**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

** **
| **x**                                                       | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|-------------------------------------------------------------|----------------------------------------------------------------------------------------------------|
|                                                        |                                                                                               |
| **For the quarterly period ended  September 30, 2009** |
|                                                        |                                                                                               |
| **OR**                                                      |
|                                                        |                                                                                               |
| **o**                                                       | **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 001-15253**

 

****

 

**Janus Capital Group Inc.**

(Exact name of registrant as specified in itscharter)

 

| **Delaware**                              | ** ** | **43-1804048**      |
|-------------------------------------------|------------|---------------------|
| (State or other  jurisdiction of          |       | (I.R.S. Employer    |
| incorporation or  organization)           |       | Identification No.) |
|                                      |       |                |
| **151 Detroit Street, Denver,  Colorado** | ** ** | **80206**           |
| (Address of principal  executive offices) |       | (Zip Code)          |

 

**(303) 333-3863**

(Registrant’s telephone number, includingarea code)

 

**Not applicable**

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

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theCompany was required to file such reports), and (2) has been subject tothe filing requirements for the past 90 days.   Yes x  No o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).   Yes o  No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reportingcompany.  See the definitions of “largeaccelerated filer,” “accelerated filer,” “non-accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 

| Large Accelerated Filer x |   | Accelerated Filer o         |
|--------------------------------|--------|----------------------------------|
|                           |   |                             |
| Non-Accelerated Filer o   |   | Smaller Reporting Company o |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).   Yes o  No x

 

As of October 19, 2009,there were 182,019,449 shares of the Company’s common stock, $.01 par value pershare, issued and outstanding.

 

 

 

----

 

**PART I - FINANCIAL INFORMATION**

**Item 1.  FinancialStatements**

 

**JANUS CAPITAL GROUP INC.**

** **

**CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

**(Dollars in Millions)**

 
| ** **                                      | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                      | ** ** | **2009**               | ** ** | **2008**              | ** ** |
| **ASSETS**                                      |       |                   |       |                  |       |
|                                            |       |                   |       |                  |       |
| **Current assets:**                             |       |                   |       |                  |       |
| Cash and cash equivalents                       |       | $                      | 236.4      |                  | $          | 282.6 |   |
| Marketable securities                           |       | 100.5                  |       | 125.3                 |       |
| Accounts receivable                             |       | 113.4                  |       | 101.1                 |       |
| Income taxes receivable                         |       | 22.9                   |       | 16.4                  |       |
| Other current assets                            |       | 72.3                   |       | 58.5                  |       |
| Total current assets                            |       | 545.5                  |       | 583.9                 |       |
|                                            |       |                   |       |                  |       |
| **Other assets:**                               |       |                   |       |                  |       |
| Other assets                                    |       | 77.4                   |       | 60.2                  |       |
| Property and equipment, net                     |       | 50.5                   |       | 51.1                  |       |
| Intangibles, net                                |       | 1,202.4                |       | 1,321.2               |       |
| Goodwill                                        |       | 574.6                  |       | 1,320.3               |       |
|                                            |       |                   |       |                  |       |
| Total assets                                    |       | $                      | 2,450.4    |                  | $          | 3,336.7 |   |
|                                            |       |                   |       |                  |       |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**  |       |                   |       |                  |       |
|                                            |       |                   |       |                  |       |
| **Current liabilities:**                        |       |                   |       |                  |       |
| Accounts payable                                |       | $                      | 4.4        |                  | $          | 0.5 |   |
| Accrued compensation and benefits               |       | 67.4                   |       | 90.0                  |       |
| Current portion of long-term debt               |       | —                 |       | 22.0                  |       |
| Other accrued liabilities                       |       | 82.6                   |       | 44.1                  |       |
| Total current liabilities                       |       | 154.4                  |       | 156.6                 |       |
|                                            |       |                   |       |                  |       |
| **Other liabilities:**                          |       |                   |       |                  |       |
| Long-term debt                                  |       | 790.2                  |       | 1,106.0               |       |
| Deferred income taxes                           |       | 387.7                  |       | 388.1                 |       |
| Other liabilities                               |       | 52.3                   |       | 62.4                  |       |
| Total liabilities                               |       | 1,384.6                |       | 1,713.1               |       |
|                                            |       |                   |       |                  |       |
| Commitments and contingencies                   |       |                   |       |                  |       |
|                                            |       |                   |       |                  |       |
| Redeemable noncontrolling interests             |       | 87.5                   |       | 106.8                 |       |
|                                            |       |                   |       |                  |       |
| **STOCKHOLDERS’ EQUITY**                   |       |                   |       |                  |       |
|                                            |       |                   |       |                  |       |
| Preferred  stock                                |       | —                 |       | —                |       |
| Common  stock                                   |       | 1.8                    |       | 1.6                   |       |
| Retained  earnings                              |       | 967.0                  |       | 1,510.6               |       |
| Accumulated  other comprehensive loss (income)  |       | 0.7                    |       | (5.3                  | )          |
| Total JCG stockholders’ equity             |       | 969.5                  |       | 1,506.9               |       |
| Noncontrolling  interests                       |       | 8.8                    |       | 9.9                   |       |
| Total stockholders’ equity                 |       | 978.3                  |       | 1,516.8               |       |
|                                            |       |                   |       |                  |       |
| Total liabilities and stockholders’ equity |       | $                      | 2,450.4    |                  | $          | 3,336.7 |   |

