Jefferies Financial : Statement of Financial Condition (Unaudited) (5/31/2022)

JEFFERIES FINANCIAL SERVICES, INC.

STATEMENT OF FINANCIAL CONDITION

AS OF MAY 31, 2022

(UNAUDITED)

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JEFFERIES FINANCIAL SERVICES, INC.

STATEMENT OF FINANCIAL CONDITION AT MAY 31, 2022

(Dollars in thousands)

ASSETS
Cash and cash equivalents ................................................................................................................	$	2,324,309
Financial instruments owned, at fair value .......................................................................................		9,704,794
Securities purchased under agreements to resell ..............................................................................		5,514,042
Receivables:......................................................................................................................................
Brokers, dealers and clearing organizations..................................................................................		705,746
Fees, interest and other .................................................................................................................		3,047
Due from affiliates........................................................................................................................		241
Premises and equipment ...................................................................................................................		111
Other assets.......................................................................................................................................		8,494
Total assets........................................................................................................................................	$	18,260,784
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Financial instruments sold, not yet purchased, at fair value.............................................................	$	7,343,819
Securities sold under agreements to repurchase ...............................................................................		8,566,534
Payables:
Brokers, dealers and clearing organizations..................................................................................		834,037
Due to Parent and affiliates...........................................................................................................		317,911
Accrued expenses and other liabilities .............................................................................................		3,692
Total liabilities ..................................................................................................................................		17,065,993
Subordinated liabilities .....................................................................................................................		400,000
Stockholder's equity:
Class A Common Stock, $2 par value; authorized, issued and outstanding 1,000 shares...........		2
Additional paid-in-capital ............................................................................................................		990,371
Retained deficit ............................................................................................................................		(195,582)
Total stockholder's equity ................................................................................................................		794,791
Total liabilities and stockholder's equity..........................................................................................	$	18,260,784

See accompanying notes to Statement of Financial Condition.

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JEFFERIES FINANCIAL SERVICES, INC.

NOTES TO STATEMENT OF FINANCIAL CONDITION (UNAUDITED)

MAY 31, 2022

1. ORGANIZATION AND BASIS OF PRESENTATION
   Organization and Business - Jefferies Financial Services, Inc. ("the Company") is a wholly owned subsidiary of Jefferies Group LLC (the "Parent"), which in turn is a wholly owned subsidiary of Jefferies Financial Group Inc. ("Jefferies" or the "Ultimate Parent"), a diversified holding company incorporated in the state of New York and engaged in a variety of businesses. The Company, a registered swap dealer with the Commodity Futures Trading Commission ("CFTC"), is subject to the CFTC's regulatory capital requirements and holds regulatory capital in excess of the minimum regulatory requirement. Additionally, the Company is registered as a security-based swap dealer with the Securities Exchange Commission ("SEC") and is subject to the SEC's security-based swap dealer regulatory rules. Further, the Company is registered with the SEC as an Over-the-Counter ("OTC") derivatives dealer, and is subject to compliance with the SEC's net capital requirements. As a security-based swap dealer and swap dealer, the Company is subject to the net capital requirements of the SEC, CFTC and the National Futures Association ("NFA"), as a member of the NFA.
   The Company operates and is managed as a single reportable business segment, Capital Markets. The Company transacts as a dealer in swap and security-based swap transactions with clients and counterparties. The Company is dependent on Jefferies LLC, a registered broker-dealer and subsidiary of the Parent, and Jefferies LLC employees provide the trade support, execution and settlement for transactions related to the Company's swaps business.
   Basis of Presentation - The accompanying Statement of Financial Condition has been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). These principles require management to make a number of estimates and assumptions that may affect the amounts reported in the Statement of Financial Condition and accompanying notes. The most important of these estimates and assumptions relate to fair value measurements, related party transactions, compensation and benefits, the ability to realize deferred tax assets and the recognition and measurement of uncertain tax positions. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates.
   Subsequent events - Management has evaluated events and transactions that occurred subsequent to May 31, 2022 through the date this Statement of Financial Condition was issued, and determined there were no events or transactions during such period requiring recognition or disclosure in the Statement of Financial Condition.
2. SIGNIFICANT ACCOUNTING POLICIES
   Cash Equivalents - Cash equivalents include highly liquid investments, including money market funds, not held for resale with original maturities of three months or less.
   Financial Instruments and Fair Value - Financial instruments owned and Financial instruments sold, not yet purchased are recorded at fair value as required by accounting pronouncements. These instruments primarily represent the Company's trading activities and include both cash and derivative products. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price).

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JEFFERIES FINANCIAL SERVICES, INC.

NOTES TO STATEMENT OF FINANCIAL CONDITION (UNAUDITED) - CONTINUED MAY 31, 2022

Fair Value Hierarchy. In determining fair value, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs reflect the assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The Company applies a hierarchy to categorize its fair value measurements broken down into three levels based on the transparency of inputs as follows:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities at the reported date. Valuation adjustments and block discounts are not applied to Level 1 instruments.

