction loan			45,949						45,471
Foursight Capital Credit Facilities			—						129,000
Vitesse Energy Finance Revolving Credit Facility			90,949						97,883
Total long-term debt – subsidiaries			7,250,092						7,359,328
Long-term debt			$	8,243,150					$	8,352,039

(1)    The carrying value of these senior notes include a net gain of $46.8 million and a net loss of $24.9 million during the three months ended February 28, 2021 and February 29, 2020, 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.

Subsidiary Debt:

During the three months ended February 28, 2021, structured notes with a total principal amount of approximately $54.1 million, net of retirements, were issued by Jefferies Group.

Jefferies Group has a revolving credit facility ("Jefferies Group Revolving Credit Facility") with a group of commercial banks. At February 28, 2021, borrowings under the Jefferies Group Revolving Credit Facility amounted to $189.9 million. Interest is based on an annual alternative base rate or an adjusted LIBOR, as defined in the Jefferies Group Revolving Credit Facility agreement. The Jefferies Group Revolving Credit Facility contains certain covenants that, among other things, requires Jefferies Group LLC to maintain specified level of tangible net worth and liquidity amounts, and imposes certain restrictions on future indebtedness of and requires specified levels of regulated capital for certain of Jefferies Group's subsidiaries. Throughout the

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three months ended February 28, 2021 and at February 28, 2021, no instances of noncompliance with the Jefferies Group Revolving Credit Facility covenants occurred and we expect to remain in compliance given Jefferies Group's current liquidity and anticipated funding requirements given its business plan and profitability expectations.

One of Jefferies Group's subsidiaries has a Loan and Security Agreement with a bank for a term loan with a principal amount of $50.0 million ("Jefferies Group Secured Bank Loan"). This Jefferies Group Secured Bank Loan is collateralized by certain trading securities. Interest on the Jefferies Group Secured Bank Loan is 1.25% plus LIBOR. The agreement contains certain covenants that, among other things, restrict lien or encumbrance upon any of the pledged collateral. At February 28, 2021, Jefferies Group was in compliance with all covenants under the Loan and Security Agreement.

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 February 28, 2021, 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 February 28, 2021, HomeFed has a construction loan agreement with an aggregate committed amount of $58.9 million. The proceeds are being used for construction at certain of its real estate projects. The outstanding principal amount of the loan bears interest based on the 30-day LIBOR plus 3.15%, subject to adjustment on the first of each calendar month. On March 1, 2021, HomeFed modified the loan to extend the maturity from March 1, 2021 to June 29, 2021 and reduced the maximum loan commitment from $58.9 million to $50.0 million. The loan is collateralized by the property underlying the related project with a guarantee by HomeFed. At February 28, 2021 and November 30, 2020, $46.6 million and $46.2 million, respectively, was outstanding under the construction loan agreement.

At February 28, 2021, Foursight Capital's credit facilities consisted of two warehouse credit commitments aggregating $175.0 million. One of the credit facilities matures in May 2021 and bears interest based on the one-month LIBOR plus a credit spread fixed through its maturity and the other credit facility matures in October 2022 and bears interest based on a commercial paper rate plus a credit spread fixed through its maturity. As a condition of the credit facilities, Foursight Capital is obligated to maintain cash reserves to comply with the hedging requirements of the credit commitment. The credit facilities are secured by first priority liens on automobile loan receivables owed to Foursight Capital. At February 28, 2021 and November 30, 2020, $0.0 million and $129.3 million, respectively, was outstanding under Foursight Capital's credit facilities.

Vitesse Energy Finance has a revolving credit facility with a syndicate of banks that matures in April 2023 and has a maximum borrowing base of $120.0 million at February 28, 2021. Amounts outstanding under the facility at February 28, 2021 and November 30, 2020 were $91.5 million and $98.5 million, respectively. Borrowings under the facility have been made as Eurodollar loans that bear interest at adjusted LIBOR plus a spread ranging from 2.5% to 3.5% based on the borrowing base utilization percentage. The credit facility is guaranteed by Vitesse Energy Finance's subsidiaries and is collateralized with a minimum of 85% of Vitesse Energy Finance's proved reserve value of its oil and gas properties. Vitesse Energy Finance'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 Finance's lenders.

Note 12.  Mezzanine Equity

Redeemable Noncontrolling Interests

At February 28, 2021 and November 30, 2020, redeemable noncontrolling interests include other redeemable noncontrolling interests of $31.0 million and $24.7 million, respectively, primarily related to our oil and gas exploration and development businesses.

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. 

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In the first quarter of 2021, we increased our quarterly dividend from $0.15 to $0.20 per common share. This increased the preferred stock dividend from $1.4 million for the three months ended February 29, 2020 to $1.6 million for the three months ended February 28, 2021. Based on our current quarterly dividend of $0.20 per common share, the effective rate on these Preferred Shares is approximately 5.2%.

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 awards for multiple years. Sign-on and retention awards are generally subject to annual ratable vesting over a four year service period and are amortized as compensation expense on a straight-line basis over the related four years. Restricted stock and RSUs are granted to certain senior executives with market, performance and 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 condition is not met. Awards with performance conditions are amortized over the service period if it is determined that it is probable that the performance condition will be achieved.

Senior Executive Compensation Plan. In December 2020, the Compensation Committee of our Board of Directors granted certain senior executives nonqualified stock options and stock appreciation rights ("SAR"). The total initial fair value of the stock option and SAR awards were recorded as expense at the time of the grant as both have no future service requirements. The SAR awards will be settled on a cash basis or, at the sole discretion of the Compensation Committee, may be converted irrevocably to a stock-settled award and are considered to be liability-classified share-based awards. Subsequent changes in the fair value of the outstanding SAR awards are recognized currently on an ongoing basis in Compensation and benefits expense. For the three months ended February 28, 2021, we recorded $46.4 million of total Compensation and benefits expense relating to the stock option and SAR awards, of which $12.9 million was stock-based compensation and $33.5 million related to the SAR awards.

Stock-Based Compensation Expense. Stock-based compensation expense relating to grants made under our share-based compensation plans was $20.7 million (including $12.9 million related to the senior executive stock option award, as discussed above) and $9.9 million for the three months ended February 28, 2021 and February 29, 2020, respectively. Total compensation cost includes the amortization of sign-on, retention and senior executive awards, less forfeitures and clawbacks. The total tax benefit recognized in results of operations related to stock-based compensation expenses was $5.1 million and $2.6 million for the three months ended February 28, 2021 and February 29, 2020, respectively. At February 28, 2021, total unrecognized compensation cost related to nonvested stock-based compensation plans was $37.1 million; this cost is expected to be recognized over a weighted average period of 1.7 years.

At February 28, 2021, there were 1,414,000 shares of restricted stock outstanding with future service required, 2,862,000 RSUs outstanding with future service required (including target RSUs issuable under the senior executive compensation plan), 16,850,000 RSUs outstanding with no future service required, 2,791,000 stock options outstanding and 1,104,000 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 28,048,000 at February 28, 2021.

Restricted Cash Awards. Jefferies Group provides compensation to certain new and existing employees in the form of loans and/or other cash awards which are subject to ratable vesting terms with service requirements. These awards are amortized to compensation expense over the relevant service period, which is generally considered to start at the beginning of the annual compensation year. At February 28, 2021, the remaining unamortized amount of the restricted cash awards was $423.0 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):

			February 28, 2021						November 30, 2020
Net unrealized gains on available for sale securities			$	453					$	513
Net unrealized foreign exchange losses			(145,635)						(156,718)
Net unrealized losses on instrument specific credit risk			(140,587)						(71,151)
Net minimum pension liability			(60,775)						(61,561)
			$	(346,544)					$	(288,917)

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 Three Months Ended
						February 28, 2021						February 29, 2020
Net unrealized gains (losses) on instrument specific credit risk, net of income tax provision (benefit) of $71 and $86						$	222					$	252					Principal transactions revenues
Amortization of defined benefit pension plan actuarial losses, net of income tax benefit of $(261) and $(224)						(786)						(639)						Selling, general and other expenses, which includes pension expense
Total reclassifications for the period, net of tax						$	(564)					$	(387)

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
															February 28, 2021						February 29, 2020
Revenues from contracts with customers:
Commissions and other fees															$	236,769					$	179,430
Investment banking															1,003,612						592,002
Manufacturing revenues															137,847						77,607
Other															54,415						63,777
Total revenues from contracts with customers															1,432,643						912,816
Other sources of revenue:
Principal transactions															919,901						404,864
Interest income															240,497						326,366
Other															110,547						48,218
Total revenues from other sources															1,270,945						779,448
Total revenues															$	2,703,588					$	1,692,264

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

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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 convertible 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.

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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
						Investment Banking and Capital Markets						Asset Management						Merchant Banking						Corporate						Consolidation Adjustments						Total
Three months ended February 28, 2021
Major Business Activity:
Investment Banking - Advisory						$	311,439					$	—					$	—					$	—					$	—					$	311,439
Investment Banking - Underwriting						692,223						—						—						—						(50)						692,173
Equities (1)						233,539						—						—						—						(169)						233,370
Fixed Income (1)						3,399						—						—						—						—						3,399
Asset Management						—						7,426						—						—						—						7,426
Manufacturing revenues						—						—						137,847						—						—						137,847
Oil and gas revenues						—						—						32,009						—						—						32,009
Other revenues						—						—						14,980						—						—						14,980
Total revenues from contracts with customers						$	1,240,600					$	7,426					$	184,836					$	—					$	(219)					$	1,432,643
Primary Geographic Region:
Americas						$	1,026,916					$	7,097					$	184,338					$	—					$	(219)					$	1,218,132
Europe						163,737						329						369						—						—						164,435
Asia Pacific						49,947						—						129						—						—						50,076
Total revenues from contracts with customers						$	1,240,600					$	7,426					$	184,836					$	—					$	(219)					$	1,432,643
Three months ended February 29, 2020
Major Business Activity:
Investment Banking - Advisory						$	343,158					$	—					$	—					$	—					$	—					$	343,158
Investment Banking - Underwriting						248,844						—						—						—						—						248,844
Equities (1)						176,249						—						—						—						(105)						176,144
Fixed Income (1)						3,286						—						—						—						—						3,286
Asset Management						—						6,091						—						—						—						6,091
Manufacturing revenues						—						—						77,607						—						—						77,607
Oil and gas revenues						—						—						42,214						—						—						42,214
Other revenues						—						—						15,472						—						—						15,472
Total revenues from contracts with customers						$	771,537					$	6,091					$	135,293					$	—					$	(105)					$	912,816
Primary Geographic Region:
Americas						$	649,069					$	2,568					$	134,779					$	—					$	(105)					$	786,311
Europe						79,438						3,523						360						—						—						83,321
Asia Pacific						43,030						—						154						—						—						43,184
Total revenues from contracts with customers						$	771,537					$	6,091					$	135,293					$	—					$	(105)					$	912,816

(1)    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 February 28, 2021. 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 February 28, 2021.

During the three months ended February 28, 2021 and February 29, 2020, we recognized $8.2 million and $6.4 million, 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 $2.9 million and $5.6 million during the three months ended February 28, 2021 and February 29, 2020, 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. 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 $367.0 million and $332.5 million at February 28, 2021 and November 30, 2020, respectively. We had no significant impairments related to these receivables during the three months ended February 28, 2021 and February 29, 2020.

Our deferred revenue primarily relates to retainer and milestone fees received in investment banking advisory engagements where the performance obligation has not yet been satisfied. Deferred revenues were $15.9 million and $14.8 million at February 28, 2021 and November 30, 2020, respectively, which are recorded as Payables, expense accruals and other liabilities in the Consolidated Statements of Financial Condition. During the three months ended February 28, 2021, we recognized $6.9 million of deferred revenue from the balance at November 30, 2020. During the three months ended February 29, 2020, we recognized $5.6 million of deferred revenue from the balance at November 30, 2019.

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 February 28, 2021 and November 30, 2020, capitalized costs to fulfill a contract were $1.3 million and $1.8 million, respectively, which are recorded in Receivables in the Consolidated Statements of Financial Condition. We recognized expenses of $1.2 million and $1.9 million, during the three months ended February 28, 2021 and February 29, 2020, 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 months ended February 28, 2021 and February 29, 2020.

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Note 16.  Income Taxes

The aggregate amount of gross unrecognized tax benefits related to uncertain tax positions was $431.7 million (including $92.2 million for interest) at February 28, 2021, of which $258.9 million related to Jefferies Group, and was $401.4 million (including $87.1 million for interest) at November 30, 2020, of which $234.0 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. No material penalties were accrued for the three months ended February 28, 2021 and February 29, 2020.

The net deferred tax asset was $410.4 million and $393.7 million at February 28, 2021 and November 30, 2020, 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 statute of limitations with respect to our federal income tax returns has expired for all years through 2016. We are currently under examination by various tax jurisdictions. Prior to becoming a wholly-owned subsidiary, Jefferies Group filed a consolidated U.S. federal income tax return with its qualifying subsidiaries and was subject to income tax in various states, municipalities and foreign jurisdictions and Jefferies Group is also currently under examination by various tax jurisdictions. We do not expect that resolution of these examinations will have a significant effect on the Consolidated Statements of Financial Condition, but could have a significant impact on the Consolidated Statements of Operations for the period in which resolution occurs.

Our provision for income taxes for the three months ended February 28, 2021 was $218.2 million, representing an effective tax rate of 27.3%. Our provision for income taxes for the three months ended February 29, 2020 was $45.8 million, representing an effective tax rate of 29.0%.

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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
															February 28, 2021						February 29, 2020
Numerator for earnings per share:
Net income attributable to Jefferies Financial Group Inc. common shareholders															$	582,435					$	113,010
Allocation of earnings to participating securities (1)															(3,216)						(695)
Net income attributable to Jefferies Financial Group Inc. common shareholders for basic earnings per share															579,219						112,315
Adjustment to allocation of earnings to participating securities related to diluted shares (1)															42						(3)
Mandatorily redeemable convertible preferred share dividends															1,626						1,422
Net income attributable to Jefferies Financial Group Inc. common shareholders for diluted earnings per share															$	580,887					$	113,734
Denominator for earnings per share:
Weighted average common shares outstanding															249,352						286,682
Weighted average shares of restricted stock outstanding with future service required															(1,461)						(1,892)
Weighted average RSUs outstanding with no future service required															18,495						17,616
Denominator for basic earnings per share – weighted average shares															266,386						302,406
Stock options															208						10
Senior executive compensation plan awards															1,846						1,423
Mandatorily redeemable convertible preferred shares															4,441						4,441
Denominator for diluted earnings per share															272,881						308,280

(1)Represents dividends declared during the period on participating securities plus an allocation of undistributed earnings to participating securities. Net losses are not allocated to participating securities. Participating securities represent restricted stock and RSUs for which requisite service has not yet been rendered and amounted to weighted average shares of 1,482,000 and 1,902,000 for the three months ended February 28, 2021 and February 29, 2020, respectively. Dividends declared on participating securities were not material during the three months ended February 28, 2021 and February 29, 2020. Undistributed earnings are allocated to participating securities based upon their right to share in earnings if all earnings for the period had been distributed.

Our Board of Directors from time to time has authorized the repurchase of our common shares. In January 2020, the Board of Directors approved an increase of $250.0 million to the share repurchase authorization and in March 2020, the Board of Directors approved an additional share repurchase authorization of $100 million. In June 2020, the Board of Directors increased the share repurchase authorization by $176.7 million and in September 2020, the Board of Directors increased the share repurchase authorization by $128.0 million. In January 2021, the Board of Directors increased the share repurchase authorization by $192.8 million. During the three months ended February 28, 2021, we purchased a total of 5,000,000 of our common shares for an aggregate purchase price of $127.5 million, or an average price of $25.51 per share. At February 28, 2021, we had approximately $122.5 million available for future purchases. In March 2021, the Board of Directors increased the share repurchase authorization to $250.0 million, including the $122.5 million.

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Note 18.  Commitments, Contingencies and Guarantees

Commitments

The following table summarizes commitments associated with certain business activities at February 28, 2021 (in millions):

			Expected Maturity Date
			2021						2022						2023 and 2024						2025 and 2026						2027 and Later						Maximum Payout
Equity commitments (1)			$	316.2					$	151.0					$	25.4					$	10.9					$	23.5					$	527.0
Loan commitments (1)			57.5						260.0						25.0						2.0						—						344.5
Underwriting commitments			224.0						—						—						—						—						224.0
Forward starting reverse repos (2)			5,703.8						193.7						4.2						—						—						5,901.7
Forward starting repos (2)			3,627.2						—						4.2						—						—						3,631.4
Other unfunded commitments (1)			135.3						25.0						136.1						—						—						296.4
			$	10,064.0					$	629.7					$	194.9					$	12.9					$	23.5					$	10,925.0

(1)Equity commitments, loan commitments and other unfunded commitments are generally presented by contractual maturity date. The amounts, however, are mostly available on demand.

