Note 22.

Commitments, Contingencies and Guarantees

Commitments

The following table summarizes our commitments associated with our capital market and asset management business activities at May 31, 2013 (in millions):


	Expected Maturity Date
					2015		2017		2019
					and		and		and		Maximum
	2013		2014		2016		2018		Later		Payout

Equity commitments	$	0.3	$	4.1	$	—	$	0.7	$	533.7	$	538.8
Loan commitments		117.0		5.2		381.5		54.5		—		558.2
Mortgage-related commitments		642.9		295.5		700.9		—		—		1,639.3
Underwriting commitments		266.6		—		—		—		—		266.6
Forward starting reverse repos and repos		948.3		—		—		—		—		948.3

	$	1,975.1	$	304.8	$	1,082.4	$	55.2	$	533.7	$	3,951.2

The table below presents our credit exposure from our loan commitments, including funded amounts, summarized by period of expiration as of May 31, 2013. Credit exposure is based on the external credit ratings of the underlyings or referenced assets of our loan commitments. Since commitments associated with these business activities may expire unused, they do not necessarily reflect the actual future cash funding requirements (in millions):


							Total		Corporate
							Corporate		Lending
	0 – 12				Greater Than		Lending		Exposure at		Corporate Lending
Credit Ratings	Months		1 – 5 Years		5 Years		Exposure (1)		Fair Value (2)		Commitments (3)

Non-investment grade	$	—	$	45.0	$	—	$	45.0	$	9.8	$	35.2
Unrated		144.3		551.4		—		695.7		172.7		523.0

Total	$	144.3	$	596.4	$	—	$	740.7	$	182.5	$	558.2

(1)	Total corporate lending exposure represents the potential loss assuming the fair value of funded loans and lending commitments were zero.

(2)

The corporate lending exposure carried at fair value includes $182.5 million of funded loans included in Financial instruments owned – Loans and a $3.1 million net liability related to lending commitments recorded in Financial instruments sold – Derivatives and Financial instruments owned- Derivatives in the Consolidated Statement of Financial Condition as of May 31, 2013.

(3)	Amounts represent the notional amount of lending commitments less the amount of funded commitments reflected in the Consolidated Statements of Financial Condition.

Equity Commitments. We have commitments to invest $600.0 million and $291.0 million in Jefferies Finance and Jefferies LoanCore as of May 31, 2013, and have funded $299.4 million and $107.5 million, respectively. See Note 12, Investments for additional information regarding these investments.

As of May 31, 2013, we have committed to invest $5.9 million in Jefferies Capital Partners LLC, the manager of Jefferies Capital Partners IV L.P., Jefferies Capital Partners V L.P. and a related parallel fund, the SBI USA Fund (Jefferies Capital Partners V L.P. and the SBI USA Fund are collectively “Fund V”). As of May 31, 2013, we have funded approximately $1.0 million of our commitment to Jefferies Capital Partners LLC, leaving $4.9 million unfunded.

We have committed to invest in aggregate up to $85.0 million in Fund V, private equity funds managed by a team led by Brian P. Friedman, one of our directors and Chairman of the Executive Committee, comprised of up to $75.0 million in the SBI USA Fund and $10.0 million in Jefferies Capital Partners V L.P. As of May 31, 2013, we have funded approximately $35.5 million and $4.8 million of our commitments to the SBI USA Fund and Jefferies Capital Partners V L.P., respectively, leaving approximately $44.7 million unfunded in aggregate.

We have committed to invest up to $45.9 million in Jefferies Capital Partners IV L.P. and $3.1 million in JCP IV LLC, the General Partner of Jefferies Capital Partners IV L.P. As of May 31, 2013, we have funded approximately $43.5 million and $2.3 million of our commitments to Jefferies Capital Partners IV L.P. and JCP IV LLC, respectively, leaving approximately $3.2 million unfunded in aggregate.

As of May 31, 2013, we had other equity commitments to invest up to $23.7 million in various other investments of which $1.9 million remained unfunded.

Loan Commitments. From time to time we make commitments to extend credit to investment banking and other clients in loan syndication, acquisition finance and securities transactions. 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. As of May 31, 2013, we had $196.8 million of outstanding loan commitments to clients.