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

 

----

 

**JANUS CAPITAL GROUP INC.**

 

**CONSOLIDATEDSTATEMENTS OF INCOME (UNAUDITED)**

**(Dollarsin Millions, Except Per Share Data)**

 
| ** **                                                                         | ** ** | **Three months ended** | ** ** | **Nine months ended**  | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                                         | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                                         | ** ** | **2009**               | ** ** | **2008**               | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                                                               |       |                   |       |                   |       |   |   |   |   |
| **Revenues:**                                                                      |       |                   |       |                   |       |   |   |   |   |
| Investment  management fees                                                        |       | $                      | 185.4      |                   | $          | 218.9 |   | $ | 482.0 |   | $ | 684.2 |   |
| Performance  fees                                                                  |       | 7.4                    |       | 8.8                    |       | 17.3 |   | 26.0 |   |
| Shareowner  servicing fees and other                                               |       | 34.8                   |       | 47.7                   |       | 98.8 |   | 150.6 |   |
| Total                                                                              |       | 227.6                  |       | 275.4                  |       | 598.1 |   | 860.8 |   |
|                                                                               |       |                   |       |                   |       |   |   |   |   |
| **Operating Expenses:**                                                            |       |                   |       |                   |       |   |   |   |   |
| Employee  compensation and benefits                                                |       | 85.7                   |       | 81.2                   |       | 214.1 |   | 264.6 |   |
| Long-term  incentive compensation                                                  |       | 19.5                   |       | 10.7                   |       | 46.9 |   | 35.3 |   |
| Marketing  and advertising                                                         |       | 6.5                    |       | 8.0                    |       | 20.3 |   | 24.5 |   |
| Distribution                                                                       |       | 29.2                   |       | 36.5                   |       | 74.7 |   | 111.0 |   |
| Depreciation  and amortization                                                     |       | 8.7                    |       | 10.1                   |       | 25.6 |   | 30.7 |   |
| General,  administrative and occupancy                                             |       | 48.4                   |       | 35.6                   |       | 113.0 |   | 106.8 |   |
| Goodwill  and intangible asset impairments                                         |       | —                 |       | —                 |       | 856.7 |   | — |   |
| Total                                                                              |       | 198.0                  |       | 182.1                  |       | 1,351.3 |   | 572.9 |   |
|                                                                               |       |                   |       |                   |       |   |   |   |   |
| **Operating income (loss)**                                                        |       | 29.6                   |       | 93.3                   |       | (753.2 | ) | 287.9 |   |
|                                                                               |       |                   |       |                   |       |   |   |   |   |
| Interest  expense                                                                  |       | (18.6                  | )          | (18.9                  | )          | (58.2 | ) | (56.6 | ) |
| Investment  gains (losses), net                                                    |       | 0.9                    |       | (32.3                  | )          | (6.0 | ) | (38.8 | ) |
| Other  income, net                                                                 |       | 0.1                    |       | 1.4                    |       | 0.5 |   | 6.6 |   |
| Gain  on early extinguishment of debt                                              |       | 5.8                    |       | —                 |       | 5.8 |   | — |   |
| Income  (loss) before taxes and equity earnings                                    |       | 17.8                   |       | 43.5                   |       | (811.1 | ) | 199.1 |   |