(2)At February 28, 2021, $5,894.4 million within forward starting securities purchased under agreements to resell and $3,631.4 million within forward starting securities sold under agreements to repurchase settled within three business days.

Equity Commitments.  Equity commitments include a commitment to invest in Jefferies Group's joint venture, Jefferies Finance, and commitments to invest in private equity funds and in Jefferies Capital Partners, LLC, the manager of the private equity funds, which consists of a team led by our President and a Director. At February 28, 2021, Jefferies Group's outstanding commitments relating to Jefferies Capital Partners, LLC and its private equity funds were $10.8 million.

See Note 8 for additional information regarding Jefferies Group's investment in Jefferies Finance.

Additionally, at February 28, 2021, we had other outstanding equity commitments to invest up to $200.0 million to strategic affiliates and up to $218.5 million to various other investments.

Loan Commitments. From time to time we make commitments to extend credit to investment banking and other clients in loan syndication and acquisition finance, and to strategic affiliates. These commitments and any related drawdowns of these facilities typically have fixed maturity dates and are contingent on certain representations, warranties and contractual conditions applicable to the borrower. At February 28, 2021, we had $80.0 million of outstanding loan commitments to clients and $5.9 million to strategic affiliates.

Loan commitments outstanding at February 28, 2021 also include Jefferies Group's portion of the outstanding secured revolving credit facility provided to Jefferies Finance to support loan underwritings by Jefferies Finance. At February 28, 2021, $0.0 million of Jefferies Group's $250.0 million commitment was funded.

Underwriting Commitments. In connection with investment banking activities, we may from time to time provide underwriting commitments to our clients in connection with capital raising transactions.

Forward Starting Reverse Repos and Repos.  We enter into commitments to take possession of securities with agreements to resell on a forward starting basis and to sell securities with agreements to repurchase on a forward starting basis that are primarily secured by U.S. government and agency securities.

Other Unfunded Commitments.  Other unfunded commitments include obligations in the form of revolving notes, warehouse financings and debt securities to provide financing to asset-backed and CLO vehicles. Upon advancing funds, drawn amounts are collateralized by the assets of an entity.

Contingencies

We and our subsidiaries are parties to legal and regulatory proceedings that are considered to be either ordinary, routine litigation incidental to their business or not significant to our consolidated financial position. We and our subsidiaries are also

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involved, from time to time, in other exams, investigations and similar reviews (both formal and informal) by governmental and self-regulatory agencies regarding our businesses, certain of which may result in judgments, settlements, fines, penalties or other injunctions. We do not believe that any of these actions will have a significant adverse effect on our consolidated financial position or liquidity, but any amounts paid could be significant to results of operations for the period.

Guarantees

Derivative Contracts.  Our dealer activities cause us to make markets and trade in a variety of derivative instruments. Certain derivative contracts that we have entered into meet the accounting definition of a guarantee under GAAP, including credit default swaps, written foreign currency options and written equity put options. On certain of these contracts, such as written interest rate caps and foreign currency options, the maximum payout cannot be quantified since the increase in interest or foreign exchange rates are not contractually limited by the terms of the contract. As such, we have disclosed notional values as a measure of our maximum potential payout under these contracts.

The following table summarizes the notional amounts associated with our derivative contracts meeting the definition of a guarantee under GAAP at February 28, 2021 (in millions):

			Expected Maturity Date
Guarantee Type			2021						2022						2023 and 2024						2025 and 2026						2027 and Later						Notional/ Maximum Payout
Derivative contracts – non-credit related			$	11,232.2					$	2,940.1					$	8,807.2					$	394.1					$	12.1					$	23,385.7
Written derivative contracts – credit related			—						—						6.4						87.2						—						93.6
Total derivative contracts			$	11,232.2					$	2,940.1					$	8,813.6					$	481.3					$	12.1					$	23,479.3

The derivative contracts deemed to meet the definition of a guarantee under GAAP are before consideration of hedging transactions and only reflect a partial or "one-sided" component of any risk exposure. Written equity options and written credit default swaps are often executed in a strategy that is in tandem with long cash instruments (e.g., equity and debt securities). We substantially mitigate our exposure to market risk on these contracts through hedges, such as other derivative contracts and/or cash instruments, and we manage the risk associated with these contracts in the context of our overall risk management framework. We believe notional amounts overstate our expected payout and that fair value of these contracts is a more relevant measure of our obligations. At February 28, 2021, the fair value of derivative contracts meeting the definition of a guarantee is approximately $305.3 million.

Berkadia.  We have agreed to reimburse Berkshire Hathaway for up to one-half of any losses incurred under a $1.5 billion surety policy securing outstanding commercial paper issued by an affiliate of Berkadia. At February 28, 2021, the aggregate amount of commercial paper outstanding was $1.47 billion.

HomeFed. For real estate development projects, HomeFed is generally required to obtain infrastructure improvement bonds at the beginning of construction work and warranty bonds upon completion of such improvements. These bonds are issued by surety companies to guarantee satisfactory completion of a project and provide funds primarily to a municipality in the event HomeFed is unable or unwilling to complete certain infrastructure improvements. As HomeFed develops the planned area and the municipality accepts the improvements, the bonds are released. Should the respective municipality or others draw on the bonds for any reason, certain of HomeFed's subsidiaries would be obligated to pay. At February 28, 2021, the aggregate amount of infrastructure improvement bonds outstanding was $71.3 million.

Other Guarantees.  We are members of various exchanges and clearing houses. In the normal course of business, we provide guarantees to securities clearing houses and exchanges. These guarantees generally are required under the standard membership agreements, such that members are required to guarantee the performance of other members. Additionally, if a member becomes unable to satisfy its obligations to the clearing house, other members would be required to meet these shortfalls. To mitigate these performance risks, the exchanges and clearing houses often require members to post collateral. Our obligations under such guarantees could exceed the collateral amounts posted. Our maximum potential liability under these arrangements cannot be quantified; however, the potential for us to be required to make payments under such guarantees is deemed remote. Accordingly, no liability has been recognized for these arrangements. Additionally, we provide certain indemnifications in connection with third-party clearing and execution arrangements whereby a third-party may clear and settle transactions on behalf of our clients. These indemnifications generally have standard contractual terms and are entered into in the ordinary course of business. Our obligations in respect of such transactions are secured by the assets in our client's account, as well as

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any proceeds received from the transactions cleared and settled on behalf of our client. However, we believe that it is unlikely we would have to make any material payments under these arrangements and no material liabilities related to these indemnifications have been recognized.

Standby Letters of Credit.  At February 28, 2021, we provided guarantees to certain counterparties in the form of standby letters of credit totaling $22.0 million. Standby letters of credit commit us to make payment to the beneficiary if the guaranteed party fails to fulfill its obligation under a contractual arrangement with that beneficiary. Since commitments associated with these collateral instruments may expire unused, the amount shown does not necessarily reflect the actual future cash funding requirement. Primarily all letters of credit expire within one year.

Note 19.  Net Capital Requirements

Jefferies LLC operates as a broker-dealer registered with the U.S. Securities and Exchange Commission ("SEC") and a member firm of the Financial Industry Regulatory Authority ("FINRA"). Jefferies LLC is subject to the SEC Uniform Net Capital Rule ("Rule 15c3-1"), which requires the maintenance of minimum net capital and has elected to calculate minimum capital requirements using the alternative method permitted by Rule 15c3-1 in calculating net capital. Jefferies LLC, as a dually-registered U.S. broker-dealer and futures commission merchant ("FCM"), is also subject to Rule 1.17 of the Commodity Futures Trading Commission ("CFTC"), which sets forth minimum financial requirements. The minimum net capital requirement in determining excess net capital for a dually-registered U.S. broker-dealer and FCM is equal to the greater of the requirement under Rule 15c3-1 or CFTC Rule 1.17.

Jefferies LLC's net capital and excess net capital at February 28, 2021 were $2,019.3 million and $1,902.9 million, respectively.

FINRA is the designated examining authority for Jefferies LLC and the National Futures Association is the designated self-regulatory organization for Jefferies LLC as an FCM.

Certain other U.S. and non-U.S. subsidiaries of Jefferies Group are subject to capital adequacy requirements as prescribed by the regulatory authorities in their respective jurisdictions, including Jefferies International Limited, which is authorized and regulated by the Financial Conduct Authority in the United Kingdom.

The regulatory capital requirements referred to above may restrict our ability to withdraw capital from Jefferies Group's regulated subsidiaries. Some of our other consolidated subsidiaries also have credit agreements which may restrict the payment of cash dividends, or the ability to make loans or advances to the parent company.

Note 20.  Other Fair Value Information

The carrying amounts and estimated fair values of our principal financial instruments that are not recognized at fair value on a recurring basis are as follows (in thousands):

			February 28, 2021												November 30, 2020
			Carrying Amount						Fair Value						Carrying Amount						Fair Value
Receivables:
Notes and loans receivable (1)			$	748,642					$	771,136					$	727,492					$	744,424
Financial Liabilities:
Short-term borrowings (2)			$	882,941					$	882,941					$	759,648					$	759,648
Long-term debt (3)			6,458,993						7,282,248						6,639,794						7,495,642

(1)Notes and loans receivable:  The fair values are estimated principally based on a discounted future cash flows model using market interest rates for similar instruments. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy.

(2)Short-term borrowings:  The fair values of short-term borrowings carried at cost are estimated to be the carrying amount due to their short maturities. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy.

(3)Long-term debt: The fair values are estimated using quoted prices, pricing information obtained from external data providers and, for certain variable rate debt, is estimated to be the carrying amount. If measured at fair value in the financial statements, these financial instruments would be classified as Level 2 and Level 3 in the fair value hierarchy.

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Note 21.  Related Party Transactions

Jefferies Capital Partners Related Funds.  Jefferies Group has equity investments in the JCP Manager and in private equity funds (including JCP Fund V), which are managed by a team led by our President and a Director ("Private Equity Related Funds"). Reflected in the Consolidated Statements of Financial Condition at February 28, 2021 and November 30, 2020 are Jefferies Group's equity investments in Private Equity Related Funds of $18.7 million and $19.0 million, respectively. Net gains (losses) from Jefferies Group's investment in JCP Fund V aggregating $(0.5) million and $1.5 million for the three months ended February 28, 2021 and February 29, 2020, respectively, were recorded in Principal transactions revenues. Gains (losses) for other funds were not material. For further information regarding our commitments and funded amounts to the Private Equity Related Funds, see Notes 7 and 18.

Berkadia Commercial Mortgage, LLC.  At February 28, 2021 and November 30, 2020, Jefferies Group has commitments to purchase $580.1 million and $401.0 million, respectively, in agency commercial mortgage-backed securities from Berkadia.

FXCM. Jefferies Group entered into a foreign exchange prime brokerage agreement with FXCM in 2017. In connection with the foreign exchange contracts entered into under this agreement, Jefferies Group had $0.1 million and $2.7 million at February 28, 2021 and November 30, 2020, respectively, included in Payables, expense accruals and other liabilities in the Consolidated Statements of Financial Condition.

Officers, Directors and Employees.  We had $37.7 million and $38.9 million of loans outstanding to certain officers and employees (none of whom are an executive officer or director of the Company) at February 28, 2021 and November 30, 2020, respectively. Receivables from and payables to customers include balances arising from officers', directors' and employees' individual security transactions. These transactions are subject to the same regulations as all customer transactions and are provided on substantially the same terms.

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Note 22.  Segment Information

We are engaged in investment banking and capital markets, asset management and direct investing. The Investment Banking and Capital Markets segment 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 and Asia Pacific. Capital markets businesses operate across the spectrum of equities and fixed income products.

Our Asset Management segment comprises all asset management operations, including those within Jefferies Group. 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.

Merchant Banking consists of our various merchant banking businesses and investments, primarily including Linkem, Vitesse Energy Finance and JETX Energy, real estate, Idaho Timber and FXCM.

Corporate assets primarily consist of cash and cash equivalents. Corporate revenues primarily include interest income.

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Certain information concerning our segments is presented in the following table (in thousands):

									For the Three Months Ended
															February 28, 2021						February 29, 2020
Net revenues:
Reportable Segments:
Investment Banking and Capital Markets															$	1,959,509					$	1,148,829
Asset Management															226,734						20,329
Merchant Banking															297,503						204,559
Corporate															590						9,792
Total net revenues related to reportable segments															2,484,336						1,383,509
Consolidation adjustments															2,606						2,819
Total consolidated revenues															$	2,486,942					$	1,386,328
Income (loss) before income taxes:
Reportable Segments:
Investment Banking and Capital Markets															$	543,283					$	249,957
Asset Management															181,465						(20,929)
Merchant Banking															107,617						(53,623)
Corporate															(20,477)						(7,754)
Income before income taxes related to reportable segments															811,888						167,651
Parent Company interest															(13,902)						(12,781)
Consolidation adjustments															2,799						2,924
Total consolidated income before income taxes															$	800,785					$	157,794
Depreciation and amortization expenses:
Reportable Segments:
Investment Banking and Capital Markets															$	20,684					$	19,116
Asset Management															479						625
Merchant Banking															16,740						18,841
Corporate															864						888
Total consolidated depreciation and amortization expenses															$	38,767					$	39,470
															February 28, 2021						November 30, 2020
Identifiable Assets Employed:
Reportable Segments:
Investment Banking and Capital Markets															$	49,021,457					$	44,835,126
Asset Management															2,713,231						3,231,059
Merchant Banking															3,276,351						3,173,064
Corporate															2,399,678						2,178,699
Identifiable assets employed related to reportable segments															57,410,717						53,417,948
Consolidation adjustments															(541,798)						(299,596)
Total consolidated assets															$	56,868,919					$	53,118,352

Interest expense classified as a component of Net revenues relates to Jefferies Group. For the three months ended February 28, 2021 and February 29, 2020, interest expense classified as a component of Expenses was primarily comprised of parent company interest ($13.9 million and $12.8 million, respectively) and Merchant Banking ($6.5 million and $8.8 million, respectively). 

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Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations.

Statements included in this report may contain forward-looking statements. See "Cautionary Statement for Forward-Looking Information" below. The following should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations, Risk Factors and the description of our businesses included in our Annual Report on Form 10-K for the year ended November 30, 2020 (the "2020 10-K").

Results of Operations

We are engaged in investment banking and capital markets, asset management and direct investing. Jefferies Group, our largest subsidiary, is now the largest independent full-service global investment banking firm headquartered in the U.S. The following tables present a summary of our financial results.

A summary of results of operations for the first quarter of 2021 is as follows (in thousands):

			Investment Banking and Capital Markets						Asset Management						Merchant Banking						Corporate						Parent Company Interest						Consolidation Adjustments						Total
Net revenues			$	1,959,509					$	226,734					$	297,503					$	590					$	—					$	2,606					$	2,486,942
Expenses:
Compensation and benefits			1,106,212						22,785						28,012						15,534						—						—						1,172,543
Cost of sales			66,574			(1)			9,842			(1)			95,559						—						—						—						171,975
Interest expense			—						—						6,465			(2)			—						13,902						—						20,367
Depreciation and amortization			20,684						479						16,740						864						—						—						38,767
Selling, general and other expenses			222,756						12,163						32,542						4,669						—						(193)						271,937
Total expenses			1,416,226						45,269						179,318						21,067						13,902						(193)						1,675,589
Income (loss) before income taxes and loss related to associated companies			543,283						181,465						118,185						(20,477)						(13,902)						2,799						811,353
Loss related to associated companies			—						—						(10,568)						—						—						—						(10,568)
Income (loss) before income taxes			$	543,283					$	181,465					$	107,617					$	(20,477)					$	(13,902)					$	2,799					800,785
Income tax provision																																							218,236
Net income																																							$	582,549

(1)    Includes Floor brokerage and clearing fees.

(2)    Interest expense within Merchant Banking of $6.5 million for the first quarter of 2021, primarily includes $5.6 million for Foursight Capital and $0.9 million for Vitesse Energy, LLC ("Vitesse Energy Finance").

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A summary of results for the first quarter of 2020 is as follows (in thousands):

			Investment Banking and Capital Markets						Asset Management						Merchant Banking						Corporate						Parent Company Interest						Consolidation Adjustments						Total
Net revenues			$	1,148,829					$	20,329					$	204,559					$	9,792					$	—					$	2,819					$	1,386,328
Expenses:
Compensation and benefits			620,924						22,221						17,190						9,858						—						—						670,193
Cost of sales			52,874			(1)			6,307			(1)			72,443						—						—						—						131,624
Interest expense			—						—						8,773			(2)			—						12,781						—						21,554
Depreciation and amortization			19,116						625						18,841						888						—						—						39,470
Selling, general and other expenses			205,958						12,105						73,080						6,800						—						(105)						297,838
Total expenses			898,872						41,258						190,327						17,546						12,781						(105)						1,160,679
Income (loss) before income taxes and loss related to associated companies			249,957						(20,929)						14,232						(7,754)						(12,781)						2,924						225,649
Loss related to associated companies			—						—						(67,855)						—						—						—						(67,855)
Income (loss) before income taxes			$	249,957					$	(20,929)					$	(53,623)					$	(7,754)					$	(12,781)					$	2,924					157,794
Income tax provision																																							45,773
Net income																																							$	112,021

(1)    Includes Floor brokerage and clearing fees.