On March 1, 2011, we and MassMutual entered into a secured revolving credit facility with Jefferies Finance, to be funded equally, to support loan underwritings by Jefferies Finance. At May 31, 2013, the facility of $700.0 million, is scheduled to mature on March 1, 2016 with automatic one year extensions subject to a 60 day termination notice by either party. As of May 31, 2013, we have not funded any of the aggregate principal balance and $350.0 million of our commitment remained unfunded.

We entered into a credit agreement with JEP IV, a related party, whereby we are committed to extend loans up to the maximum aggregate principal amount of $33.0 million. As of May 31, 2013, we funded approximately $21.6 million of the aggregate principal balance, which is included in Loans to and investments in related parties in our Consolidated Statements of Financial Condition and $11.4 million of our commitment remained unfunded.

The unfunded loan commitments to Jefferies Finance and JEP IV of $361.4 million in aggregate are unrated and included in the total unrated lending commitments of $523.0 million presented in the table above.

Mortgage-Related Commitments. We enter into forward contracts to purchase mortgage participation certificates and mortgage-backed securities. The mortgage participation certificates evidence interests in mortgage loans insured by the Federal Housing Administration and the mortgage-backed securities are insured or guaranteed by the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Government National Mortgage Association (Ginnie Mae). We frequently securitize the mortgage participation certificates and mortgage-backed securities. The fair value of mortgage-related commitments recorded in the Consolidated Statement of Financial Condition was $30.8 million at May 31, 2013.

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.

Contingencies

Seven putative class action lawsuits have been filed in New York and Delaware concerning the merger transactions whereby Jefferies Group LLC became a wholly owned subsidiary of Leucadia. The class actions, filed on behalf of our shareholders prior to the merger transactions, name as defendants Jefferies Group, Inc., the members of the board of directors of Jefferies Group, Inc., Leucadia and, in certain of the actions, certain merger-related subsidiaries. The actions allege that the directors breached their fiduciary duties in connection with the merger transactions by engaging in a flawed process and agreeing to sell Jefferies Group, Inc. for inadequate consideration pursuant to an agreement that contains improper deal protection terms. The actions allege that Jefferies Group, Inc. and Leucadia aided and abetted the directors’ breach of fiduciary duties. The actions filed in New York have been stayed, and the actions filed in Delaware are proceeding. We are unable to predict the outcome of this litigation or to estimate the amount of or range of any reasonably possible loss.

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 U.S. 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 U.S. GAAP at May 31, 2013 (in millions):


	Expected Maturity Date
					2015		2017		2019		Notional/
					and		and		and		Maximum
Guarantee Type	2013		2014		2016		2018		Later		Payout

Derivative contracts - non-credit related	$	838,343.7	$	3,148.5	$	42.6	$	1.2	$	59.7	$	841,595.7

Written derivative contracts - credit related		—		—		—		7,388.5		—		7,388.5


Total derivative contracts	$	838,343.7	$	3,148.5	$	42.6	$	7,389.7	$	59.7	$	848,984.2

At May 31, 2013 the external credit ratings of the underlyings or referenced assets for our credit related derivatives contracts (in millions):


	External Credit Rating
									Below				Notional/
	AAA/								Investment				Maximum
	Aaa		AA/Aa		A		BBB/Baa		Grade		Unrated		Payout

Credit related derivative contracts:
Single name credit default swaps	$	7.5	$	—	$	40.0	$	203.0	$	—	$	—	$	250.5
Index credit default swaps		7,138.0		—		—		—		—		—		7,138.0

The derivative contracts deemed to meet the definition of a guarantee under U.S. 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 May 31, 2013, the fair value of derivative contracts meeting the definition of a guarantee is approximately $87.6 million.

Stand by Letters of Credit. At May 31, 2013, we provided guarantees to certain counterparties in the form of standby letters of credit in the amount of $22.9 million, which expire within one year. Stand by 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.

Other Guarantees. We are members of various exchanges and clearing houses. In the normal course of business we provide guarantees to securities clearinghouses 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 clearinghouse, other members would be required to meet these shortfalls. To mitigate these performance risks, the exchanges and clearinghouses 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.