<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) March 17, 1998
-------------------------
Investment Technology Group, Inc.
- -----------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-23644 13-3757717
- -----------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
380 Madison Avenue, New York, New York 10017
- -----------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 588-4000
-------------------------
- -----------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 5. Other Events
On March 17, 1998, Jefferies Group, Inc. ("Group") and Investment
Technology Group, Inc. ("ITGI") jointly announced plans to separate Group's
100%-owned subsidary, Jefferies & Company, Inc., and Group's 82.3%-owned
subsidiary, ITGI, through a proposed spin-off and related transactions.
Attached hereto and incorporated herein by reference as though a part hereof
are (i) a joint press release announcing the proposed spin-off and related
transactions (Exhibit 99.1) and (ii) information made available to
stockholders concerning the transactions and separation, as included on the
website of Group and ITGI (Exhibit 99.2).
Item 7. Financial Statements and Exhibits
EXHIBIT INDEX
Exhibit No. Exhibit Description
- ----------- -------------------
99.1 Joint press release of Group and ITGI concerning proposed
spin-off and related transactions.
99.2 Unaudited financial information concerning Group and ITGI.
<PAGE>
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 hereunto duly authorized.
Investment Technology Group, Inc.
---------------------------------
(Registrant)
Date March 18, 1998 By /s/ John R. MacDonald
------------------------------ ---------------------------------
John R. MacDonald
Senior Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
March 17, 1998
CONTACT: JEFFERIES GROUP
CLARENCE T. SCHMITZ
(310) 914-1164
INVESTMENT TECHNOLOGY GROUP
JOHN R. MACDONALD
(212) 444-6252
JEFFERIES GROUP AND INVESTMENT TECHNOLOGY GROUP
ANNOUNCE PLAN TO SEPARATE INTO TWO INDEPENDENT COMPANIES
LOS ANGELES -- Jefferies Group, Inc. (NYSE: JEF) and Investment Technology
Group, Inc. (NASDAQ: ITGI) today announced plans to separate Jefferies &
Company, Inc. and Investment Technology Group, Inc. through a spin-off.
Jefferies Group, Inc. is a holding company for two principal lines of
business: a full-service global investment bank serving institutions and
small- to medium-sized corporations (referred to in this release as "JEFCO");
and 82.3 percent-owned Investment Technology Group, Inc., the leading
provider of technology-based equity trading services and transaction research
to institutional investors and brokers.
According to the plan, Jefferies Group shareholders will own 100% of JEFCO
and approximately 82.3% of ITGI when the transaction closes. The public ITGI
shareholders will continue to own approximately 17.7% of ITGI. The spin-off
will be accomplished by a tax-free distribution of 100% of the shares of a
new holding company, JEFCO, to Jefferies Group shareholders. Jefferies
Group's 15 million shares of ITGI would then be its only asset. The
spin-off would be followed immediately by a tax-free merger of Jefferies
Group and ITGI.
Jefferies Group will seek a ruling from the IRS regarding the tax-free nature
of the distribution of JEFCO and expects to complete the transaction by the
end of the year.
Jefferies Group and ITGI expect that both companies will have financial
strength and flexibility for future growth. The spin-off plan calls for:
- - Increasing JEFCO's capital base through a combination of Jefferies Group
stock option exercises, termination of Jefferies Group's deferred
compensation plan, various tax benefits and a special dividend of
approximately $50-75 million from ITGI to all of its stockholders.
<PAGE>
- - Assumption by JEFCO of Jefferies Group's existing $150 million senior
unsecured debt obligation.
- - Establishing an employee stock ownership plan at JEFCO, which will further
align the interests of employees and stockholders at JEFCO by providing
equity-based compensation incentives linked directly to JEFCO's operating
performance.
The spin-off and restructuring transactions are contingent on a number of
factors, including receipt of all required Board of Directors and shareholder
approvals of Jefferies Group and ITGI, receipt of a favorable tax ruling from
the IRS and other required regulatory and contractual approvals.
Jefferies Group Chairman and Chief Executive Officer Frank Baxter said, "Our
goal is to maximize value for the shareholders of Jefferies Group and ITGI.