(2)    Interest expense within Merchant Banking of $8.8 million for the first quarter of 2020, primarily includes $7.4 million for Foursight Capital and $1.4 million for Vitesse Energy Finance.

The composition of our financial results has varied over time and we expect will continue to evolve. Our strategy is designed to transform Jefferies into a pure financial services firm and, as such, we are focused on the development of our Investment Banking and Capital Markets, and Asset Management segments, while we continue to realize the value of or otherwise transform our investments in Merchant Banking. The following factors and events should be considered in evaluating our financial results as they impact comparisons:

Our financial results for the first quarter of 2021 were impacted by:

•Record quarterly investment banking net revenues of $1,033.5 million, including record equity underwriting net revenues of $494.8 million, advisory net revenues of $311.4 million and debt underwriting net revenues of $197.4 million;

•Record quarterly combined capital markets net revenues of $894.4 million, including record equities net revenues of $531.0 million and fixed income net revenues of $363.4 million;

•Record Asset Management revenues (before allocated net interest) of $237.1 million; and

•Pre-tax income of $107.6 million related to our Merchant Banking businesses reflecting record quarterly results from Idaho Timber and mark-to-market increases in the value of several of our investments in public companies.

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Our financial results for the first quarter of 2020 were impacted by:

•Investment banking net revenues of $577.5 million, including equity underwriting net revenues of $131.7 million, advisory net revenues of $343.2 million and debt underwriting net revenues of $117.2 million;

•Combined capital markets net revenues of $493.8 million, including equities net revenues of $245.6 million and fixed income net revenues of $248.2 million;

•Asset Management revenues (before allocated net interest) of $31.0 million; and

•Pre-tax loss of $53.6 million related to our Merchant Banking businesses reflecting:

◦Non-cash charge of $55.6 million to write off the value of HomeFed LLC's ("HomeFed") RedSky JZ Fulton Investors joint venture investment related to a softening of the Brooklyn real estate market;

◦Non-cash charge of $33.0 million to write down the value of our investment in JETX Energy, LLC ("JETX Energy") to reflect the decline in oil prices; and

◦A gain of $61.5 million from effective short-term hedges against mark-to-market and fair value decreases in some of our other investments within Merchant Banking.

Investment Banking and Capital Markets

A summary of results of operations for our Investment Banking and Capital Markets segment is as follows (in thousands):

									For the Three Months Ended
															February 28, 2021						February 29, 2020
Net revenues															$	1,959,509					$	1,148,829
Expenses:
Compensation and benefits															1,106,212						620,924
Floor brokerage and clearing fees															66,574						52,874
Depreciation and amortization															20,684						19,116
Selling, general and other expenses															222,756						205,958
Total expenses															1,416,226						898,872
Income before income taxes															$	543,283					$	249,957

Our Investment Banking and Capital Markets segment comprises many business units, with many interactions and much integration among them. Business activities include the sales, trading, origination and advisory effort for various equity, fixed income, commodities, foreign exchange and advisory services. Our Investment Banking and Capital Markets segment business, by its nature, does not produce predictable or necessarily recurring revenues or earnings. Our results in any given period can be materially affected by conditions in global financial markets, economic conditions generally, and our own activities and positions.

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Revenues by Source

Net revenues presented for our Investment Banking and Capital Markets segment include allocations of interest income and interest expense as we assess the profitability of these businesses inclusive of the net interest revenue or expense associated with the respective activities, including the net interest cost of allocated long-term debt, which is a function of the mix of each business's associated assets and liabilities and the related funding costs. The following provides a summary of net revenues by source (in thousands):

									For the Three Months Ended
															February 28, 2021						February 29, 2020
Advisory															$	311,439					$	343,158
Equity underwriting															494,806						131,692
Debt underwriting															197,417						117,152
Total underwriting															692,223						248,844
Other investment banking															29,825						(14,529)
Total investment banking															1,033,487						577,473
Equities															531,016						245,641
Fixed income															363,359						248,182
Total capital markets															894,375						493,823
Other															31,647						77,533
Total Investment Banking and Capital Markets (1) (2)															$	1,959,509					$	1,148,829

(1)Includes net interest revenues of $12.2 million and $2.9 million for the first quarter of 2021 and 2020, respectively.

(2)Allocated net interest is not separately disaggregated in presenting our Investment Banking and Capital Markets reportable segment within our Net Revenues by Source. This presentation is aligned to our Investment Banking and Capital Markets internal performance measurement.

Investment Banking Revenues

Investment banking is comprised of revenues from:

•    advisory services with respect to mergers and acquisitions and restructurings and recapitalizations;

•    underwriting services, which include underwriting and placement services related to corporate debt, municipal bonds, mortgage-backed and asset-backed securities and equity and equity-linked securities and loan syndication;

•    our 50% share of net earnings from Jefferies Group's corporate lending joint venture, Jefferies Finance LLC ("Jefferies Finance"); and

•    securities and loans received or acquired in connection with our investment banking activities.

The following table sets forth our investment banking activities (dollars in billions):

												Deals Completed																														Aggregate Value
									For the Three Months Ended																					For the Three Months Ended
															February 28, 2021						February 29, 2020																					February 28, 2021						February 29, 2020
Advisory transactions															65						66																					$	82.2					$	57.7
Public and private debt financings															163						152																					$	76.7					$	69.6
Public and private equity and convertible offerings															116						56																					$	43.8					$	11.8

Investment banking revenues for the first quarter of 2021 were a record of $1.03 billion, compared with $577.5 million for the first quarter of 2020, reflecting record revenues in equity underwriting and solid performance in debt underwriting and slightly lower revenues in mergers and acquisitions.

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Our underwriting revenues for the first quarter of 2021 were a record $692.2 million, an increase of 178.2%, from $248.8 million in the same period last year, with record quarterly net revenues in equity underwriting of $494.8 million and solid net revenues of $197.4 million in debt underwriting, as clients took advantage of the strong equity environment to raise equity capital in almost all sectors and companies continued to take advantage of the low rate environment to access the debt capital markets. In addition, our equity underwriting results in the first quarter of 2021 include revenues of $129.2 million generated from our underwriting activities on 22 Special Purpose Acquisition Companies ("SPACs") offerings and other SPAC-related transactions. Our advisory revenues were $311.4 million, a decrease of $31.8 million, or 9.2%, from the prior year comparable quarter.

Other investment banking revenues were $29.8 million for the first quarter of 2021, compared with a loss of $14.5 million for the first quarter of 2020. Other investment banking revenues during the first quarter of 2021 include net revenues of $30.6 million from our share of the net earnings of the Jefferies Finance joint venture, compared with net revenues of $10.4 million in the first quarter of 2020. This is reflective of an increase in committed loan arrangement volumes during the first quarter of 2021. Additionally, the results during the first quarter of 2020, included a higher level of reserves recorded on the loan portfolio and unrealized losses related to the write-down of certain equity investments due to the impact of the coronavirus ("COVID-19") on the markets and the economy as compared with minimal portfolio reserves and mark-to-market activity on equity investments in the first quarter of 2021. The first quarter of 2020 also included unrealized write-downs of private equity investments received or acquired in connection with our investment banking activities. Our Other investment banking revenues are reduced by allocated interest expense and the amortization of costs related to our investment in the Jefferies Finance business.

Equities Net Revenues

Equities are comprised of net revenues from:

•services provided to our clients from which we earn commissions or spread revenue by executing, settling and clearing transactions for clients;

•advisory services offered to clients;

•financing, securities lending and other prime brokerage services offered to clients, including capital intelligence and outsourced trading; and

•wealth management services.

Total equities net revenues were a record $531.0 million for the first quarter of 2021, an increase of 116.2%, compared with $245.6 million for the first quarter of 2020, driven by all-time record results in predominately all our equities businesses and across each of our core regions. Our equities franchise benefited significantly from the favorable trading environment and SPAC-related activity in the U.S.

In the last several months, we received recognition from leading third-party market surveys - Jefferies Group's international convertibles franchise was ranked 1st in both European and Asian, excluding Japan, convertibles by Greenwich Associates. Bloomberg ranked Jefferies Group's electronic trading platform as 2nd in the U.S. Hedgeweek named Jefferies Group as the best U.S. Prime Broker and we doubled the number of analysts ranked in the Japanese Institutional Investor survey.

Our global cash equities business had record net revenues, primarily driven by meaningful higher trading revenue, with strong client activity and market volumes. Our electronic trading businesses in Europe and Asia achieved record results, while our U.S. electronic trading business delivered strong results, all driven by increased global market volumes and new client activity. Record results in our global convertibles franchise were driven by increased client activity and higher trading revenues on the back of a significant increase in new issuance in this market. Our prime services franchise, consisting of prime brokerage and securities finance, recorded record results driven by increased client balances and customer trading activity and the addition of new clients in our outsourced trading business. Our equity derivatives business had record quarterly results driven by a higher volatility trading environment and an increase in client activity.

Fixed Income Net Revenues

Fixed income is comprised of net revenues from:

•executing transactions for clients and making markets in securitized products, investment grade, high-yield, distressed, emerging markets, municipal and sovereign securities and bank loans, as well as foreign exchange execution on behalf of clients;

•interest rate derivatives and credit derivatives; and

•financing services offered to clients.

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Fixed income net revenues totaled $363.4 million for the first quarter of 2021, an increase of 46.4% from net revenues of $248.2 million for the first quarter of 2020, driven by continued strong client activity across most products and geographies, and our ongoing investments to grow our business, particularly in Europe.

Net revenues in the first quarter of 2021 were higher in our U.S. and international securitized markets groups due to increased demand in the securitization markets for most of these product classes, as compared with the first quarter of 2020, as the relative higher yields on securitized products drove investor demand in the first quarter of 2021. Our revenues also benefited from our expansion in European collateralized loan obligations origination and trading.

Strong results across our global credit franchise resulted from robust revenues across regions and products due to increased client activity and higher levels of volatility in the current year quarter, as well as continued tightening of already record low credit spreads throughout most of the quarter and a strong issuance calendar. We have also made strategic hires in our European credit franchise which contributed to our revenue growth.

The record results were partially offset by lower revenues in our U.S. rates business due to a decline in trading opportunities, which was impacted by volatile Treasury yields during the first quarter of 2021.

Other

Other is comprised of revenues from:

• Berkadia Commercial Mortgage Holding LLC ("Berkadia") and other investments (other than Jefferies Finance, which is included in Other investment banking);

• principal investments in private equity and hedge funds managed by third-parties or related parties and are not part of our asset management platform; and

• investments held as part of employee benefit plans, including deferred compensation plans (for which we incur an equal and offsetting amount of compensation expense).

Our other net revenues totaled $31.6 million for the first quarter of 2021, a decrease of $45.9 million compared with net revenues of $77.5 million for the first quarter of 2020.

The results for the first quarter of 2020 include gains of $61.5 million from macro hedges that were bought and sold in the first quarter of 2020 at the onset of the COVID-19 pandemic.

Results in the first quarter of 2021 include net revenues of $30.0 million due to our share of the net income of Berkadia compared with $21.9 million in the first quarter of 2020.

Compensation and Benefits

Compensation and benefits expense consists of salaries, benefits, commissions, annual cash compensation and share-based awards and the amortization of share-based and cash compensation awards to employees. Cash and share-based awards and a portion of cash awards granted to employees as part of year end compensation generally contain provisions such that employees who terminate their employment or are terminated without cause may continue to vest in their awards, so long as those awards are not forfeited as a result of other forfeiture provisions (primarily non-compete clauses) of those awards. Accordingly, the compensation expense for a portion of awards granted at year end as part of annual compensation is recorded during the year of the award. Compensation and benefits expense includes amortization expense associated with these awards to the extent vesting is contingent on future service. In addition, the senior executive awards contain market and performance conditions and the awards are amortized over their service periods.

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Compensation and benefits expense increased to $1.11 billion for the first quarter of 2021 from $620.9 million for the first quarter of 2020. The following table provides a summary of compensation and benefits expense (dollars in thousands):

												For the Three Months Ended
																		February 28, 2021						February 29, 2020
Compensation expense without future service requirements																		$	1,064,910					$	537,836
Amortization of share-based and cash-based awards																		41,302						83,088
Total Compensation and benefits expense																		$	1,106,212					$	620,924

Compensation and benefits expense increased in line with the significant increase in our net revenues. A significant portion of compensation expense is highly variable with net revenues. Amortization of share-based and cash-based awards decreased as a result of the accelerated amortization recognized in the year ended November 30, 2020.

Non-Compensation Expenses

Non-compensation expenses include floor brokerage and clearing fees, underwriting costs, technology and communications expense, occupancy and equipment rental expense, business development, professional services, bad debt provision, impairment charges, depreciation and amortization expense and other costs. All of these expenses, other than floor brokerage and clearing fees and depreciation and amortization expense, are included in Selling, general and other expenses in the Consolidated Statements of Operations.

Non-compensation expenses were $310.0 million for the first quarter of 2021, an increase of $32.1 million, compared with $277.9 million in the first quarter of 2020. Non-compensation expenses as a percentage of Net revenues were 15.8% and 24.2% for the first quarter of 2021 and 2020, respectively, demonstrating the operating leverage inherent in our business.

The modest absolute increase in non-compensation expenses was primarily due to higher Floor brokerage and clearing fees due to record net revenues in equities and strong net revenues in fixed income resulting from an increase in trading volumes. The increase was also due to higher underwriting costs, primarily due to record investment banking net revenues resulting from an increase in the volume of investment banking transactions and higher technology and communication expenses, primarily related to costs associated with the development of various trading systems and increased market data costs. Non-compensation expenses in the first quarter of 2021 also included our charitable donations of $7.7 million to approximately 130 charities around our planet that promote diversity and inclusion, support COVID-19 relief efforts, help Texas relief and support, protect and sustain our environment and strive to help humanity in other meaningful ways. The first quarter of 2020 included our $2.4 million donation made to various charities in support of the Australian wildfire relief effort. The increase in non-compensation expenses was partially offset by meaningfully lower business development expenses as business travel and events remained substantially curtailed due to COVID-19.

Asset Management

Our asset management business is a diversified alternative asset management platform offering institutional clients an innovative range of investment strategies through us and our affiliated asset managers. We provide certain of our affiliated asset managers access to fully integrated global operational infrastructure and support. This may include strategy and product development, daily operations and finance-related activities, compliance, legal and human resources support, as well as all aspects of business development.

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A summary of results of operations for our Asset Management segment is as follows (in thousands):

									For the Three Months Ended
															February 28, 2021						February 29, 2020
Net revenues															$	226,734					$	20,329
Expenses:
Compensation and benefits															22,785						22,221
Floor brokerage and clearing fees															9,842						6,307
Depreciation and amortization															479						625
Selling, general and other expenses															12,163						12,105
Total expenses															45,269						41,258
Income (loss) before income taxes															$	181,465					$	(20,929)

Revenues

Asset management net revenues include the following:

•    Total asset management fees: management and performance fees from funds and accounts managed by us;

•     Revenue from arrangements with strategic affiliates: revenues from affiliated asset managers in which we hold interests that entitle us to portions of their revenues and/or profits, as well as earnings on our ownership interests in our affiliated asset managers; and

•    Investment return: this includes investment income from capital invested in and managed by us and our affiliated asset managers.

The key components of asset management revenues are the level of assets under management and the performance return, for the most part on an absolute basis, and, in certain cases, relative to a benchmark or hurdle. These components can be affected by financial markets, profits and losses in the applicable investment portfolios and client capital activity. Further, asset management fees vary with the nature of investment management services. The terms under which clients may terminate our investment management authority, and the requisite notice period for such termination, varies depending on the nature of the investment vehicle and the liquidity of the portfolio assets. Performance fees and similar revenues are generally recognized once a year, typically in December, when they become fixed and determinable and are not probable of being significantly reversed. As a result, performance fees and similar revenues are generally realized and recognized in the first quarter of our fiscal year.

The following summarizes the results of our Asset Management businesses revenues by asset class (in thousands):

									For the Three Months Ended
															February 28, 2021						February 29, 2020
Asset management fees:
Equities															$	4,999					$	2,938
Multi-asset															2,427						3,153
Total asset management fees															7,426						6,091
Revenues from arrangements with strategic affiliates (1)															58,883						1,291
Total asset management fees and revenues															66,309						7,382
Investment return (2) (3)															170,824						23,639
Allocated net interest (2) (4)															(10,399)						(10,692)
Total Asset Management															$	226,734					$	20,329

(1)The amounts include our share of fees received by affiliated asset management companies with which we have revenue and profit share arrangements, as well as earnings on our ownership interest in affiliated asset managers.