|                                                                               |       |                   |       |                   |       |   |   |   |   |
| Income  tax provision                                                              |       | (6.0                   | )          | (17.2                  | )          | 26.5 |   | (65.5 | ) |
| Equity  in earnings of unconsolidated affiliate                                    |       | —                 |       | 2.5                    |       | — |   | 6.8 |   |
|                                                                               |       |                   |       |                   |       |   |   |   |   |
| Income  (loss) from continuing operations                                          |       | 11.8                   |       | 28.8                   |       | (784.6 | ) | 140.4 |   |
|                                                                               |       |                   |       |                   |       |   |   |   |   |
| Loss  from discontinued operations                                                 |       | —                 |       | (0.6                   | )          | — |   | (1.5 | ) |
|                                                                               |       |                   |       |                   |       |   |   |   |   |
| Net  income (loss)                                                                 |       | 11.8                   |       | 28.2                   |       | (784.6 | ) | 138.9 |   |
| Noncontrolling  interest                                                           |       | (3.6                   | )          | (2.8                   | )          | (9.5 | ) | (9.8 | ) |
|                                                                               |       |                   |       |                   |       |   |   |   |   |
| **Net income (loss) attributable to JCG**                                          |       | $                      | 8.2        |                   | $          | 25.4 |   | $ | (794.1 | ) | $ | 129.1 |   |
|                                                                               |       |                   |       |                   |       |   |   |   |   |
| **Basic earnings (loss) per share****attributable  to JCG common shareholders:**   |       |                   |       |                   |       |   |   |   |   |
| Income  (loss) from continuing operations                                          |       | $                      | 0.05       |                   | $          | 0.17 |   | $ | (4.89 | ) | $ | 0.82 |   |
| Loss  from discontinued operations                                                 |       | —                 |       | —                 |       | — |   | (0.01 | ) |
| Net  income (loss)                                                                 |       | $                      | 0.05       |                   | $          | 0.17 |   | $ | (4.89 | ) | $ | 0.81 |   |
|                                                                               |       |                   |       |                   |       |   |   |   |   |
| **Diluted earnings (loss) per share****attributable  to JCG common shareholders:** |       |                   |       |                   |       |   |   |   |   |
| Income  (loss) from continuing operations                                          |       | $                      | 0.05       |                   | $          | 0.16 |   | $ | (4.89 | ) | $ | 0.80 |   |
| Loss  from discontinued operations                                                 |       | —                 |       | —                 |       | — |   | (0.01 | ) |
| Net  income (loss)                                                                 |       | $                      | 0.05       |                   | $          | 0.16 |   | $ | (4.89 | ) | $ | 0.79 |   |
|                                                                               |       |                   |       |                   |       |   |   |   |   |
| **Amounts attributable to JCG common shareholders:**                               |       |                   |       |                   |       |   |   |   |   |
| Income  (loss) from continuing operations                                          |       | $                      | 8.2        |                   | $          | 26.0 |   | $ | (794.1 | ) | $ | 130.6 |   |
| Loss  from discontinued operations                                                 |       | —                 |       | (0.6                   | )          | — |   | (1.5 | ) |
| Net  income (loss)                                                                 |       | $                      | 8.2        |                   | $          | 25.4 |   | $ | (794.1 | ) | $ | 129.1 |   |