By pursuing separate destinies each firm will be better understood by
investors, better equipped to sharpen its focus on serving clients, and
better able to take advantage of opportunities unique to its business. Each
firm has separate, seasoned management teams and highly motivated employees
who will help to ensure a smooth and rapid transition."
ITGI President and Chief Executive Officer Scott Mason said, "We are very
excited by the prospect of this spin-off, which should increase the depth and
breadth of the market for ITGI's common stock. As an independent company,
ITGI will have greater flexibility with its capital structure and will have
the opportunity to use its common stock to raise capital and make
acquisitions. We hope to use this flexibility to invest in businesses that
create a seamless infrastructure for trading stocks and developing
high-content, leading-edge research products."
JEFCO, a global investment bank, is the principal operating business of
Jefferies Group, Inc. Its focus is on capital raising, research, mergers and
acquisitions, advisory and restructuring services for small- to medium-sized
companies, and trading in equity and taxable fixed-income securities,
convertible bonds, options, futures and international securities for
institutional clients. In 1997, JEFCO completed for a client the largest
solely-managed high yield transaction of this decade.
ITGI, through its wholly-owned broker-dealer subsidiary, ITG Inc. (ITG), is
the leading provider of technology-based equity trading services and
transaction research to institutional investors and brokers. ITG services
help clients to access liquidity, execute trades more efficiently, and make
better trading decisions. With an emphasis on ongoing research, ITG offers
the following services: ITG POSIT-Registered Trademark-, an electronic stock
crossing system; ITG QuantEX-Registered Trademark-, a decision-support and
routing system; Electronic Trading Desk Services, offering customers trading
capabilities through the ITG trading desk, which utilizes multiple sources of
liquidity; ITG Platform, a PC based routing system; and ITG ISIS, a set of
analytical tools for systematically lowering transactions costs.
<PAGE>
Further information regarding the planned spin-off, including historical
financial data on both companies, can be found at Jefferies Group's website,
WWW.JEFCO.COM and ITGI's website, WWW.ITGINC.COM. Jefferies Group has
retained J.P. Morgan & Co., Incorporated as its advisor in this transaction.
Jefferies Group has more than 1,000 investment and technology professionals
with offices in Los Angeles, New York, Short Hills, Chicago, Dallas, Boston,
Atlanta, New Orleans, Houston, Jersey City, San Francisco, Stamford, London,
Hong Kong, Zurich and Tokyo.
This press release contains statements concerning the timing, structure and
ramifications of the proposed spin-off and related transactions that are
intended to be "forward-looking statements", as that phrase is defined by the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements, which can be identified by the use of terms such as "plan",
"anticipate", "will", "would", "expect", "estimate" or variations of such
terms, may not occur as presently anticipated in the event necessary
approvals are not obtained or are not obtained on acceptable terms or in the
event of adverse developments in the market for Jefferies Group or ITGI
securities or in securities markets in general. As a result, no
forward-looking statement should be regarded as a representation by Jefferies
Group, ITGI or any other person that the presently anticipated events will
occur as described herein.
####
<PAGE>
EXHIBIT 99.2
JEFFERIES GROUP, INC.
UNAUDITED FINANCIAL INFORMATION
RELATING TO PLANNED SPIN-OFF
[LOGO] JEFFERIES
-----------
GROUP, INC.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PAGE
----
<TABLE>
<S> <C>
HIGHLIGHTS
PLANNED TRANSACTION. . . . . . . . . . . . . . . . . . . . 1-3
SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . 4-7
APPENDIX
JEFFERIES GROUP, INC. CONSOLIDATING FINANCIAL INFORMATION
STATEMENTS OF FINANCIAL CONDITION . . . . . . . . . . A
STATEMENTS OF EARNINGS. . . . . . . . . . . . . . . . B
</TABLE>
This document contains statements concerning the timing, structure and
ramifications of the proposed spin-off and related transactions that are
intended to be "forward-looking statements", as that phrase is defined by the
Private Securities Litigation Reform Act of 1995. Forward-looking statements,
which can be identified by the use of terms such as "plan", "anticipate",
"will", "would", "expect", "estimate" or variations of such terms, may not
occur as presently anticipated in the event necessary approvals are not
obtained or are not obtained on acceptable terms or in the event of adverse
developments in the market for Jefferies Group or ITGI securities or in
securities markets in general. As a result, no forward-looking statement
should be regarded as a representation by Jefferies Group, ITGI or any other
person that the presently anticipated events will occur as described herein.