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(2)Net revenues attributed to the Investment return in our Asset Management segment have been disaggregated to separately present Investment return and Allocated net interest (see footnote 4 below). This disaggregation is intended to increase transparency and to make clearer actual Investment return. We believe that aggregating Investment return and Allocated net interest would obscure the Investment return by including an amount that is unique to our credit spreads, debt maturity profile, capital structure, liquidity risks and allocation methods.

(3)Includes direct net interest expense of $2.3 million and $6.4 million for the first quarter of 2021 and 2020, respectively.

(4)Allocated net interest represents the allocation of long-term debt interest expense to our Asset Management reportable segment, net of interest income on Cash and cash equivalents and other sources of liquidity.

Asset management net revenues for the first quarter of 2021 were a record $226.7 million, significantly higher than $20.3 million recorded in the first quarter of 2020, driven by meaningfully higher investment returns across most platforms and a substantial increase in asset management fees and revenues. Results in the current year quarter include $66.3 million in management and performance fees and similar revenues earned directly or through our strategic affiliates in the first quarter of 2021 as compared with $7.4 million in the first quarter of 2020. Performance fees and similar revenues are generally realized and recognized once a year in the first quarter of our fiscal year and are attributable to performance realized in respect of the calendar year ending during our first fiscal quarter.

Expenses

The increase in expenses in the first quarter of 2021 as compared with the first quarter of 2020 primarily reflects the expansion of the Asset Management business and the increase in Floor brokerage and clearing fees.

Assets under Management

The tables below include only third-party assets under management by us, excluding those of our affiliated asset managers.

Assets under management by predominant asset class were as follows (in millions):

						February 28, 2021						November 30, 2020
Assets under management (1):
Equities						$	418					$	481
Multi-asset						355						293
Total						$	773					$	774

(1)    Assets under management include third-party net assets actively managed by us, including hedge funds and certain managed accounts. We may consolidate certain funds and for such consolidated funds, assets under management include the pro-rata portion of third-party net assets in consolidated funds based on the percentage ownership of third-party investors in the consolidated fund. The above amounts do not include assets under management at non-consolidated strategic affiliates or investments.

Change in assets under management were as follows (in millions):

									For the Three Months Ended
															February 28, 2021						February 29, 2020
Balance, beginning of period															$	774					$	1,216
Net cash flow in (out)															(34)						(21)
Net market appreciation (depreciation)															33						(55)
Balance, end of period															$	773					$	1,140

The decrease in assets under management in our wholly-owned managers during the first quarter of 2021 is primarily due to the redemption from certain funds offset by market appreciation during the period. The decrease in assets under management in our wholly-owned managers during the first quarter of 2020 is primarily due to the liquidation and redemptions from certain funds and market depreciation during the period, partially offset by new subscriptions and investments from third-parties.

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Our definition of assets under management is not based on any definition contained in any of our investment management agreements and differs from the manner in which "Regulatory Assets Under Management" is reported to the SEC on Form ADV.

Asset Management Investments

In connection with building our business and growing revenues we participate in via our affiliated managers, our asset management business makes seed and additional strategic investments directly in alternative asset management separately managed accounts and co-mingled funds where we act as the asset manager or in affiliated asset managers where we have strategic relationships and participate in the earnings or profits of the affiliated manager. Our asset management investments generated an investment return of $170.8 million and $23.6 million for the first quarter of 2021 and 2020, respectively. The following table reflects amounts invested by asset manager (in thousands):

						February 28, 2021						November 30, 2020
Jefferies Financial Group Inc., as manager:
Fund investments (1)						$	312,051					$	258,893
Separately managed accounts (2)						279,621						352,084
Total						591,672						610,977
Third-party, as manager:
Fund investments						674,085						650,585
Separately managed accounts (2)						315,141						323,943
Investments in asset managers						188,618						162,268
Total						1,177,844						1,136,796
Total asset management investments						$	1,769,516					$	1,747,773

(1)    Due to the level or nature of an investment in a fund, we may consolidate that fund, and accordingly, the assets and liabilities of the fund are included in the representative line items in the consolidated financial statements. At February 28, 2021 and November 30, 2020, $20.3 million and $0.1 million, respectively, represents net investments in funds that have been consolidated in our financial statements.

(2)    Where we have investments in a separately managed account, the assets and liabilities of such account are presented in the Consolidated Statements of Financial Condition within each respective line item.

Collectively, we and our affiliated asset managers have aggregate net asset values or net asset value equivalent assets under management of approximately $29.3 billion and $26.8 billion at February 28, 2021 and November 30, 2020, respectively. Net asset values or net asset value equivalent assets under management are comprised of the fair value of the net assets of a fund, the net capital invested in a separately managed account, par value of collateralized loan obligations or notional account value. These include the following:

•$14.4 billion and $12.6 billion as of February 28, 2021 and November 30, 2020, respectively - This includes the assets under management raised by affiliated asset managers with whom we have an ongoing profit or revenue sharing arrangement. In some instances, due to the timing of payments and crystallization of profits or revenue, the majority of revenue related to these relationships will be realized at their calendar year-end (during our first fiscal quarter).

•$11.6 billion and $10.8 billion as of February 28, 2021 and November 30, 2020, respectively - Asset management activities within Jefferies Finance, our 50/50 joint venture with Massachusetts Mutual Life Insurance Company, which represent the aggregate par value of collateralized loan obligations managed by Jefferies Finance, including those consolidated by Jefferies Finance. Because management evaluates segment performance based on the inclusion of our share of the net earnings of our Jefferies Finance joint venture in our Investment Banking and Capital Markets segment, those activities are excluded from our Asset Management segment results.

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•$2.5 billion and $2.6 billion as of February 28, 2021 and November 30, 2020, respectively - Net asset values of investments made by us in funds or separately managed accounts. At times, we will incubate strategies using our own capital during the institutional build-out phase before opening investments to outside capital. This net asset value includes our seed capital of $1.5 billion and $1.5 billion as of February 28, 2021 and November 30, 2020, respectively, in addition to amounts financed of $1.0 billion and $1.1 billion as of February 28, 2021 and November 30, 2020, respectively, invested in funds and separately managed accounts that are managed by us and our affiliated asset managers.

•$0.8 billion and $0.8 billion as of February 28, 2021 and November 30, 2020, respectively - This includes third-party investments actively managed by wholly-owned divisions.

Merchant Banking

A summary of results for Merchant Banking is as follows (in thousands):

									For the Three Months Ended
															February 28, 2021						February 29, 2020
Net revenues															$	297,503					$	204,559
Expenses:
Compensation and benefits															28,012						17,190
Cost of sales															95,559						72,443
Interest expense															6,465						8,773
Depreciation and amortization															16,740						18,841
Selling, general and other expenses															32,542						73,080
Total expenses															179,318						190,327
Income before income taxes and loss related to associated companies															118,185						14,232
Loss related to associated companies															(10,568)						(67,855)
Income (loss) before income taxes															$	107,617					$	(53,623)

A summary of results for Merchant Banking by source is as follows (in thousands):

			Revenues						Expenses						Income (Loss) from Associated Companies						Total Pre-Tax Income (Loss)
For the three months ended February 28, 2021
Oil and gas			$	13,318					$	34,247					$	—					$	(20,929)
Idaho Timber			137,892						99,593						—						38,299
Real estate			11,672						14,291						6,051						3,432
FXCM			2,677						—						(5,462)						(2,785)
Other			131,944						31,187						(11,157)						89,600
Total			$	297,503					$	179,318					$	(10,568)					$	107,617
For the three months ended February 29, 2020
Oil and gas			$	62,856					$	71,594					$	—					$	(8,738)
Idaho Timber			77,639						72,930						—						4,709
Real estate			12,230						11,104						(53,014)						(51,888)
FXCM			2,508						—						(1,638)						870
Other			49,326						34,699						(13,203)						1,424
Total			$	204,559					$	190,327					$	(67,855)					$	(53,623)

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Oil and Gas

Oil and gas results for the first quarter of 2021 were lower than the first quarter of 2020 primarily due to increased unrealized losses related to oil hedge derivatives and decreased production revenues due to curtailed production and decreased development activity in the second half of 2020, partially offset by impairment charges recorded during the first quarter of 2020. Oil and gas net revenues totaled $13.3 million and $62.9 million during the first quarter of 2021 and 2020, respectively, and primarily consist of three components:

•Production revenues (including the impact of realized gains and losses related to oil hedges) were $35.3 million and $45.4 million during the first quarter of 2021 and 2020, respectively. The decrease in production revenues related to lower production across most of the basin due to weather and reduced development activity during the second half of 2020 due to a lower price environment at that time. Production revenues included realized gains on oil hedges of $2.7 million during both the first quarter of 2021 and 2020, respectively.

•Net unrealized gains (losses) related to oil hedge derivatives were $(21.9) million and $20.0 million in the first quarter of 2021 and 2020, respectively. As discussed further in Note 3 to the consolidated financial statements, Vitesse Energy Finance uses swaps and call and put options to reduce exposure to future oil price fluctuations. For the first quarter of 2021, approximately 73% of oil production was hedged at a weighted average price of approximately $58/barrel. For the remainder of 2021, approximately 42% of expected oil production is hedged at a weighted average price of approximately $53/barrel.

•Mark-to-market gains (losses) related to a financial instrument owned held at fair value were immaterial during the first quarter of 2021 and $(2.5) million during the first quarter of 2020.

Total expenses for Oil and gas were $34.2 million during the first quarter of 2021 as compared to $71.6 million during the first quarter of 2020. The decrease in expenses was primarily due to a non-cash charge of $33.0 million in the first quarter of 2020 to write down JETX Energy's oil and gas assets to reflect the impact of oil price declines during the quarter.

Idaho Timber

High demand for wood for home improvement and construction led to favorable pricing and record results for Idaho Timber. Net revenues increased in the first quarter of 2021 as compared to the first quarter of 2020, primarily due to an increase in the average selling price of 87%.

The increase in total expenses for Idaho Timber in the first quarter of 2021 as compared to the first quarter of 2020 primarily reflects increased cost of sales and increased compensation expense.

Real Estate

Income (loss) related to real estate associated companies for the first quarter of 2020, includes a non-cash charge of $55.6 million to fully write off the value of HomeFed's RedSky JZ Fulton Investors joint venture investment due to the softening of the Brooklyn real estate market

FXCM

Net revenues from our FXCM term loan include gains of $2.7 million and $2.5 million during the first quarter of 2021 and 2020, respectively.

Other

Other revenues reflect realized and unrealized gains (losses) on financial instruments owned, which are held at fair value, of $103.5 million and $41.0 million for the first quarter of 2021 and 2020, respectively, including mark-to-market changes in the value of our investments in public companies of $83.8 million and $(23.5) million, respectively. The first quarter of 2020, also includes a gain of $61.5 million from effective short-term hedges against mark-to-market and fair value decreases in our portfolio investments.

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Corporate

A summary of results of operations for Corporate is as follows (in thousands):

									For the Three Months Ended
															February 28, 2021						February 29, 2020
Net revenues															$	590					$	9,792
Expenses:
Compensation and benefits															15,534						9,858
Depreciation and amortization															864						888
Selling, general and other expenses															4,669						6,800
Total expenses															21,067						17,546
Loss before income taxes															$	(20,477)					$	(7,754)

Net revenues primarily include interest income from the investment of our liquidity balance at the parent company. The prior year balance reflects higher rates during the first quarter of 2020, which have since decreased. Total expenses include share-based compensation expense of $9.1 million and $3.4 million for the first quarter of 2021 and 2020, respectively. Share-based compensation expense is higher this quarter as it reflects $7.0 million related to the full current fair value of certain share-based grants made during this period, which were fully vested upon grant.

Parent Company Interest

Parent company interest expense totaled $13.9 million and $12.8 million for the first quarter of 2021 and 2020, respectively. We capitalize interest on qualifying HomeFed real estate assets. Parent company interest capitalized during the first quarter of 2021 and 2020 was $0.9 million and $2.0 million, respectively.

Income Taxes

Our provision for income taxes was $218.2 million for the first quarter of 2021, representing an effective tax rate of 27.3%. Our provision for income taxes was $45.8 million for the first quarter of 2020, representing an effective tax rate of 29.0%. The decrease in the effective tax rate for the first quarter of 2021, as compared to the first quarter of 2020, is primarily due to our substantially higher earnings before income taxes minimizing the impact of nondeductible expenses.

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Selected Statement of Financial Condition Data

The tables below reconcile the balance sheet for each of our segments to our consolidated balance sheet (in thousands):

			February 28, 2021
			Investment Banking and Capital Markets						Asset Management						Merchant Banking						Corporate						Consolidation Adjustments						Total
Assets
Cash and cash equivalents			$	6,697,347					$	10,373					$	202,329					$	1,738,912					$	—					$	8,648,961
Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations			615,115						—						—						—						—						615,115
Financial instruments owned, at fair value			16,626,120						2,062,327						408,706						—						—						19,097,153
Loans to and investments in associated companies			1,012,352						166,755						509,941						—						—						1,689,048
Securities borrowed			7,150,657						—						—						—						—						7,150,657
Securities purchased under agreements to resell			6,680,284						—						—						—						—						6,680,284
Receivables			6,790,630						313,942						765,747						223						—						7,870,542
Property, equipment and leasehold improvements, net			849,057						7,404						29,601						10,255						—						896,317
Intangible assets, net and goodwill			1,722,775						143,317						48,230						—						—						1,914,322
Other assets			877,120						9,113						1,311,797						650,288						(541,798)						2,306,520
Total assets			49,021,457						2,713,231						3,276,351						2,399,678						(541,798)						56,868,919
Liabilities
Long-term debt (1) (2)			6,319,132						602,576						328,384						993,058						—						8,243,150
Other liabilities			36,696,129						1,223,927						906,897						406,277						(541,798)						38,691,432
Total liabilities			43,015,261						1,826,503						1,235,281						1,399,335						(541,798)						46,934,582
Redeemable noncontrolling interests			—						—						30,979						—						—						30,979
Mandatorily redeemable convertible preferred shares			710						15,003						16,783						—						—						32,496
Noncontrolling interests			—						—						—						125,000						—						125,000
Total Jefferies Financial Group Inc. shareholders' equity			$	6,005,486					$	871,725					$	1,993,308					$	875,343					$	—					$	9,745,862

(1)    Jefferies Group long-term debt of $6.9 billion at February 28, 2021 is allocated to Investment Banking and Capital Markets, and Asset Management segments based on an internal management view only and may not be reflective of what long-term debt would be on a stand-alone segment basis.

(2)    Long-term debt within Merchant Banking of $328.4 million at February 28, 2021, primarily includes $237.4 million for real estate businesses and $90.9 million for Vitesse Energy Finance. At February 28, 2021, Vitesse Energy Finance had $91.5 million drawn out of the maximum $120.0 million borrowing base on its credit facility. See Note 11 in our consolidated financial statements for additional information.

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			November 30, 2020
			Investment Banking and Capital Markets						Asset Management						Merchant Banking						Corporate						Consolidation Adjustments						Total
Assets
Cash and cash equivalents			$	7,102,004					$	10,109					$	212,668					$	1,730,367					$	—					$	9,055,148
Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations			604,321						—						—						—						—						604,321
Financial instruments owned, at fair value			15,249,686						2,534,860						340,031						—						—						18,124,577
Loans to and investments in associated companies			995,730						148,005						542,828						—						—						1,686,563
Securities borrowed			6,934,762						—						—						—						—						6,934,762
Securities purchased under agreements to resell			5,096,769						—						—						—						—						5,096,769
Securities received as collateral, at fair value			7,517						—						—						—						—						7,517
Receivables			5,470,104						378,037						762,382						52						(1,808)						6,608,767
Property, equipment and leasehold improvements, net			847,108						8,121						30,670						11,305						—						897,204
Intangible assets, net and goodwill			1,721,277						143,310						48,880						—						—						1,913,467
Other assets			805,848						8,617						1,235,605						436,975						(297,788)						2,189,257
Total assets			44,835,126						3,231,059						3,173,064						2,178,699						(299,596)						53,118,352
Liabilities
Long-term debt (1) (2)			6,218,797						676,883						463,648						992,711						—						8,352,039
Other liabilities			32,752,740						1,758,373						727,088						239,507						(299,596)						35,178,112
Total liabilities			38,971,537						2,435,256						1,190,736						1,232,218						(299,596)						43,530,151
Redeemable noncontrolling interests			—						—						24,676						—						—						24,676
Mandatorily redeemable convertible preferred shares			—						—						—						125,000						—						125,000
Noncontrolling interests			712						16,677						17,243						—						—						34,632
Total Jefferies Financial Group Inc. shareholders' equity			$	5,862,877					$	779,126					$	1,940,409					$	821,481					$	—					$	9,403,893

(1)    Jefferies Group long-term debt of $6.9 billion at November 30, 2020 is allocated to Investment Banking and Capital Markets, and Asset Management segments based on an internal management view only and may not be reflective of what long-term debt would be on a stand-alone segment basis.