Level 2 - Pricing inputs other than quoted prices in active markets, which are either directly or indirectly observable at the reported date. The nature of these financial instruments include cash instruments for which quoted prices are available but traded less frequently, derivative instruments for which fair values have been derived using model inputs that are directly observable in the market, or can be derived principally from, or corroborated by, observable market data, and instruments that are fair valued by using other financial instruments, the parameters of which can be directly observed.

Level 3 - Instruments that have little to no pricing observability at the reported date. These financial instruments are measured using management's best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

Certain financial instruments have bid and ask prices that can be observed in the marketplace. For financial instruments whose inputs are based on bid-ask prices, the financial instrument is valued at the point within the bid-ask range that meets the Company's best estimate of fair value. The Company uses prices and inputs that are current at the measurement date. For financial instruments that do not have readily determinable fair values using quoted market prices, the determination of fair value is based on the best available information, taking into account the types of financial instruments, current financial information, restrictions (if any) on dispositions, fair values of underlying financial instruments and quotations for similar instruments.

The valuation of financial instruments may include the use of valuation models and other techniques. Adjustments to valuations derived from valuation models are permitted based on management's judgment, which takes into consideration the features of the financial instrument such as its complexity, the market in which the financial instrument is traded and underlying risk uncertainties about market conditions. Adjustments from the price derived from a valuation model reflect management's judgment that other participants in the market for the financial instrument being measured at fair value would also consider in valuing that same financial instrument. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.

The availability of observable inputs can vary and is affected by a wide variety of factors, including, for example, the type of financial instrument and market conditions. As the observability of prices and inputs may change for a financial instrument from period to period, this condition may cause a transfer of an instrument among the fair value hierarchy levels. The degree of judgment exercised in determining fair value is greatest for instruments categorized within Level 3.

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JEFFERIES FINANCIAL SERVICES, INC.

NOTES TO STATEMENT OF FINANCIAL CONDITION (UNAUDITED) - CONTINUED MAY 31, 2022

Receivable from and Payable to Brokers, Dealers and Clearing Organizations - Receivables from and payables to brokers, dealers and clearing organizations include deposits of cash and/or securities with exchange clearing organizations to meet margin requirements, amounts due to or from clearing organizations for daily variation settlements, receivables and payables for fees and commissions and net receivables or payables arising from unsettled security transactions.

Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase - Securities purchased under agreements to resell and Securities sold under agreements to repurchase (collectively "repos") are accounted for as collateralized financing transactions and are recorded at their contracted resale or repurchase amount plus accrued interest. Repos are presented in the Statement of Financial Condition on a net basis by counterparty, where permitted by U.S. GAAP. The Company monitors the fair value of the underlying securities daily versus the related receivable or payable balances. Should the fair value of the underlying securities decline or increase, additional collateral is requested or excess collateral is returned, as appropriate.

Offsetting of Derivative Financial Instruments and Securities Financing Agreements - To manage the Company's exposure to credit risk associated with its derivative activities and securities financing transactions, the Company may enter into International Swaps and Derivative Association, Inc. ("ISDA") master netting agreements, master repurchase agreements or similar agreements and collateral arrangements with counterparties. A master agreement creates a single contract under which all transactions between two counterparties are executed allowing for trade aggregation and a single net payment obligation. Master agreements provide protection in bankruptcy in certain circumstances and, where legally enforceable, enable receivables and payables with the same counterparty to be settled or otherwise eliminated by applying amounts due against all or a portion of an amount due from the counterparty or a third party.

Under the Company's ISDA master netting agreements, it typically also executes credit support annexes, which provide for collateral, either in the form of cash or securities, to be posted by or paid to a counterparty based on the fair value of the derivative receivable or payable based on the rates and parameters established in the credit support annex.

In the event of the counterparty's default, provisions of the master agreement permit acceleration and termination of all outstanding transactions covered by the agreement such that a single amount is owed by, or to, the non-defaulting party. In addition, any collateral posted can be applied to the net obligations, with any excess returned; and the collateralized party has a right to liquidate the collateral. Any residual claim after netting is treated along with other unsecured claims in bankruptcy court.

The conditions supporting the legal right of offset may vary from one legal jurisdiction to another and the enforceability of master netting agreements and bankruptcy laws in certain countries or in certain industries is not free from doubt. The right of offset is dependent both on contract law under the governing arrangement and consistency with the bankruptcy laws of the jurisdiction where the counterparty is located. Industry legal opinions with respect to the enforceability of certain standard provisions in respective jurisdictions are relied upon as a part of managing credit risk. In cases where the Company has not determined an agreement to be enforceable, the related amounts are not offset. Master netting agreements are a critical component of the Company's risk management processes as part of reducing counterparty credit risk and managing liquidity risk.

Refer to Note 5, Derivative Financial Instruments and Note 6, Collateralized Transactions, for further information.

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