<PAGE>
PLANNED TRANSACTION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
On March 17, 1998, Jefferies Group, Inc. and Investment Technology Group, Inc.
announced plans to separate Jefferies & Company, Inc. and Investment Technology
Group, Inc. through a spin-off.
Jefferies Group, Inc. is a holding company for two principal lines of business:
a full-service global investment bank serving institutions and small- to medium-
sized corporations (referred to in this document as "JEFCO"); and 82.3 percent-
owned Investment Technology Group, Inc., the leading provider of technology-
based equity trading services and transaction research to institutional
investors and brokers.
According to the plan, Jefferies Group shareholders will own 100% of JEFCO and
approximately 82.3% of ITGI when the transaction closes. The public ITGI
shareholders will continue to own approximately 17.7% of ITGI. The spin-off
will be accomplished by a tax-free distribution of 100% of the shares of a new
holding company, JEFCO, to Jefferies Group shareholders. Jefferies Group's 15
million shares of ITGI would then be its only asset. (As of December 31, 1997,
total outstanding shares of ITGI were 18.2 million.) The spin-off would be
followed immediately by a tax-free merger of Jefferies Group and ITGI.
Jefferies Group will seek a ruling from the IRS regarding the tax-free nature
of the distribution of JEFCO and expects to complete the transaction by the end
of the year.
1
<PAGE>
PLANNED TRANSACTION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Jefferies Group and ITGI expect that both companies will have financial
strength and flexibility for future growth. The spin-off plan calls for:
- Increasing JEFCO's capital base through a combination of Jefferies
Group stock option exercises, termination of Jefferies Group's
deferred compensation plan, various tax benefits and a special
dividend of approximately $50-75 million from ITGI to all of its
stockholders. It is currently anticipated that at the transaction
closing date, JEFCO will have a minimum equity capital base of $320
million and ITGI will have a minimum equity capital base of $20
million.
- Assumption by JEFCO of Jefferies Group's existing $150 million senior
unsecured debt obligation.
- Establishing an employee stock ownership plan at JEFCO, which will
further align the interests of employees and stockholders at JEFCO by
providing equity-based compensation incentives linked directly to
JEFCO's operating performance.
The spin-off and restructuring transactions are contingent on a number of
factors, including receipt of all required Board of Directors and shareholder
approvals of Jefferies Group and ITGI, receipt of a favorable tax ruling from
the IRS and other required regulatory and contractual approvals.
2
<PAGE>
PLANNED TRANSACTION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
--------------
| JEF GROUP |
|----------------------| SHAREHOLDERS |
| | 100% OWNERSHIP|
| --------------
| |
| --------------------- ------------------
| | [LOGO] JEFFERIES | | ITGI |
| | ----------- | | MINORITY INTEREST|
| | GROUP, INC. |----------------| |
| ---------| | | |
| | | 82% OWNERSHIP| | 18% OWNERSHIP |
| | --------------------- ------------------
SPIN-OFF | | |
| | | UPSTREAM MERGER |
| | | ------------------ |
| | - Post Spin-Off | - MERGE ITGI INTO JEF GROUP AND |
| | Minimum Equity: $20mm | EXCHANGE MINORITY INTEREST |
| | | SHARES IN ITGI FOR JEF GROUP |
| | | SHARES |
| | | - CHANGE JEF GROUP NAME TO ITGI |
| | | |
| | | |
| | | |
-------------- | --------------- |
| | | | INVESTMENT | |
| "JEFCO" | ---------| TECHNOLOGY |------------
| | | GROUP, INC. |
------------- ---------------
- Post Spin-Off Minimum Capital: $470mm
- Post Spin-Off Minimum Capital: $320mm