(2)    Long-term debt within Merchant Banking of $463.6 million at November 30, 2020, primarily includes $236.8 million for real estate businesses, $97.9 million for Vitesse Energy Finance and $129.0 million for Foursight Capital. At November 30, 2020, Vitesse Energy Finance had $98.5 million drawn out of the maximum $120.0 million borrowing base on its credit facility and Foursight Capital had $129.3 million drawn out of the maximum $175.0 million credit commitment on its credit facilities. See Note 11 in our consolidated financial statements for additional information.

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The table below presents our capital by significant business and investment (in thousands):

			February 28, 2021						November 30, 2020
Jefferies Group			$	6,599,129					$	6,407,954
Assets held on behalf of Asset Management (excluding Jefferies Group)			278,082						234,049
Merchant Banking:
Oil and gas			494,870						526,642
Real estate			536,657						531,553
Linkem			181,101						198,991
FXCM			130,917						133,375
Idaho Timber			98,391						85,595
Investments in public companies			257,856						192,363
Other			293,516						271,890
Total Merchant Banking			1,993,308						1,940,409
Corporate liquidity and other assets, net of Corporate liabilities including long-term debt			875,343						821,481
Total Capital			$	9,745,862					$	9,403,893

Below is a brief description of the captions in the table above:

•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 and Asia. Capital markets businesses operate across the spectrum of equities and fixed income products. Our Investment Banking and Capital Markets businesses are conducted by Jefferies Group, our largest subsidiary, and is now the largest independent full-service global investment banking firm headquartered in the U.S.

•Our Asset Management segment comprises all asset management operations, including those within Jefferies Group. 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.

•Merchant Banking:

◦Our oil and gas business consists of Vitesse Energy Finance and JETX Energy. Vitesse Energy Finance is our 97% owned consolidated subsidiary that acquires, invests and monetizes non-operated working interests and royalties predominantly in the Bakken Shale of the Williston Basin in North Dakota. JETX Energy is our 98% owned consolidated subsidiary that currently has non-operated working interests and acreage in east Texas.

◦Our real estate assets primarily consist of our 100% ownership of HomeFed, a developer and owner of residential and mixed-use real estate properties in California, New York, Florida, Virginia and South Carolina. HomeFed's key assets include Otay Ranch, a master planned community that is under development in Chula Vista, CA, made up of approximately 4,450 acres of land entitled for 13,050 total units; and Renaissance Plaza, a mixed-use asset in Brooklyn, NY, comprised of an office building, garage and hotel.

◦We own approximately 42% of the common shares of Linkem, as well as convertible preferred shares and warrants. If all of our convertible preferred stock was converted and warrants were exercised, it would increase our ownership to approximately 56% of Linkem's common equity at February 28, 2021. Linkem provides residential broadband services in Italy using LTE technologies deployed over the 3.5 GHz spectrum band. Linkem deployed its first 5G towers in late 2020 and plans to rapidly increase its network coverage and service offerings over the coming years as it upgrades to 5G, adds subscribers and leverages its assets. Linkem is accounted for under the equity method.

◦Our investment in FXCM and associated companies consists of a senior secured term loan due February 15, 2022 ($71.6 million principal outstanding at February 28, 2021), a 50% voting interest in FXCM and rights to a majority of all distributions in respect of the equity in FXCM. FXCM is a provider of online foreign exchange trading, contract for difference trading, spread betting and related services.

◦Idaho Timber is our 100% owned consolidated subsidiary engaged in the manufacture and distribution of various wood products.

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•Corporate liquidity and other assets, net of Corporate liabilities, primarily consist of cash and cash equivalents, net of long-term debt and payables, expense accruals and other liabilities, as well as our outstanding mandatorily redeemable convertible preferred shares.

Liquidity and Capital Resources

Parent Company Liquidity

Our strategy focuses on strengthening and expanding our core businesses of Investment Banking and Capital Markets and Asset Management, while continuing to simplify our structure and return capital to our shareholders. We are simplifying our structure through a managed transformation of Merchant Banking, which to date has included divestitures, special distributions to shareholders of assets, as well as transfers of financial assets out of our Merchant Banking portfolio and into Jefferies Group. We anticipate additional transactions as our transformation is completed. Some of these transactions have generated significant excess liquidity; some of these transactions have also reduced the future receipt of periodic distributions from subsidiaries to the parent company.

Parent company liquidity, which includes cash and investments that are easily convertible into cash within a relatively short period of time, total $1,951.2 million at February 28, 2021 and are primarily comprised of cash, prime and government money market funds and other publicly traded securities. These are classified in the Consolidated Statement of Financial Condition as cash and cash equivalents and financial instruments owned, at fair value. At February 28, 2021, $1,560.7 million of this amount is invested in U.S. government money funds that invest at least 99.5% of its total assets in cash, securities issued by the U.S. government and U.S. government-sponsored entities and repurchase agreements that are fully collateralized by cash or government securities.

During the first quarter of 2021, our parent company received cash distributions of $212.2 million from our subsidiary businesses, including $153.6 million from Jefferies Group. We also received $39.1 million from divestitures.

Our recurring cash requirements, including the payment of interest on our parent company debt, dividends and corporate cash overhead expenses, aggregate approximately $305.7 million on an annual basis. Dividends paid during the first quarter of 2021 of $49.8 million include quarterly dividends of $0.20 per share. The payment of dividends is subject to the discretion of our Board of Directors and depends upon general business conditions, legal and contractual restrictions on the payment of dividends and other factors that our Board of Directors may deem to be relevant.

For many years, we benefited from federal net operating loss carryovers ("NOLs") which substantially offset our federal cash tax requirements. As a result of full utilization of our federal NOLs and other tax attributes, we will incur federal cash tax liabilities in 2021.

Our primary long-term parent company cash requirement is our $1.0 billion principal outstanding as of February 28, 2021 under our long-term debt, of which $750.0 million is due in 2023 and $250.0 million in 2043. As we generate excess liquidity, we evaluate the best use of the proceeds, which may include reductions to existing debt, share repurchases, special dividends, investments in our businesses, or any of a number of other options available to us.

Shares Outstanding

At November 30, 2020, we had approximately $57.2 million available for future share repurchases. In January 2021, the Board of Directors increased the share repurchase authorization by $192.8 million to $250.0 million. During the first quarter of 2021, we purchased a total of 5,000,000 of our common shares for $127.5 million, or an average price per share of $25.51. At February 28, 2021, we had approximately $122.5 million available for future repurchases. In March 2021, the Board of Directors increased the share repurchase authorization to $250.0 million, including the $122.5 million.

At February 28, 2021, we had outstanding 246,703,277 common shares, 20,816,000 share-based awards that do not require the holder to pay any exercise price and 2,791,000 stock options that require the holder to pay an average exercise price of $23.45 per share. The 20,816,000 share-based awards include the target number of shares under the senior executive award plan. Additionally, we have mandatorily redeemable convertible preferred shares that are currently convertible into 4,440,863 common shares, at an effective conversion price of $28.15 per share. At February 28, 2021, the maximum potential increase to common shares outstanding resulting from these outstanding awards and the preferred shares is 28,048,000 (potentially an aggregate of 274,751,277 outstanding common shares if all awards and preferred shares become outstanding common shares).

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Concentration and Liquidity Targets

From time to time in the past, we have accessed public and private credit markets and raised capital in underwritten bond financings. The funds raised have been used by us for general corporate purposes, including for our existing businesses and new investment opportunities. In addition, the ratings of Jefferies are a factor considered by rating agencies that rate the debt of our subsidiary companies, including Jefferies Group, whose access to external financing is important to its day to day operations. Ratings issued by bond rating agencies, subject to change at any time, are as follows:

			Rating			Outlook
Moody's Investors Service (1)			Baa3			Positive
Standard and Poor's			BBB			Stable
Fitch Ratings			BBB			Stable

(1) On March 15, 2021, Moody's Investors Service affirmed our rating of Baa3 and revised our rating outlook from stable to positive.

We target specific concentration and liquidity principles although there is no legal requirement to do so. 

Concentration Target: As a diversification measure, we limit cash investments such that our single largest investment does not exceed 20% of equity excluding Jefferies Group, and that our next largest investment does not exceed 10% of equity excluding Jefferies Group, in each case measured at the time the investment was made. On this basis, Linkem is our largest investment excluding Jefferies Group and Vitesse Energy Finance is our next largest investment excluding Jefferies Group. There were no investments made during the year that approached 10% of equity excluding Jefferies Group.

Liquidity Target: We hold a parent company liquidity reserve calculated as a minimum of twenty-four months of holding company expenses (excluding non-cash components), parent company interest, and dividends. Maturities of parent company debt within the upcoming year are also included in the target; however, our next maturity is during 2023 so there is no current inclusion.

Liquidity reserve (in thousands):			February 28, 2021
Minimum reserve under liquidity target			$	611,400
Actual liquidity			$	1,951,214

Consolidated Statements of Cash Flows

As discussed above, we have historically relied on our available liquidity to meet short-term and long-term needs, and to make acquisitions of new businesses and investments. Except as otherwise disclosed herein, our operating businesses do not generally require significant funds to support their operating activities. The mix of our operating businesses and investments can change frequently as a result of acquisitions or divestitures, the timing of which is impossible to predict but which often have a significant impact on the Consolidated Statements of Cash Flows in any one period. Further, the timing and amounts of distributions from investments in associated companies may be outside our control. As a result, reported cash flows from operating, investing and financing activities do not generally follow any particular pattern or trend, and reported results in the most recent period should not be expected to recur in any subsequent period.

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The following table provides a summary of our cash flows (in thousands):

			Three Months Ended February 28, 2021						Three Months Ended February 29, 2020
Cash, cash equivalents and restricted cash at beginning of period			$	9,664,972					$	8,480,435
Net cash used for operating activities			(1,495,938)						(918,083)
Net cash used for investing activities			(32,340)						(49,310)
Net cash provided by (used for) financing activities			1,069,653						(316,165)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash			3,886						(2,927)
Cash, cash equivalents and restricted cash at end of period			$	9,210,233					$	7,193,950

During the first quarter of 2021, net cash used for operating activities primarily relates to funds used by Jefferies Group of $1,542.9 million.

During the first quarter of 2020, net cash used for operating activities primarily relates to funds used by Jefferies Group of $896.5 million. Net losses related to property and equipment, and other assets include the non-cash charge of $33.0 million to write down the value of our investment in JETX Energy to reflect the impact of oil price declines during the first quarter of 2020.

During the first quarter of 2021, net cash used for investing activities principally reflects $914.5 million of loans to and investments in associated companies and $969.8 million of capital distributions and loan repayments from associated companies.

During the first quarter of 2020, net cash used for investing activities includes principally reflects $864.4 million of loans to and investments in associated companies and $883.3 million of capital distributions and loan repayments from associated companies.

During the first quarter of 2021, net cash provided by financing activities primarily relates to funds provided by Jefferies Group of $1,198.6 million, including funds provided by the issuance of debt of $378.0 million and proceeds from other secured financings of $1,033.0 million, partially offset by funds used for the repayment of debt of $206.2 million, and proceeds from other secured financings of $186.6 million in our Merchant Banking segment. This was partially offset by funds used to repurchase common shares for treasury of $130.1 million, funds used for the repayment of debt of $190.4 million in our Merchant Banking segment and funds used to pay dividends of $49.8 million.

During the first quarter of 2020, net cash used for financing activities primarily relates to funds used to repurchase common shares for treasury of $310.2 million, funds used to pay dividends of $42.8 million and funds used by Jefferies Group of $85.7 million. This includes funds used for the repayment of debt of $397.6 million and payment of other secured financings of $300.9 million, partially offset by funds provided by the issuance of debt of $642.8 million. This was partially offset by proceeds from other secured financings of $150.4 million in our Merchant Banking segment.

Jefferies Group Liquidity

General

The Chief Financial Officer and Global Treasurer of Jefferies Group are responsible for developing and implementing liquidity, funding and capital management strategies for Jefferies Group. These policies are determined by the nature and needs of day to day business operations, business opportunities, regulatory obligations and liquidity requirements.

The actual levels of capital, total assets and financial leverage are a function of a number of factors, including asset composition, business initiatives and opportunities, regulatory requirements and cost and availability of both long-term and short-term funding. Jefferies Group has historically maintained a balance sheet consisting of a large portion of total assets in cash and liquid marketable securities, arising principally from traditional securities brokerage and trading activity. The liquid nature of these assets provides flexibility in financing and managing our business.

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Jefferies Group maintains modest leverage to support its investment grade ratings. The growth of its balance sheet is supported by its equity and we have quantitative metrics in place to monitor leverage and double leverage. Jefferies Group's capital plan is robust, in order to sustain its operating model through stressed conditions. We maintain adequate financial resources to support business activities in both normal and stressed market conditions, including a buffer in excess of regulatory, or other internal or external, requirements. Jefferies Group's access to funding and liquidity is stable and efficient to ensure that there is sufficient liquidity to meet its financial obligations in normal and stressed market conditions.

A business unit level balance sheet and cash capital analysis are prepared and reviewed with senior management on a weekly basis. As a part of this balance sheet review process, capital is allocated to all assets and gross balance sheet limits are adjusted, as necessary. This process ensures that the allocation of capital and costs of capital are incorporated into business decisions. The goals of this process are to protect the firm's platform, enable the businesses to remain competitive, maintain the ability to manage capital proactively and hold businesses accountable for both balance sheet and capital usage.

We actively monitor and evaluate our financial condition and the composition of assets and liabilities. The overall securities inventory is continually monitored, including the inventory turnover rate, which confirms the liquidity of overall assets. Substantially all of Jefferies Group's financial instruments are valued on a daily basis and we monitor and employ balance sheet limits for its various businesses.

At February 28, 2021, the Consolidated Statement of Financial Condition includes Jefferies Group's Level 3 financial instruments owned, at fair value that are approximately 2% of total financial instruments owned, at fair value.

Securities financing assets and liabilities include financing for financial instruments trading activity, matched book transactions and mortgage finance transactions. Matched book transactions accommodate customers, as well as obtain securities for the settlement and financing of inventory positions. 

The following table presents period end balance, average balance and maximum balance at any month end within the periods presented for Securities purchased under agreements to resell and Securities sold under agreements to repurchase (in millions):

			Three Months Ended February 28, 2021						Year Ended November 30, 2020
Securities purchased under agreements to resell:
Period end			$	6,680					$	5,097
Month end average			9,219						8,040
Maximum month end			12,321						12,061
Securities sold under agreements to repurchase:
Period end			$	7,208					$	8,316
Month end average			12,975						13,501
Maximum month end			19,207						18,979

Fluctuations in the balance of repurchase agreements from period to period and intraperiod are dependent on business activity in those periods. Additionally, the fluctuations in the balances of securities purchased under agreements to resell are influenced in any given period by our clients' balances and our clients' desires to execute collateralized financing arrangements via the repurchase market or via other financing products. Average balances and period end balances will fluctuate based on market and liquidity conditions and we consider the fluctuations intraperiod to be typical for the repurchase market.

Liquidity Management

The key objectives of Jefferies Group's liquidity management framework are to support the successful execution of its business strategies while ensuring sufficient liquidity through the business cycle and during periods of financial distress. The liquidity management policies are designed to mitigate the potential risk that adequate financing may not be accessible to service financial obligations without material franchise or business impact.

The principal elements of Jefferies Group's liquidity management framework are the Contingency Funding Plan, the Cash Capital Policy and the assessment of Modeled Liquidity Outflow.

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Contingency Funding Plan.  Jefferies Group's Contingency Funding Plan is based on a model of a potential liquidity contraction over a one year time period. This incorporates potential cash outflows during a liquidity stress event, including, but not limited to, the following:

•Repayment of all unsecured debt maturing within one year and no incremental unsecured debt issuance;

•Maturity rolloff of outstanding letters of credit with no further issuance and replacement with cash collateral;

•Higher margin requirements than currently exist on assets on securities financing activity, including repurchase agreements;

•Liquidity outflows related to possible credit downgrade;

•Lower availability of secured funding;

•Client cash withdrawals;

•The anticipated funding of outstanding investment and loan commitments; and

•Certain accrued expenses and other liabilities and fixed costs.

Cash Capital Policy. A cash capital model is maintained that measures long-term funding sources against requirements. Sources of cash capital include equity and the noncurrent portion of long-term borrowings. Uses of cash capital include the following:

•Illiquid assets such as equipment, goodwill, net intangible assets, exchange memberships, deferred tax assets and certain investments;

•A portion of securities inventory that is not expected to be financed on a secured basis in a credit stressed environment (i.e., margin requirements); and

•Drawdowns of unfunded commitments. 

To ensure that inventory does not need to be liquidated in the event of a funding crisis, we seek to maintain surplus cash capital, which is reflected in the leverage ratios Jefferies Group maintains. Jefferies Group's total long-term capital of $13.2 billion at February 28, 2021 exceeded its cash capital requirements.