3
<PAGE>
JEFFERIES GROUP, INC. CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT(a)
Net Revenues $ 703,038 $ 478,774 $ 351,222 $ 262,538 $ 292,789
Operating Income 115,950 83,187 53,238 30,779 47,344
Earnings before income taxes, minority interest,
and cumulative effect on change in accounting
principle 115,950 83,187 53,238 39,036 47,344
Income Taxes 47,677 35,438 21,911 17,568 19,755
Minority Interest 4,706 4,189 2,798 1,244 0
--------------------------------------------------------------------------
Net Earnings $ 63,567 $ 43,560 $ 28,529 $ 20,224 $ 28,947(b)
EARNINGS PER SHARE
Diluted Earnings $ 2.80 $ 1.84 $ 1.19 $ 0.81 $ 1.22
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET(a)
Cash, Cash Equivalents, and Short Term Investments $ 224,465 $ 180,435 $ 72,821 $ 73,533 $ 28,914
Total Assets 2,099,542 1,568,087 1,536,969 1,557,348 1,388,403
Long-Term Debt 149,290 52,987 56,322 59,570 9,968
Stockholders' Equity 242,756 195,445 186,261 163,235 144,558
SELECTED RATIOS:
Pre-Tax Margin (as a % of Net Revenue) 16% 17% 15% 15% 16%
Return on Average Equity 30% 23% 17% 13% 25%
Book Value Per Share Outstanding $ 11.97 $ 9.43 $ 8.28 $ 7.28 $ 6.35
Shares Outstanding 20,286 20,726 22,514 22,420 22,782
Diluted Weighted Average Shares Outstanding 22,349 23,410 23,922 24,756 24,664
</TABLE>
(a) ITGI is fully consolidated into Jefferies Group, Inc. The minority
interest in ITGI is recorded as a liability. This liability representing
the minority interest is increased each period by the minority's share of
net income from ITGI and such amount is deducted from the determination of
net earnings from Jefferies Group, Inc.
(b) Includes cumulative adjustment of $1.4 million due to adoption of
accounting standard in 1993.
4
<PAGE>
JEFFERIES GROUP, INC. CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL REVENUE GROWTH & COMPOSITION
<TABLE>
<CAPTION>
[GRAPH]
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
$800 $765
17%
$600 $517
$406 21%
ITGI
$400 $310 $304 18% JEFCO
16% 18% 83%
$200 79%
82%
84% 82%
$ 0
1993 1994 1995 1996 1997
</TABLE>
5
<PAGE>
SEGMENT FINANCIAL INFORMATION - "JEFCO"
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
The following represents historical financial information of Jefferies Group,
Inc.'s core brokerage and banking business - "JEFCO."
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
Net Revenues $ 569,528 $ 369,183 $ 279,939 $ 206,968 $ 243,470
Operating Income 68,690 42,186 28,350 13,007 40,918
Contribution to Consolidated Jefferies Group, Inc.
Net Earnings 41,356 24,414 16,422 29,330(b) 25,620
EARNINGS PER SHARE
Contribution to Consolidated Jefferies Group, Inc.
Diluted Earnings)(a) $ 1.85 $ 1.04 $ 0.69 $ 1.18 $ 1.04
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET
Cash, Cash Equivalents, and Short Term Investments $ 173,202 $ 136,480 $ 54,861 $ 52,087 $ 22,904
Total Assets 1,994,684 1,493,117 1,497,351 1,526,869 1,376,293
Long-Term Debt 149,290 52,987 56,322 59,570 9,968
Stockholders' Equity 165,568 140,314 149,163 137,478 130,714
SELECTED RATIOS:
Pre-Tax Margin (as a % of Net Revenue) 12% 11% 10% 25% 17%
Return on Average Equity 27% 17% 11% 22% 24%
</TABLE>
(a) Contribution is calculated based on consolidated Jefferies Group, Inc.
diluted weighted average shares outstanding.
(b) Contribution to consolidated Jefferies Group, Inc. net earnings in 1994
includes a one-time after tax gain of approximately $22 million or $.89
per diluted share related to the IP0 of ITGI
6
<PAGE>
SEGMENT FINANCIAL INFORMATION - "ITGI"
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
The following represents historical financial information of Jefferies Group,
Inc.'s equity ownership of approximately 82% currently of Investment Technology
Group, Inc. - "ITGI."