Modeled Liquidity Outflow. Jefferies Group's businesses are diverse, and liquidity needs are determined by many factors, including market movements, collateral requirements and client commitments, all of which can change dramatically in a difficult funding environment. During a liquidity crisis, credit-sensitive funding, including unsecured debt and some types of secured financing agreements, may be unavailable, and the terms (e.g., interest rates, collateral provisions and tenor) or availability of other types of secured financing may change. As a result of Jefferies Group's policy to ensure it has sufficient funds to cover estimates of what may be needed in a liquidity crisis, Jefferies Group holds more cash and unencumbered securities and has greater long-term debt balances than the businesses would otherwise require. As part of this estimation process, we calculate a Modeled Liquidity Outflow that could be experienced in a liquidity crisis. Modeled Liquidity Outflow is based on a scenario that includes both a market-wide stress and firm-specific stress.

Based on the sources and uses of liquidity calculated under the Modeled Liquidity Outflow scenarios, we determine, based on a calculated surplus or deficit, additional long-term funding that may be needed versus funding through the repurchase financing market and consider any adjustments that may be necessary to Jefferies Group's inventory balances and cash holdings. At February 28, 2021, Jefferies Group had sufficient excess liquidity to meet all contingent cash outflows detailed in the Modeled Liquidity Outflow. We regularly refine our model to reflect changes in market or economic conditions and the firm's business mix.

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Sources of Liquidity

Within Jefferies Group, the following are financial instruments that are cash and cash equivalents or are deemed by management to be generally readily convertible into cash, marginable or accessible for liquidity purposes within a relatively short period of time, as reflected in the Consolidated Statements of Financial Condition (in thousands):

			February 28, 2021						Average Balance  First Quarter 2021 (1)						November 30, 2020
Cash and cash equivalents:
Cash in banks			$	1,621,608					$	2,960,754					$	1,979,058
Money market investments (2)			5,085,874						3,402,188						5,132,871
Total cash and cash equivalents			6,707,482						6,362,942						7,111,929
Other sources of liquidity:
Debt securities owned and securities purchased under agreements to resell (3)			990,510						1,174,837						1,180,410
Other (4)			416,377						430,080						312,511
Total other sources			1,406,887						1,604,917						1,492,921
Total cash and cash equivalents and other liquidity sources			$	8,114,369					$	7,967,859					$	8,604,850

(1)Average balances are calculated based on weekly balances.

(2)At February 28, 2021 and November 30, 2020, $5,071.0 million and $5,118.0 million, respectively, was invested in U.S. government money funds that invest at least 99.5% of its total assets in cash, securities issued by the U.S. government and U.S. government-sponsored entities, and repurchase agreements that are fully collateralized by cash or government securities. The remaining $14.9 million and $14.9 million at February 28, 2021 and November 30, 2020, respectively, are invested in AAA rated prime money funds. The average balance of U.S. government money funds for the quarter ended February 28, 2021 was $3,394.7 million.

(3)Consists of high quality sovereign government securities and reverse repurchase agreements collateralized by U.S. government securities and other high quality sovereign government securities; deposits with a central bank within the European Economic Area, Canada, Australia, Japan, Switzerland or the U.S.; and securities issued by a designated multilateral development bank and reverse repurchase agreements with underlying collateral comprised of these securities.

(4)Other includes unencumbered inventory representing an estimate of the amount of additional secured financing that could be reasonably expected to be obtained from financial instruments owned that are currently not pledged after considering reasonable financing haircuts.

In addition to the cash balances and liquidity pool presented above, the majority of financial instruments (both long and short) in our trading accounts are actively traded and readily marketable. At February 28, 2021, repurchase financing can be readily obtained for approximately 67% of Jefferies Group's inventory at haircuts of 10% or less, which reflects the liquidity of the inventory. In addition, as a matter of our policy, all of these assets have internal capital assessed, which is in addition to the funding haircuts provided in the securities finance markets. Additionally, certain of Jefferies Group's financial instruments owned primarily consisting of bank loans, consumer loans and investments are predominantly funded by Jefferies Group's long-term capital. Under Jefferies Group's cash capital policy, capital allocation levels are modeled that are more stringent than the haircuts used in the market for secured funding; and surplus capital is maintained at these more stringent levels. We continually assess the liquidity of Jefferies Group's inventory based on the level at which Jefferies Group could obtain financing in the marketplace for a given asset. Assets are considered to be liquid if financing can be obtained in the repurchase market or the securities lending market at collateral haircut levels of 10% or less. 

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The following summarizes Jefferies Group's financial instruments owned by asset class that are considered to be of a liquid nature and the amount of such assets that have not been pledged as collateral as reflected in the Consolidated Statements of Financial Condition (in thousands):

			February 28, 2021												November 30, 2020
			Liquid Financial  Instruments						Unencumbered Liquid Financial  Instruments (2)						Liquid Financial  Instruments						Unencumbered Liquid Financial  Instruments (2)
Corporate equity securities			$	2,552,964					$	386,688					$	2,191,536					$	238,129
Corporate debt securities			2,432,402						51,691						2,298,591						50,217
U.S. government, agency and municipal securities			2,787,053						58,802						3,336,361						110,586
Other sovereign obligations			2,415,981						952,038						2,518,928						1,101,272
Agency mortgage-backed securities (1)			1,718,972						—						1,652,743						—
Loans and other receivables			541,807						—						564,112						—
Total			$	12,449,179					$	1,449,219					$	12,562,271					$	1,500,204

(1)Consists solely of agency mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae. These securities include pass-through securities, securities backed by adjustable rate mortgages, collateralized mortgage obligations, commercial mortgage-backed securities and interest- and principal-only securities.

(2)Unencumbered liquid balances represent assets that can be sold or used as collateral for a loan, but have not been.

In addition to being able to be readily financed at modest haircut levels, it is estimated that each of the individual securities within each asset class above could be sold into the market and converted into cash within three business days under normal market conditions, assuming that the entire portfolio of a given asset class was not simultaneously liquidated. There are no restrictions on the unencumbered liquid securities, nor have they been pledged as collateral.

Sources of Funding and Capital Resources

Jefferies Group's assets are funded by equity capital, senior debt, securities loaned, securities sold under agreements to repurchase, customer free credit balances, bank loans and other payables.

Secured Financing

Readily available secured funding is used to finance Jefferies Group's inventory of financial instruments. Jefferies Group's ability to support increases in total assets is largely a function of the ability to obtain short- and intermediate-term secured funding, primarily through securities financing transactions. Repurchase or reverse repurchase agreements (collectively "repos"), respectively, are used to finance a portion of long inventory and cover some of short inventory by pledging and borrowing securities. At February 28, 2021, approximately 62% of Jefferies Group's cash and noncash repurchase financing activities use collateral that is considered eligible collateral by central clearing corporations. During the first quarter of 2021, an average of approximately 74% of Jefferies Group's cash and noncash repurchase financing activities used collateral that was considered eligible collateral by central clearing corporations. Central clearing corporations are situated between participating members who borrow cash and lend securities (or vice versa); accordingly, repo participants contract with the central clearing corporation and not one another individually. Therefore, counterparty credit risk is borne by the central clearing corporation which mitigates the risk through initial margin demands and variation margin calls from repo participants. The comparatively large proportion of Jefferies Group's total repo activity that is eligible for central clearing reflects the high quality and liquid composition of the inventory Jefferies Group carries in its trading books. For those asset classes not eligible for central clearing house financing, Jefferies Group seeks to execute its bi-lateral financings on an extended term basis and the tenor of Jefferies Group's repurchase and reverse repurchase agreements generally exceeds the expected holding period of the assets Jefferies Group is financing. The weighted average maturity of cash and noncash repurchase agreements for non-clearing corporation eligible funded inventory is approximately seven months at February 28, 2021.

Jefferies Group's ability to finance its inventory via central clearinghouses and bi-lateral arrangements is augmented by Jefferies Group's ability to draw bank loans on an uncommitted basis under its various banking arrangements. At February 28, 2021, short-term borrowings, which must be repaid within one year or less and include bank loans and overdrafts, borrowings under revolving credit facilities and floating rate puttable notes, totaled $882.9 million. Interest under the bank lines is generally at a spread over the federal funds rate. Letters of credit are used in the normal course of business mostly to satisfy various collateral

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requirements in favor of exchanges in lieu of depositing cash or securities. Average daily short-term borrowings outstanding for Jefferies Group were $884.4 million for the first quarter of 2021.

Jefferies Group's short-term borrowings include facilities that contain certain covenants that, among other things, require it to maintain a specified level of tangible net worth and impose certain restrictions on the future indebtedness of certain of its subsidiaries that are borrowers. At February 28, 2021, Jefferies Group was in compliance with all covenants under these facilities. Jefferies Group's facilities included within short-term borrowings at February 28, 2021 were as follows (in thousands):

Bank of New York Mellon Master Loan Agreement (1)			$	300,000
JPMorgan Chase Bank, N.A. Credit Facility (2)			274,000
Royal Bank of Canada Credit Facility (3)			200,000
Bank of New York Mellon Credit Facility (4)			100,000
Total			$	874,000

(1)    Interest is generally based at spreads over the Federal Funds Rate as defined in this master loan agreement.

(2)    Interest is based on an annual alternative base rate or an adjusted London Interbank Offered Rate ("LIBOR"), as defined in this credit facility agreement.

(3)    Interest is based on a rate per annum equal to LIBOR plus an applicable margin of 2.05%.

(4)    Interest is based on a rate per annum equal to the Federal Funds Rate plus 2%.

Jefferies Group's short-term borrowings at February 28, 2021 also include floating rate puttable notes of $6.8 million and other bank loans of $2.1 million.

In addition, the Bank of New York Mellon has agreed to make revolving intraday credit advances ("Jefferies Group Intraday Credit Facility") for an aggregate committed amount of $150.0 million. The Jefferies Group Intraday Credit Facility is structured so that advances are generally repaid before the end of each business day. However, if an advance is not repaid by the end of any business day, the advance is converted to an overnight loan. Intraday loans accrue interest at a rate of 0.12%. Interest is charged based on the number of minutes in a day the advance is outstanding. Overnight loans are charged interest at the base rate plus 3% on a daily basis. The base rate is the higher of the federal funds rate plus 0.50% or the prime rate in effect at that time. The Intraday Credit Facility contains financial covenants, which include a minimum regulatory net capital requirement for Jefferies Group's U.S. broker-dealer, Jefferies LLC. At February 28, 2021, Jefferies Group was in compliance with all debt covenants under the Jefferies Group Intraday Credit Facility.

In addition to the above financing arrangements, Jefferies Group issues notes backed by eligible collateral under a master repurchase agreement, which provides an additional financing source for its inventory ("repurchase agreement financing program"). The notes issued under the program are presented within Other secured financings in the Consolidated Statements of Financial Condition. At February 28, 2021, the outstanding notes were $3.8 billion, bear interest at a spread over LIBOR and mature from March 2021 to January 2023. 

Long-Term Debt

Jefferies Group's long-term debt reflected in the Consolidated Statement of Financial Condition at February 28, 2021 is $6.9 billion. Jefferies Group's long-term debt, excluding its revolving credit facility and the secured bank loan, has a weighted average maturity of approximately 10.6 years. 

During the three months ended February 28, 2021, Jefferies Group's long-term debt increased $26.0 million, primarily due to approximately $54.1 million of structured notes issuances, net of retirements, and changes in instrument specific credit risk on structured notes, partially offset by losses associated with interest rate swaps based on their designation as fair value hedges. At February 28, 2021, all of Jefferies Group's 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 revenue. The fair value of all of Jefferies Group's structured notes at February 28, 2021 was $1,784.2 million.

Jefferies Group has a Revolving Credit Facility ("Jefferies Group Revolving Credit Facility") with a group of commercial banks. At February 28, 2021, borrowings under the Jefferies Group Revolving Credit Facility amounted to $189.9 million.

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Interest is based on an annual alternative base rate or an adjusted LIBOR, as defined in the Jefferies Group Revolving Credit Facility agreement. The Jefferies Group Revolving Credit Facility contains certain covenants that, among other things, requires Jefferies Group LLC to maintain specified level of tangible net worth and liquidity amounts, and imposes certain restrictions on future indebtedness of and requires specified levels of regulated capital for certain of its subsidiaries. Throughout the period and at February 28, 2021, no instances of noncompliance with the Jefferies Group Revolving Credit Facility covenants occurred and we expect to remain in compliance given our current liquidity and anticipated funding requirements given our business plan and profitability expectations.

One of Jefferies Group's subsidiaries has a Loan and Security Agreement with a bank for a term loan with a principal amount of $50.0 million ("Jefferies Group Secured Bank Loan"). This Jefferies Group Secured Bank Loan matures on September 27, 2021 and is collateralized by certain trading securities. Interest on the Jefferies Group Secured Bank Loan is 1.25% plus LIBOR. The agreement contains certain covenants that, among other things, restrict lien or encumbrance upon any of the pledged collateral. At February 28, 2021, we were in compliance with all covenants under the Jefferies Group Loan and Security Agreement.

Jefferies Group's long-term debt ratings are as follows:

			Rating			Outlook
Moody's Investors Service (1)			Baa3			Positive
Standard and Poor's			BBB			Stable
Fitch Ratings			BBB			Stable

(1) On March 15, 2021, Moody's Investors Service affirmed Jefferies Group's rating of Baa3 and revised its rating outlook from stable to positive.

Jefferies Group's access to external financing to finance its day to day operations, as well as the cost of that financing, is dependent upon various factors, including its debt ratings. Jefferies Group's current debt ratings are dependent upon many factors, including industry dynamics, operating and economic environment, operating results, operating margins, earnings trend and volatility, balance sheet composition, liquidity and liquidity management, capital structure, overall risk management, business diversification and market share and competitive position in the markets in which it operates. Deterioration in any of these factors could impact Jefferies Group's credit ratings. While certain aspects of a credit rating downgrade are quantifiable pursuant to contractual provisions, the impact on business and trading results in future periods is inherently uncertain and depends on a number of factors, including the magnitude of the downgrade, the behavior of individual clients and future mitigating action taken by us.

In connection with certain over-the-counter derivative contract arrangements and certain other trading arrangements, Jefferies Group may be required to provide additional collateral to counterparties, exchanges and clearing organizations in the event of a credit rating downgrade. At February 28, 2021, the amount of additional collateral that could be called by counterparties, exchanges and clearing organizations under the terms of such agreements in the event of a downgrade of Jefferies Group's long-term credit rating below investment grade was $126.9 million. For certain foreign clearing organizations, credit rating is only one of several factors employed in determining collateral that could be called. The above represents management's best estimate for additional collateral to be called in the event of a credit rating downgrade. The impact of additional collateral requirements is considered in Jefferies Group's Contingency Funding Plan and calculation of Modeled Liquidity Outflow, as described above.

Ratings issued by credit rating agencies are subject to change at any time.

Net Capital

Jefferies Group operates a broker-dealer, Jefferies LLC, registered with the Securities and Exchange Commission ("SEC") and member firms of the Financial Industry Regulatory Authority ("FINRA"). Jefferies LLC is subject to the SEC Uniform Net Capital Rule ("Rule 15c3-1"), which requires the maintenance of minimum net capital and has elected to calculate minimum capital requirements using the alternative method permitted by Rule 15c3-1 in calculating net capital. Jefferies LLC, as a dually-registered U.S. broker-dealer and futures commission merchant ("FCM"), is also subject to Rule 1.17 of the Commodity Futures Trading Commission ("CFTC"), which sets forth minimum financial requirements. The minimum net capital requirement in determining excess net capital for a dually-registered U.S. broker-dealer and FCM is equal to the greater of the requirement under Rule 15c3-1 or CFTC Rule 1.17. Jefferies LLC's net capital and excess net capital at February 28, 2021 were $2,019.3 million and $1,902.9 million, respectively. FINRA is the designated examining authority for Jefferies LLC and the National Futures Association is the designated self-regulatory organization for Jefferies LLC as an FCM.

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Certain other U.S. and non-U.S. subsidiaries of Jefferies Group are subject to capital adequacy requirements as prescribed by the regulatory authorities in their respective jurisdictions, including Jefferies International Limited which is subject to the regulatory supervision and requirements of the Financial Conduct Authority in the United Kingdom ("U.K."). The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") was signed into law on July 21, 2010. The Dodd-Frank Act contains provisions that require the registration of all swap dealers, major swap participants, security-based swap dealers, and/or major security-based swap participants. The CFTC has finalized rules establishing capital requirements and financial reporting requirements for CFTC registered swap dealers not subject to regulation by a banking regulator. We expect that these provisions will result in modifications to the regulatory capital requirements of some of Jefferies Group's entities, and will result in some of Jefferies Group's other entities becoming subject to regulatory capital requirements for the first time, including Jefferies Financial Services, Inc., which registered as a swap dealer with the CFTC during January 2013 and Jefferies Financial Products LLC, which registered during August 2014. Jefferies Group may also be required in the future to register one or more additional subsidiaries as security-based swap dealers with the SEC. Compliance with these rules is required by October 6, 2021.