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
Net Revenues $ 136,896 $ 111,333 $ 72,328 $ 56,706 $ 49,316
Contribution to Consolidated Jefferies Group, Inc.
Net Earnings (Loss)(a) 22,211 19,146 12,107 (9,106)(c) 3,327
EARNINGS (LOSS) PER SHARE
Contribution to Consolidated Jefferies Group, Inc.
Diluted Earnings(b) $ 0.95 $ 0.80 $ 0.50 $ (0.37)(c) $ 0.18
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET
Cash, Cash Equivalents, and Short Term Investments $ 51,263 $ 43,955 $ 17,960 $ 21,446 $ 6,010
Total Assets 113,641 82,798 55,318 38,354 23,496
Long-Term Debt 0 0 0 0 0
SELECTED RATIOS:
Pre-Tax Margin (as a % of Net Revenue) 35% 37% 34% (22%) 13%
</TABLE>
(a) Contribution to consolidated Jefferies Group, Inc. net earnings (loss)
represent Jefferies Group, Inc.'s ownership percentage of approximately
82% of ITGI from May 1994 to present. Previous to May 1994, ITGI was a
wholly owned subsidiary of Jefferies Group, Inc.
(b) Contribution is calculated based on consolidated Jefferies Group, Inc.
diluted weighted average shares outstanding including earnings adjustments
for stock options on ITGI.
(c) Contribution to consolidated Jefferies Group, Inc. net earnings in 1994
includes a non-recurring, after tax charge of approximately $20 million or
$.80 per diluted share related to termination of plans expense.
7
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
JEFFERIES GROUP INC. HISTORICAL CONSOLIDATING STATEMENTS OF FINANCIAL CONDITION
The following table represents the historical assets and liabilities of
Jefferies Group, Inc. broken down between its core brokerage and banking
business - "JEFCO" - and its approximately 82% ownership interest of ITGI.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) AS OF DECEMBER 31, 1997
--------------------------------------------
--------------------------------------------
JEFFERIES
ITGI(a) JEFCO(a) GROUP, INC.
--------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $51,263 $58,225 $109,488
Cash and securities segregated and on deposit for
regulatory purposes or deposited with clearing and
depository organizations 0 30,977 30,977
Receivables from brokers and dealers 2,931 1,269,664 1,269,664
Receivables from customers, officers and directors 0 166,284 166,284
Securities owned 358 245,055 245,413
Investments 10,935 143,649 154,584
Premises and equipment 19,506 23,322 42,828
Other assets 28,648 57,508 80,304
--------------------------------------------
$113,641 $1,994,684 $2,099,542
--------------------------------------------
--------------------------------------------
LIABILITIES AND
STOCKHOLDERS'EQUITY
Payable to brokers and dealers $0 $981,705 $981,705
Payable to customers 0 202,255 202,255
Securities sold, not yet purchased 3 188,700 188,703
Accrued expenses and other liabilities 19,875 307,166 318,258
--------------------------------------------
19,878 1,679,826 1,690,921
Long-term debt 0 149,290 149,290
Minority interest 16,575 0 16,575
--------------------------------------------
36,453 1,829,116 1,856,786
Stockholders' equity 77,188 165,568 242,756
--------------------------------------------
$113,641 $1,994,684 $2,099,542
--------------------------------------------
--------------------------------------------
<CAPTION>
AS OF DECEMBER 31, 1996
--------------------------------------------
--------------------------------------------
JEFFERIES
ITGI(a) JEFCO(a) GROUP, INC.
--------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $43,955 $70,187 $114,142
Cash and securities segregated and on deposit for
regulatory purposes or deposited with clearing and
depository organizations 0 29,107 29,107
Receivables from brokers and dealers 2,812 965,625 965,625
Receivables from customers, officers and directors 0 113,872 113,872
Securities owned 4,808 192,962 197,770
Investments 5,193 45,416 50,609
Premises and equipment 8,442 22,429 30,871
Other assets 17,588 53,519 66,091
--------------------------------------------
$82,798 $1,493,117 $1,568,087
--------------------------------------------
--------------------------------------------
LIABILITIES AND
STOCKHOLDERS'EQUITY
Payable to brokers and dealers $0 $805,713 $805,713
Payable to customers 0 170,384 170,384
Securities sold, not yet purchased 1,226 123,089 124,315
Accrued expenses and other liabilities 14,479 200,630 207,281
--------------------------------------------
15,705 1,299,816 1,307,693
Long-term debt 0 52,987 52,987
Minority interest 11,962 0 11,962
--------------------------------------------
27,667 1,352,803 1,372,642
Stockholders' equity 55,131 140,314 195,445
--------------------------------------------
$82,798 $1,493,117 $1,568,087
--------------------------------------------
--------------------------------------------
</TABLE>
(a) Each company's financial statements, which are shown here on a stand
alone basis, include intercompany balances which would eliminate in
consolidation. As a result, the sum of the two companies may not total
the consolidated Jefferies Group, Inc. balance shown.