The regulatory capital requirements referred to above may restrict Jefferies Group's ability to withdraw capital from its regulated subsidiaries.

Some of our other consolidated subsidiaries also have credit agreements which may restrict the payment of cash dividends, or the ability to make loans or advances to the parent company.

Other Developments

The U.K. left the European Union on January 31, 2020 and the current transition period ended on December 31, 2020. On January 1, 2021, Jefferies Group's U.K. broker-dealer, Jefferies International Limited, was no longer able to provide services to European clients under the passport regime. Jefferies Group has taken steps to ensure its ability to provide services to its European clients without interruption by establishing a wholly-owned subsidiary in Germany ("Jefferies GmbH"), which is authorized and regulated in Germany by the Federal Financial Services Authority ("BaFin"). At January 1, 2021, all of Jefferies Group's European clients have been migrated to Jefferies GmbH to conduct business across all of Jefferies Group's European investment banking, fixed income and equity platforms. There were no client disruptions or settlement issues experienced after this migration.

Central banks and regulators around the world have convened working groups to find, and implement the transition to, suitable replacements for IBORs. Jefferies Group has an active transition program that focuses on an orderly transition from IBORs to alternative reference rates, including internal operational readiness and risk management. Jefferies Group is identifying, assessing and monitoring risk associated with the expected discontinuation of IBORs, which includes taking steps to update operational processes and models and evaluation legacy contracts for any changes that may be required.

Off-Balance Sheet Risk

Jefferies Group has contractual commitments arising in the ordinary course of business for securities loaned or purchased under agreements to resell, repurchase agreements, future purchases and sales of foreign currencies, securities transactions on a when-issued basis and underwriting. Each of these financial instruments and activities contains varying degrees of off-balance sheet risk whereby the fair values of the securities underlying the financial instruments may be in excess of, or less than, the contract amount. The settlement of these transactions is not expected to have a material effect upon our consolidated financial statements.

In the normal course of business, we engage in other off-balance sheet arrangements, including derivative contracts. Neither derivatives' notional amounts nor underlying instrument values are reflected as assets or liabilities in the Consolidated Statements of Financial Condition. Rather, the fair values of derivative contracts are reported in the Consolidated Statements of Financial Condition as Financial instruments owned, at fair value, or Financial instruments sold, not yet purchased, at fair value, as applicable. Derivative contracts are reflected net of cash paid or received pursuant to credit support agreements and are reported on a net by counterparty basis when a legal right of offset exists under an enforceable master netting agreement.

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Cautionary Statement for Forward-Looking Information

This report contains or incorporates by reference "forward-looking statements" within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements about our future and statements that are not historical facts. These forward-looking statements are usually preceded by the words "will," "could," "estimates," "expects," "anticipates," "believes," "plans," "intends" and variations of such words or similar expressions. Forward-looking statements may contain expectations regarding revenues, earnings, operations and other results, and may include statements of future performance, plans and objectives. Forward-looking statements include statements pertaining to our strategies for future development of our businesses and products. Forward-looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain. Future events and actual results could differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Information regarding important factors that could cause actual results to differ, perhaps materially, from those in our forward-looking statements is contained in this report and other documents we file. You should read and interpret any forward-looking statement together with these documents, including the following:

•The description of our business and risk factors contained in our Annual Report on Form 10-K for the fiscal year ended November 30, 2020 and filed with the SEC on January 29, 2021 (the "2020 10-K");

•The discussion and analysis of financial condition and result of operations contained in this report under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" herein;

•The notes to the consolidated financial statements in this report; and

•Cautionary statements we make in our public documents, reports and announcements.

Any forward-looking statement speaks only as of the date on which that statement is made. We will not update any forward-looking statement to reflect events or circumstances that occur after the date on which the statement is made, except as required by applicable law.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

The following includes "forward-looking statements" that involve risk and uncertainties. See "Cautionary Statement for Forward-Looking Information" above. Actual results could differ materially from those projected in the forward-looking statements. The discussion of risk is presented separately for Jefferies Group and the balance of our company. Exclusive of Jefferies Group, our market risk arises principally from equity price risk. Information related thereto required under this Item is contained in Item 7A in our 2020 10-K, and is incorporated by reference herein.

Excluding Jefferies Group, Financial instruments owned, at fair value include corporate equity securities with an aggregate fair value of $367.7 million at February 28, 2021. Assuming a decline of 10% in market prices, the value of these investments could decrease by approximately $36.8 million.

Jefferies Group

Overview

Risk is an inherent part of our business and activities. The extent to which we properly and effectively identify, assess, monitor and manage each of the various types of risk involved in our activities is critical to our financial soundness, viability and profitability. Accordingly, we have a comprehensive risk management approach, with a formal governance structure and processes to identify, assess, monitor and manage risk. Principal risks involved in our business activities include market, credit, liquidity and capital, operational, legal and compliance, new business and reputational risk.

Risk management is a multifaceted process that requires communication, judgment and knowledge of financial products and markets. Our risk management process encompasses the active involvement of executive and senior management, and also many departments independent of the revenue-producing business units, including Jefferies Group's Risk Management, Operations, Compliance, Legal and Finance Departments. Our risk management policies, procedures and methodologies are flexible in nature and are subject to ongoing review and modification.

In achieving our strategic business objectives, our risk appetite incorporates keeping our clients' interests at the top of our priority list and ensuring we are in compliance with applicable laws, rules and regulations, as well as adhering to the highest ethical standards. We undertake prudent and conservative risk-taking that protects the capital base and franchise, utilizing risk limits and tolerances that avoid outsized risk-taking. We maintain a diversified business mix and avoid significant concentrations to any sector, product, geography, or activity and set quantitative concentration limits to manage this risk. We consider contagion, second order effects and correlation in our risk assessment process and actively seek out value opportunities of all sizes. We manage the risk of opportunities larger than our approved risk levels through risk sharing and risk distribution, sell-down and hedging, as appropriate. We have a limited appetite for illiquid assets and complex derivative financial instruments. We maintain the asset quality of our balance sheet through conducting trading activity in liquid markets and generally ensure high turnover of our inventory. We subject less liquid positions and derivative financial instruments to oversight and use a wide variety of specific metrics, limits, and constraints to manage these risks. We protect our reputation and franchise, as well as our standing within the market. We operate a federated approach to risk management with risk oversight responsibilities assigned to those areas of the business that have the appropriate knowledge.

For discussion of liquidity and capital risk management, refer to the "Liquidity and Capital Resources" section herein.

Risk Considerations

We apply a comprehensive framework of limits on a variety of key metrics to constrain the risk profile of our business activities. The size of the limits reflects our risk tolerance for a certain activity under normal business conditions. Key metrics included in our risk management framework include inventory position and exposure limits on a gross and net basis, scenario analysis and stress tests, Value-at-Risk ("VaR"), sensitivities, exposure concentrations, aged inventory, amount of Level 3 assets, counterparty exposure, leverage and cash capital.

Market Risk

Market risk is defined as the risk of loss due to fluctuations in the market value of financial assets and liabilities attributable to changes in market variables.

Our market risk principally arises from interest rate risk, from exposure to changes in the yield curve, the volatility of interest rates, and credit spreads, and from equity price risks from exposure to changes in prices and volatilities of individual equities, equity baskets and

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equity indices. In addition, commodity price risk results from exposure to the changes in prices and volatilities of individual commodities, commodity baskets and commodity indices, and foreign exchange risk results from changes in foreign currency rates.

Market risk is present in our market-making, proprietary trading, underwriting, specialist and investing activities and is principally managed by diversifying exposures, controlling position sizes, and establishing economic hedges in related securities or derivatives. Due to imperfections in correlations, gains and losses can occur even for positions that are economically hedged. Position limits in trading and inventory accounts are established and monitored on an ongoing basis. Each day, consolidated position and exposure reports are prepared and distributed to various levels of management, which enable management to monitor inventory levels and the results of its trading businesses.

Value-at-Risk

VaR is a statistical estimate of the potential loss from adverse market movements over a specified time horizon within a specified probability (confidence level). It provides a common risk measure across financial instruments, markets and asset classes. We estimate VaR using a model that simulates revenue and loss distributions on Jefferies Group's trading portfolios by applying historical market changes to the current portfolio. We calculate a one day VaR using a one year look-back period measured at a 95% confidence level.

As with all measures of VaR, the estimate has inherent limitations due to the assumption that historical changes in market conditions are representative of the future. Furthermore, the VaR model measures the risk of a current static position over a one day horizon and might not capture the market risk over a longer time horizon where moves may be more extreme. Previous changes in market risk factors may not generate accurate predictions of future market movements. While we believe the assumptions and inputs in our risk model are reasonable, we could incur losses greater than the reported VaR. Consequently, this VaR estimate is only one of a number of tools we use in our daily risk management activities.

There was a modest increase in average daily VaR to $16.02 million for the first quarter of 2021 from $14.92 million for the fourth quarter of 2020. The increase was primarily driven by a lower diversification effect.

The following table illustrates each separate component of VaR for each component of market risk by interest rate and credit spreads, equity, currency and commodity products, as well as for Jefferies Group's overall trading positions using the past 365 days of historical data (in millions): 

Daily VaR (1) Value-at-Risk in Trading Portfolios
Risk Categories						VaR at February 28, 2021						Daily VaR for the Three Months Ended February 28, 2021																		VaR at November 30, 2020						Daily VaR for the Three Months Ended November 30, 2020
												Average						High						Low												Average						High						Low
Interest Rates and Credit Spreads						$	10.35					$	8.58					$	11.15					$	5.83					$	7.66					$	8.71					$	11.57					$	6.09
Equity Prices						11.36						10.90						15.71						6.17						12.54						11.14						14.91						7.21
Currency Rates						0.31						0.19						0.31						0.11						0.16						0.13						0.41						0.03
Commodity Prices						0.72						0.42						0.75						0.16						0.44						0.39						0.56						0.28
Diversification Effect (2)						(6.61)						(4.07)						N/A						N/A						(2.04)						(5.45)						N/A						N/A
Firmwide						$	16.13					$	16.02					$	22.91					$	6.94					$	18.76					$	14.92					$	22.78					$	8.75

(1)For the VaR numbers reported above, a one day time horizon, with a one year look-back period, and a 95% confidence level were used.

(2)The diversification effect is not applicable for the maximum and minimum VaR values as Jefferies Group's firmwide VaR and VaR values for the four risk categories might have occurred on different days during the period.

The aggregated VaR presented here is less than the sum of the individual components (i.e., interest rate risk, foreign exchange rate risk, equity risk and commodity price risk) due to the benefit of diversification among the four risk categories. Diversification benefit equals the difference between aggregated VaR and the sum of VaRs for the four risk categories and arises because the market risk categories are not perfectly correlated.

The primary method used to test the efficacy of the VaR model is to compare actual daily net revenue for those positions included in the VaR calculation with the daily VaR estimate. This evaluation is performed at various levels of the trading portfolio, from the overall level

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down to specific business lines. For the VaR model, trading related revenue is defined as principal transactions revenues, trading related commissions, revenue from securitization activities and net interest income.

For a 95% confidence one day VaR model (i.e., no intra-day trading), assuming current changes in market value are consistent with the historical changes used in the calculation, net trading losses would not be expected to exceed the VaR estimates more than twelve times on an annual basis (i.e., once in every 20 days). During the first quarter of 2021, results of the evaluation at the aggregate level demonstrated one day when the net trading loss exceeded the 95% one day VaR.

The chart below reflects our daily VaR over the last four quarters. The increases from August 2020 through mid-January 2021 were driven by the high historical volatility observed throughout the initial period of the pandemic. The recent lower trend from January to the end of February was driven by exposure reductions.

Daily Net Trading Revenue

There were nine days with trading losses out of a total of 60 trading days in the first quarter of 2021. The histogram below presents the distribution of our actual daily net trading revenue for substantially all of Jefferies Group's trading activities for the first quarter of 2021 (in millions).

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Other Risk Measures

Certain positions within financial instruments are not included in the VaR model because VaR is not the most appropriate measure of risk. Accordingly, Jefferies Group's Risk Management has additional procedures in place to assure that the level of potential loss that would arise from market movements are within acceptable levels. Such procedures include performing stress tests, monitoring concentration risk and tracking price target/stop loss levels. The table below presents the potential reduction in net income associated with a 10% stress of the fair value of the positions that are not included in the VaR model at February 28, 2021 (in thousands):

			10% Sensitivity
Investment in funds (1)			$	101,782
Private investments			15,012
Corporate debt securities in default			9,867
Trade claims			5,704

(1)    Includes investments in hedge funds, fund of funds and private equity funds. For additional information on these investments, see Note 3 in our consolidated financial statements.

VaR also excludes the impact of changes in Jefferies Group's own credit spreads on its structured notes for which the fair value option was elected. The estimated credit spread risk sensitivity for each one basis point widening in Jefferies Group's own credit spreads on financial liabilities for which the fair value option was elected was an increase in value of approximately $1.6 million at February 28, 2021, which is included in Accumulated other comprehensive income (loss).

Stress Tests and Scenario Analysis

Stress tests are used to analyze the potential impact of specific events or extreme market moves on the current portfolio both firm wide and within business segments. Stress testing is an important part of our risk management approach because it allows us to quantify our exposure to tail risks, highlight potential loss concentrations, undertake risk/reward analysis, set risk controls and overall assess and mitigate its risk.

We employ a range of stress scenarios, which comprise both historical market price and rate changes and hypothetical market environments, and generally involve simultaneous changes of many risk factors. Indicative market changes in our scenarios include, but are not limited to, a large widening of credit spreads, a substantial decline in equities markets, significant moves in selected emerging markets, large moves in interest rates and changes in the shape of the yield curve.

Unlike VaR, which measures potential losses within a given confidence interval, stress scenarios do not have an associated implied probability. Rather, stress testing is used to estimate the potential loss from market moves that tend to be larger than those embedded in the VaR calculation. Stress testing complements VaR to cover for potential limitations of VaR such as the breakdown in correlations, non-linear risks, tail risk and extreme events and capturing market moves beyond the confidence levels assumed in the VaR calculations.

Stress testing is performed and reported at least weekly as part of our risk management process and on an ad hoc basis in response to market events or concerns. Current stress tests provide estimated revenue and loss of the current portfolio through a range of both historical and hypothetical events. The stress scenarios are reviewed and assessed at least annually so that they remain relevant and up to date with market developments. Additional hypothetical scenarios are also conducted on a sub-portfolio basis to assess the impact of any relevant idiosyncratic stress events as needed.

Counterparty Credit Risk

Credit risk is the risk of loss due to adverse changes in a counterparty's credit worthiness or its ability or willingness to meet its financial obligations in accordance with the terms and conditions of a financial contract.

We are exposed to credit risk as a trading counterparty to other broker-dealers and customers, as a direct lender and through extending loan commitments, as a holder of securities and as a member of exchanges and clearing organizations. Credit exposure exists across a wide-range of products, including cash and cash equivalents, loans, securities finance transactions and over-the-counter derivative contracts. The main sources of our credit risk are:

•Loans and lending arising in connection with our investment banking and capital markets activities, which reflects our exposure at risk on a default event with no recovery of loans. Current exposure represents loans that have been drawn by the borrower and lending commitments that are outstanding. In addition, credit exposures on forward settling traded loans are included within our

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loans and lending exposures for consistency with the balance sheet categorization of these items. Loans and lending also arise in connection with our portion of Jefferies Group's Secured Revolving Credit Facility that is with Jefferies Group and Massachusetts Mutual Life Insurance Company, to be funded equally, to support loan underwritings by Jefferies Finance. See Note 8 for additional information on this facility. In addition, Jefferies Group has loans outstanding to certain of its officers and employees (none of whom are executive officers or directors). See Note 21 for additional information on these employee loans.

•Securities and margin financing transactions, which reflect our credit exposure arising from reverse repurchase agreements, repurchase agreements and securities lending agreements to the extent the fair value of the underlying collateral differs from the contractual agreement amount and from margin provided to customers.

•Over-the-counter derivatives, which are reported net by counterparty when a legal right of setoff exists under an enforceable master netting agreement. Over-the-counter derivative exposure is based on a contract at fair value, net of cash collateral received or posted under credit support agreements. In addition, credit exposures on forward settling trades are included within our derivative credit exposures.

•Cash and cash equivalents, which include both interest-bearing and non-interest-bearing deposits at banks.