<PAGE>
APPENDIX B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
JEFFERIES GROUP, INC. HISTORICAL CONSOLIDATING STATEMENTS OF EARNINGS
The following table represents the results of operations of Jefferies Group,
Inc. broken down between its core brokerage and banking business -"JEFCO" - and
its approximately 82% ownership interest of ITGI.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) FOR THE YEAR ENDED DECEMBER 31, 1997
----------------------------------------
----------------------------------------
JEFFERIES
ITGI(a) JEFCO(a) GROUP, INC.
----------------------------------------
<S> <C> <C> <C>
Total revenues $137,042 $630,842 $764,504
Interest expense 146 61,314 61,466
----------------------------------------
Revenues, net of interest expense 136,896 569,528 703,038
Total non-interest expenses 89,636 500,838 587,088
----------------------------------------
Earnings before income taxes and minority interest 47,260 68,690 115,950
Income taxes 20,343 27,334 47,677
----------------------------------------
Earnings before minority interest 26,917 41,356 68,273
Minority interest 4,706 0 4,706
----------------------------------------
Net earnings $22,211 $41,356 $63,567
EARNINGS PER SHARE
Basic Earnings(a) $1.03 $1.92 $2.95
Diluted Earnings(b) $0.95 $1.85 $2.80
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
----------------------------------------
----------------------------------------
JEFFERIES
ITGI(a) JEFCO(a) GROUP, INC.
----------------------------------------
<S> <C> <C> <C>
Total revenues $111,556 $407,023 $516,626
Interest expense 223 37,840 37,852
----------------------------------------
Revenues, net of interest expense 111,333 369,183 478,774
Total non-interest expenses 70,332 326,997 395,587
----------------------------------------
Earnings before income taxes and minority interest 41,001 42,186 83,187
Income taxes 17,666 17,772 35,438
----------------------------------------
Earnings before minority interest 23,335 24,414 47,749
Minority interest 4,189 0 4,189
----------------------------------------
Net earnings $19,146 $24,414 $43,560
EARNINGS PER SHARE
Basic Earnings(a) $0.84 $1.06 $1.90
Diluted Earnings(b) $0.80 $1.04 $1.84
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
----------------------------------------
----------------------------------------
JEFFERIES
ITGI(a) JEFCO(a) GROUP, INC.
----------------------------------------
<S> <C> <C> <C>
Total revenues $72,381 $334,282 $405,587
Interest expense 53 54,343 54,365
----------------------------------------
Revenues, net of interest expense 72,328 279,939 351,222
Total non-interest expenses 47,440 251,589 297,984
----------------------------------------
Earnings before income taxes and minority interest 24,888 28,350 53,238
Income taxes 9,983 11,928 21,911
----------------------------------------
Earnings before minority interest 14,905 16,422 31,327
Minority interest 2,798 0 2,798
----------------------------------------
Net earnings $12,107 $16,422 $28,529
EARNINGS PER SHARE
Basic Earnings(a) $0.52 $0.71 $1.23
Diluted Earnings(b) $0.50 $0.69 $1.19
</TABLE>
(a) Each company's financial statements, which are shown here on a stand alone
basis, include intercompany balances which would eliminate in
consolidation. As a result, the sum of the two companies may not total
the consolidated Jefferies Group, Inc. balance shown.
(b) For ITGI and JEFCO, the earnings per share represent the contribution to
consolidated Jefferies Group, Inc. earnings per share for basic and
diluted.