Credit is extended to counterparties in a controlled manner and in order to generate acceptable returns, whether such credit is granted directly or is incidental to a transaction. All extensions of credit are monitored and managed as a whole to limit exposure to loss related to credit risk. Credit risk is managed according to the Credit Risk Policy, which sets out the process for identifying counterparty credit risk, establishing counterparty limits, and managing and monitoring credit limits. The policy includes our approach for:

•Client on-boarding and approving counterparty credit limits;

•Negotiating, approving and monitoring credit terms in legal and master documentation;

•Determining the analytical standards and risk parameters for ongoing management and monitoring credit risk books;

•Actively managing daily exposure, exceptions and breaches; and

•Monitoring daily margin call activity and counterparty performance.

Counterparty credit exposure limits are granted within our credit ratings framework, as detailed in the Credit Risk Policy. Jefferies Group's Credit Risk Department assesses counterparty credit risk and sets credit limits at the counterparty master agreement level. Limits must be approved by appropriate credit officers and initiated in our credit and trading systems before trading commences. All credit exposures are reviewed against approved limits on a daily basis.

Jefferies Group's Secured Revolving Credit Facility, which supports loan underwritings by Jefferies Finance, is governed under separate policies other than the Credit Risk Policy and is approved by Jefferies Group's Board of Directors. The loans outstanding to certain of Jefferies Group's officers and employees are extended pursuant to a review by its most senior management.

Current counterparty credit exposures are summarized in the tables below and provided by credit quality, region and industry. Credit exposures presented take netting and collateral into consideration by counterparty and master agreement. Collateral taken into consideration includes both collateral received as cash as well as collateral received in the form of securities or other arrangements. Current exposure is the loss that would be incurred on a particular set of positions in the event of default by the counterparty, assuming no recovery. Current exposure equals the fair value of the positions less collateral. Issuer risk is the credit risk arising from inventory positions (for example, corporate debt securities and secondary bank loans). Issuer risk is included in our country risk exposure tables below.

The amounts in the tables below are for amounts included in the Consolidated Statements of Financial Condition at February 28, 2021 and November 30, 2020 (in millions).

Counterparty Credit Exposure by Credit Rating
			Loans and Lending												Securities and Margin Finance												OTC Derivatives												Total												Cash and Cash Equivalents												Total with Cash and Cash Equivalents
			At												At												At												At												At												At
			February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020
AAA Range			$	—					$	—					$	0.7					$	1.1					$	—					$	0.1					$	0.7					$	1.2					$	5,085.9					$	5,132.9					$	5,086.6					$	5,134.1
AA Range			45.1						45.2						97.7						111.7						40.5						9.8						183.3						166.7						4.6						7.8						187.9						174.5
A Range			0.4						0.2						487.1						542.2						294.0						147.2						781.5						689.6						1,601.2						1,967.9						2,382.7						2,657.5
BBB Range			250.1						250.5						122.7						110.2						13.3						18.1						386.1						378.8						14.4						2.2						400.5						381.0
BB or Lower			50.0						50.0						8.8						8.3						163.1						201.6						221.9						259.9						0.1						0.1						222.0						260.0
Unrated			161.0						142.0						—						—						0.3						0.2						161.3						142.2						1.3						1.0						162.6						143.2
Total			$	506.6					$	487.9					$	717.0					$	773.5					$	511.2					$	377.0					$	1,734.8					$	1,638.4					$	6,707.5					$	7,111.9					$	8,442.3					$	8,750.3

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Counterparty Credit Exposure by Region
			Loans and Lending												Securities and Margin Finance												OTC Derivatives												Total												Cash and Cash Equivalents												Total with Cash and Cash Equivalents
			At												At												At												At												At												At
			February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020
Asia/Latin America/Other			$	15.0					$	15.0					$	54.0					$	72.6					$	21.1					$	6.9					$	90.1					$	94.5					$	242.2					$	248.4					$	332.3					$	342.9
Europe			0.2						0.1						298.4						313.0						40.9						42.5						339.5						355.6						111.2						96.4						450.7						452.0
North America			491.4						472.8						364.6						387.9						449.2						327.6						1,305.2						1,188.3						6,354.1						6,767.1						7,659.3						7,955.4
Total			$	506.6					$	487.9					$	717.0					$	773.5					$	511.2					$	377.0					$	1,734.8					$	1,638.4					$	6,707.5					$	7,111.9					$	8,442.3					$	8,750.3

Counterparty Credit Exposure by Industry
			Loans and Lending												Securities and Margin Finance												OTC Derivatives												Total												Cash and Cash Equivalents												Total with Cash and Cash Equivalents
			At												At												At												At												At												At
			February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020						February 28, 2021						November 30, 2020
Asset Managers			$	0.1					$	0.2					$	—					$	—					$	6.3					$	—					$	6.4					$	0.2					$	5,085.9					$	5,132.9					$	5,092.3					$	5,133.1
Banks, Broker-dealers			250.5						250.7						521.4						558.6						332.5						178.8						1,104.4						988.1						1,621.6						1,979.0						2,726.0						2,967.1
Corporates			132.7						132.7						—						—						150.6						183.9						283.3						316.6						—						—						283.3						316.6
Other			123.3						104.3						195.6						214.9						21.8						14.3						340.7						333.5						—						—						340.7						333.5
Total			$	506.6					$	487.9					$	717.0					$	773.5					$	511.2					$	377.0					$	1,734.8					$	1,638.4					$	6,707.5					$	7,111.9					$	8,442.3					$	8,750.3

For additional information regarding credit exposure to over-the-counter derivative contracts, see Note 4 in the consolidated financial statements.

Country Risk Exposure

Country risk is the risk that events or developments that occur in the general environment of a country or countries due to economic, political, social, regulatory, legal or other factors, will affect the ability of obligors of the country to honor their obligations. We define the country of risk as the country of jurisdiction or domicile of the obligor, and monitor country risk resulting from both trading positions and counterparty exposure, which may not include the offsetting benefit of any financial instruments utilized to manage market risk.

The following tables reflect our top exposure to the sovereign governments, corporations and financial institutions in those non-U.S. countries in which we have a net long issuer and counterparty exposure, as reflected in the Consolidated Statements of Financial Condition (in millions):

			February 28, 2021
			Issuer Risk																		Counterparty Risk																								Issuer and Counterparty Risk
			Fair Value of Long Debt  Securities						Fair Value of Short Debt  Securities						Net Derivative Notional  Exposure						Loans and  Lending						Securities and Margin  Finance						OTC Derivatives						Cash and Cash Equivalents						Excluding Cash and Cash Equivalents						Including Cash and Cash Equivalents
United Kingdom			$	498.8					$	(225.1)					$	(9.8)					$	0.2					$	44.4					$	16.1					$	75.2					$	324.6					$	399.8
France			417.0						(389.5)						144.6						—						134.0						14.8						—						320.9						320.9
Canada			367.8						(307.6)						(1.1)						—						14.9						231.6						2.0						305.6						307.6
Italy			1,324.1						(1,092.3)						34.9						—						12.1						0.1						1.4						278.9						280.3
Hong Kong			23.1						(9.1)						—						—						3.0						—						180.0						17.0						197.0
Japan			270.0						(245.0)						103.2						—						20.4						0.3						19.4						148.9						168.3
China			670.3						(431.2)						(117.3)						—						—						—						—						121.8						121.8
Germany			673.0						(386.2)						(258.1)						—						50.6						8.1						32.1						87.4						119.5
Switzerland			100.6						(63.3)						4.8						—						38.6						1.6						1.4						82.3						83.7
Israel			75.2						(16.7)						(2.1)						15.0						0.1						7.9						—						79.4						79.4
Total			$	4,419.9					$	(3,166.0)					$	(100.9)					$	15.2					$	318.1					$	280.5					$	311.5					$	1,766.8					$	2,078.3

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			November 30, 2020
			Issuer Risk																		Counterparty Risk																								Issuer and Counterparty Risk
			Fair Value of Long Debt  Securities						Fair Value of Short Debt  Securities						Net Derivative Notional  Exposure						Loans and  Lending						Securities and Margin  Finance						OTC  Derivatives						Cash and Cash Equivalents						Excluding Cash and Cash Equivalents						Including Cash and Cash Equivalents
Italy			$	1,929.5					$	(921.6)					$	(618.9)					$	—					$	—					$	0.1					$	—					$	389.1					$	389.1
United Kingdom			464.0						(235.8)						(46.7)						0.1						67.4						5.2						64.8						254.2						319.0
France			357.3						(290.9)						48.3						—						140.8						24.3						—						279.8						279.8
Germany			470.7						(352.7)						40.2						—						63.1						11.3						26.7						232.6						259.3
Australia			32.7						(17.8)						173.9						—						24.9						—						12.8						213.7						226.5
Hong Kong			35.2						(11.8)						0.7						—						0.1						—						157.4						24.2						181.6
Canada			417.3						(326.8)						1.3						—						20.4						64.3						2.1						176.5						178.6
Austria			151.2						(73.6)						—						—						—						—						—						77.6						77.6
India			50.9						(6.7)						—						—						—						—						24.3						44.2						68.5
Switzerland			104.0						(72.2)						2.9						—						31.6						1.3						0.4						67.6						68.0
Total			$	4,012.8					$	(2,309.9)					$	(398.3)					$	0.1					$	348.3					$	106.5					$	288.5					$	1,759.5					$	2,048.0

At February 28, 2021, we have no material exposure to countries where either sovereign or non-sovereign sectors pose potential default risk as the result of liquidity concerns.

Operational Risk

Operational risk refers to the risk of loss resulting from operations, including, but not limited to, improper or unauthorized execution and processing of transactions, deficiencies in our operating systems, business disruptions and inadequacies or breaches in internal control processes. Our businesses are highly dependent on our ability to process, on a daily basis, a large number of transactions across numerous and diverse markets in many currencies. In addition, the transactions we process have become increasingly complex. If our financial, accounting or other data processing systems do not operate properly or are disabled or if there are other shortcomings or failures in our internal processes, people or systems, we could suffer an impairment to our liquidity, financial loss, a disruption of our businesses, liability to clients, regulatory intervention or reputational damage.

These systems may fail to operate properly or become disabled as a result of events that are wholly or partially beyond our control, including a disruption of electrical or communications services or the inability to occupy one or more of our buildings. The inability of our systems to accommodate an increasing volume of transactions could also constrain our ability to expand our businesses.

We also face the risk of operational failure or termination of any of the clearing agents, exchanges, clearing houses or other financial intermediaries we use to facilitate our securities transactions. Any such failure or termination could adversely affect our ability to effect transactions and manage exposure to risk. In addition, despite the contingency plans we have in place, our ability to conduct business may be adversely impacted by a disruption in the infrastructure that supports our businesses and the communities in which they are located. This may include a disruption involving electrical, communications, transportation or other services used by us or third-parties with which we conduct business.

Our operations rely on the secure processing, storage and transmission of confidential and other information in our computer systems and networks. Although we take protective measures and endeavor to modify them as circumstances warrant, our computer systems, software and networks may be vulnerable to unauthorized access, computer viruses or other malicious code, and other events that could have a security impact. If one or more of such events occur, this potentially could jeopardize our or our clients' or counterparties' confidential and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our, our clients', our counterparties' or third-parties' operations. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us.

Our Operational Risk framework includes governance, collection of operational risk incidents, proactive operational risk management, and periodic review and analysis of business metrics to identify and recommend controls and process-related enhancements. Each revenue producing and support department is responsible for the management and reporting of operational risks and the implementation of the Operational Risk policy and processes within the department. Operational Risk policy, framework, infrastructure, methodology, processes, guidance and oversight of the operational risk processes are centralized and consistent firm wide and also subject to regional operational risk governance.

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Our leadership is continuously monitoring circumstances around COVID-19, as well as economic and capital market conditions, and providing frequent communications to both our clients and our employees. We have adopted enhanced cleaning practices across our offices, have restricted business travel, and have monitored the health and welfare of our employees and worked actively with many individuals diagnosed with COVID-19. We continue to execute our Business Continuity Planning plan and maintain a largely remote working environment across all functions without any significant disruptions to our business or control processes. Additionally, we are working continuously with all of our critical vendors regarding their own pandemic responses to ensure there is minimal impact on our business operations.

Model Risk

Model risk refers to the risk of losses resulting from decisions that are based on the output of models, due to errors or weaknesses in the design and development, implementation, or improper use of models. We use quantitative models primarily to value certain financial assets and liabilities and to monitor and manage our risk. Model risk is a function of the model materiality, frequency of use, complexity and uncertainty around inputs and assumptions used in a given model. Robust model risk management is a core part of our risk management approach and is overseen through our risk governance structure and risk management controls.

Legal and Compliance Risk

Legal and compliance risk includes the risk of noncompliance with applicable legal and regulatory requirements. We are subject to extensive regulation in the different jurisdictions in which we conduct our business. We have various procedures addressing issues such as regulatory capital requirements, sales and trading practices, use of and safekeeping of customer funds, credit granting, collection activities, anti-money laundering and record keeping. These risks also reflect the potential impact that changes in local and international laws and tax statutes have on the economics and viability of current or future transactions. In an effort to mitigate these risks, we continuously review new and pending regulations and legislation and participate in various industry interest groups. We also maintain an anonymous hotline for employees or others to report suspected inappropriate actions by us or by our employees or agents.

New Business Risk

New business risk refers to the risks of entering into a new line of business or offering a new product. By entering a new line of business or offering a new product, we may face risks that we are unaccustomed to dealing with and may increase the magnitude of the risks we currently face. The New Business Committee reviews proposals for new businesses and new products to determine if we are prepared to handle the additional or increased risks associated with entering into such activities.

Reputational Risk

We recognize that maintaining our reputation among clients, investors, regulators and the general public is an important aspect of minimizing legal and operational risks. Maintaining our reputation depends on a large number of factors, including the selection of our clients and the conduct of our business activities. We seek to maintain our reputation by screening potential clients and by conducting our business activities in accordance with high ethical standards. Our reputation and business activity can be affected by statements and actions of third-parties, even false or misleading statements by them. We actively monitor public comment concerning us and are vigilant in seeking to assure accurate information and perception prevails.

Item 4.  Controls and Procedures.

Evaluation of disclosure controls and procedures

The Company's management evaluated, with the participation of the Company's principal executive and principal financial officers, the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of February 28, 2021. Based on their evaluation, the Company's principal executive and principal financial officers concluded that the Company's disclosure controls and procedures were effective as of February 28, 2021.

Changes in internal control over financial reporting

There has been no change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company's fiscal quarter ended February 28, 2021, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1.  Legal Proceedings.

The information set forth in response to this Item 1 is incorporated by reference from the "Contingencies" section in Note 18, Commitments, Contingencies and Guarantees, in the Notes to consolidated financial statements in Item 1 of Part I of this Quarterly Report, which is incorporated herein by reference.

Item 1A.  Risk Factors.

Information regarding our risk factors appears in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended November 30, 2020. These risk factors describe some of the assumptions, risks, uncertainties and other factors that could adversely affect our business or that could otherwise result in changes that differ materially from our expectations.

Item 2.  Unregistered Sale of Equity Securities and Use of Proceeds.

(c)  Issuer Purchases of Equity Securities

The following table presents information on our purchases of our common shares during the first quarter of 2021 (dollars in thousands, except per share amounts):

			(a) Total Number of Shares Purchased (1)						(b) Average Price Paid per Share						(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)						(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
December 1, 2020 to December 31, 2020			—						$	—					—						$	57,242
January 1, 2021 to January 31, 2021			2,052,805						$	24.59					1,950,000						$	202,080
February 1, 2021 to February 28, 2021			3,050,000						$	26.10					3,050,000						$	122,461
Total			5,102,805												5,000,000

(1)Includes an aggregate 102,805 shares repurchased other than as part of our publicly announced Board authorized repurchase program. We repurchased these securities in connection with our share compensation plans which allow participants to use shares to satisfy certain tax liabilities arising from the vesting of restricted shares and the distribution of restricted share units. The total number of shares purchased does not include unvested shares forfeited back to us pursuant to the terms of our share compensation plans.

(2) In January 2021, the Board of Directors increased the share repurchase authorization by $192.8 million to $250.0 million. At February 28, 2021, $122.5 million remains available for future purchases. In March 2021, the Board of Directors increased the share repurchase authorization to $250.0 million, including the $122.5 million.

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Item 6.			Exhibits.

See Exhibit Index.

Exhibit Index

10.1			Form of Stock Option Agreement under 2003 Stock Award and Incentive Plan.
10.2			Form of Stock Appreciation Award Agreement.
10.3			Form of Stock Option Agreement (Converted Stock Appreciation Award) under Equity Compensation Plan.
31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2			Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101			Financial statements from the Quarterly Report on Form 10-Q of Jefferies Financial Group Inc. for the quarter ended February 28, 2021, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Changes in Equity and (vi) the Notes to Consolidated Financial Statements.
104			Cover Page Interactive Data File, formatted in iXBRL (included in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

			JEFFERIES FINANCIAL GROUP INC.
						(Registrant)
Date: April 8, 2021			By:			/s/          John M. Dalton
						Name:   John M. Dalton
						Title:     Vice President and Controller
						(Duly Authorized Officer and Chief Accounting Officer)

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