 

The accompanying notesare an integral part of these consolidated financial statements.

 

2

----

 

**JANUSCAPITAL GROUP INC.**

 

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS (UNAUDITED)**

**(Dollarsin Millions)**

 
| ** **                                                   | ** ** | **Nine months ended** | ** ** |
|--------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                   | ** ** | **September 30,**     | ** ** |
| ** **                                                   | ** ** | **2009**              | ** ** | **2008** | ** ** |
| **CASH  FLOWS PROVIDED BY (USED FOR):**                      |       |                  |       |   |   |
| **Continuing  Operations**                                   |       |                  |       |   |   |
| **Operating  Activities:**                                   |       |                  |       |   |   |
| Net income  (loss)                                           |       | $                     | (784.6     | ) | $ | 140.4 |   |
| Adjustments to  net income:                                  |       |                  |       |   |   |
| Depreciation and  amortization                               |       | 25.6                  |       | 30.7 |   |
| Deferred income  taxes                                       |       | (13.7                 | )          | (8.9 | ) |
| Amortization of  stock-based compensation                    |       | 30.3                  |       | 25.3 |   |
| Investment  losses, net                                      |       | 6.0                   |       | 38.8 |   |
| Goodwill and  intangible asset impairments                   |       | 856.7                 |       | — |   |
| Gain on early  extinguishment of debt                        |       | (5.8                  | )          | — |   |
| Payment of  deferred commissions, net                        |       | (5.7                  | )          | (2.2 | ) |
| Other, net                                                   |       | 5.4                   |       | 4.4 |   |
| Changes in  working capital items:                           |       |                  |       |   |   |
| Accounts  receivable                                         |       | (12.1                 | )          | 28.4 |   |
| Other current  assets                                        |       | (14.8                 | )          | (26.6 | ) |
| Accounts payable  and accrued compensation payable           |       | (18.7                 | )          | (46.3 | ) |
| Other  liabilities                                           |       | 12.3                  |       | (15.9 | ) |
| Net operating                                                |       | 80.9                  |       | 168.1 |   |
|                                                         |       |                  |       |   |   |
| **Investing  Activities:**                                   |       |                  |       |   |   |
| Purchase of  property and equipment                          |       | (8.1                  | )          | (14.1 | ) |
| Acquisitions                                                 |       | (1.3                  | )          | (67.7 | ) |
| Purchase of  marketable securities                           |       | (49.2                 | )          | (63.7 | ) |
| Proceeds from  sales and maturities of marketable securities |       | 55.3                  |       | 65.8 |   |
| Distribution of  cash from discontinued operations           |       | —                |       | 13.5 |   |
| Net investing                                                |       | (3.3                  | )          | (66.2 | ) |
|                                                         |       |                  |       |   |   |
| **Financing  Activities:**                                   |       |                  |       |   |   |
| Proceeds from  issuance of long-term debt                    |       | 170.0                 |       | — |   |
| Debt issuance  costs                                         |       | (8.5                  | )          | — |   |
| Repayment of  long-term debt                                 |       | (456.0                | )          | — |   |
| Issuance of  common stock                                    |       | 218.1                 |       | — |   |
| Purchase of  noncontrolling interests                        |       | (27.5                 | )          | — |   |
| Proceeds from  stock plans                                   |       | 0.9                   |       | 21.5 |   |
| Excess tax  benefit from equity-based compensation           |       | 0.4                   |       | 4.4 |   |
| Repurchase of  common stock                                  |       | —                |       | (289.8 | ) |
| Distributions to  noncontrolling interest                    |       | (14.2                 | )          | (14.6 | ) |
| Principal  payments under capital lease obligations          |       | (0.5                  | )          | — |   |
| Dividends paid  to shareholders                              |       | (6.5                  | )          | (6.5 | ) |
| Net financing                                                |       | (123.8                | )          | (285.0 | ) |
|                                                         |       |                  |       |   |   |
| **Cash  and Cash Equivalents:**                              |       |                  |       |   |   |
| Net decrease                                                 |       | (46.2                 | )          | (183.1 | ) |
| At beginning of  period                                      |       | 282.6                 |       | 480.7 |   |
| At end of period                                             |       | $                     | 236.4      |   | $ | 297.6 |   |
|                                                         |       |                  |       |   |   |
| **Discontinued  Operations:**                                |       |                  |       |   |   |
| Operating  activities                                        |       | $                     | (0.1       | ) | $ | (5.0 | ) |
| Investing  activities                                        |       | —                |       | 2.8 |   |
|                                                         |       |                  |       |   |   |
| Cash and Cash  Equivalents:                                  |       |                  |       |   |   |
| Net decrease                                                 |       | (0.1                  | )          | (2.2 | ) |
| At beginning of  period                                      |       | 0.4                   |       | 4.3 |   |
| At end of period                                             |       | $                     | 0.3        |   | $ | 2.1 |   |
|                                                         |       |                  |       |   |   |
| **Supplemental  Cash Flow Information:**                     |       |                  |       |   |   |
| Cash paid for  interest                                      |       | $                     | 47.5       |   | $ | 44.0 |   |
| Cash paid  (received) for income taxes                       |       | $                     | (0.6       | ) | $ | 94.1 |   |

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

3

----

 

**JANUS CAPITAL GROUP INC.**

 

**CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’EQUITY (UNAUDITED)**

**(Amounts in Millions, Except Per Share Data)**

 
| ** **                                                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **   | ** ** | **Accumulated**   | ** ** | ** **         | ** ** | ** **             | ** ** |
|------------------------------------------------------------------------------|------------|------------|------------|------------|------------|--------------|------------|-------------------|------------|--------------------|------------|------------------------|------------|
| ** **                                                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **   | ** ** | **Other**         | ** ** | **Nonredeemable**  | ** ** | **Total**              | ** ** |
| ** **                                                                   | ** ** | ** ** | ** ** | **Common** | ** ** | **Retained** | ** ** | **Comprehensive** | ** ** | **Noncontrolling** | ** ** | **Stockholders’** | ** ** |
| ** **                                                                   | ** ** | **Shares** | ** ** | **Stock**  | ** ** | **Earnings** | ** ** | **Income**        | ** ** | **Interest**       | ** ** | **Equity**             | ** ** |
|                                                                         |       |       |       |       |       |         |       |              |       |               |       |                   |       |
| **Balance  at December 31, 2007**                                            |       | 166.3      |       | $          | 1.7        |         | $          | 1,717.0           |       | $                  | 4.8        |                   | $          | — |   | $ | 1,723.5 |   |
| Cumulative-effect  adjustment for the adoption of a new accounting principle |       | —     |       | —     |       | (236.7       | )          | —            |       | 7.1                |       | (229.6                 | )          |
| **Balance  at January 1, 2008**                                              |       | 166.3      |       | 1.7        |       | 1,480.3      |       | 4.8               |       | 7.1                |       | 1,493.9                |       |
| Net income  attributable to JCG                                              |       |       |       |       |       | 136.9        |       |              |       | 2.4                |       | 139.3                  |       |
| Net unrealized  loss on marketable securities                                |       |       |       |       |       |         |       | (3.8              | )          |               |       | (3.8                   | )          |
| Amortization of  net loss on cash flow hedge                                 |       |       |       |       |       |         |       | 0.5               |       |               |       | 0.5                    |       |
| Reclassification  for net gains included in net income                       |       |       |       |       |       |         |       | (0.9              | )          |               |       | (0.9                   | )          |
| Foreign currency  translation adjustment                                     |       |       |       |       |       |         |       | (5.9              | )          |               |       | (5.9                   | )          |
| *Comprehensive  income*                                                      |       |       |       |       |       |         |       |              |       |               |       | 129.2                  |       |
| Amortization of  stock-based compensation                                    |       |       |       |       |       | 29.3         |       |              |       | 2.1                |       | 31.4                   |       |
| Issuance and  forfeitures of restricted stock awards                         |       | 1.6        |       |       |       |         |       |              |       |               |       | —                 |       |
| Tax impact of  stock-based compensation                                      |       |       |       |       |       | 3.4          |       |              |       |               |       | 3.4                    |       |
| Stock option  exercises                                                      |       | 1.1        |       |       |       | 21.6         |       |              |       |               |       | 21.6                   |       |
| Repurchase of  common stock                                                  |       | (11.1      | )          | (0.1       | )          | (291.6       | )          |              |       |               |       | (291.7                 | )          |
| Noncontrolling  interest in consolidated investment products                 |       |       |       |       |       |         |       |              |       | 1.1                |       | 1.1                    |       |
| Purchase of noncontrolling  interests                                        |       |       |       |       |       |         |       |              |       | (0.3               | )          | (0.3                   | )          |
| Distributions to  noncontrolling interests                                   |       |       |       |       |       |         |       |              |       | (2.5               | )          | (2.5                   | )          |
| Change in value  of redeemable noncontrolling interest                       |       |       |       |       |       | 137.2        |       |              |       |               |       | 137.2                  |       |
| Common stock  dividends ($0.04 per share)                                    |       |       |       |       |       | (6.5         | )          |              |       |               |       | (6.5                   | )          |
| **Balance  at December 31, 2008**                                            |       | 157.9      |       | 1.6        |       | 1,510.6      |       | (5.3              | )          | 9.9                |       | 1,516.8                |       |
|                                                                         |       |       |       |       |       |         |       |              |       |               |       |                   |       |
| Net loss  attributable to JCG                                                |       |       |       |       |       | (794.1       | )          |              |       | 2.1                |       | (792.0                 | )          |
| Net unrealized  gain on marketable securities                                |       |       |       |       |       |         |       | 4.1               |       |               |       | 4.1                    |       |
| Amortization of  net loss on cash flow hedge                                 |       |       |       |       |       |         |       | 1.1               |       |               |       | 1.1                    |       |
| Foreign currency  translation adjustment                                     |       |       |       |       |       |         |       | 0.8               |       |               |       | 0.8                    |       |
| *Comprehensive  income*                                                      |       |       |       |       |       |         |       |              |       |               |       | (786.0                 | )          |
| Common stock  issuance                                                       |       | 20.9       |       | 0.2        |       | 217.9        |       |              |       |               |       | 218.1                  |       |
| Convertible debt  issuance                                                   |       |       |       |       |       | 26.4         |       |              |       |               |       | 26.4                   |       |
| Amortization of  stock-based compensation                                    |       |       |       |       |       | 27.2         |       |              |       | 3.3                |       | 30.5                   |       |
| Issuance and  forfeitures of restricted stock awards                         |       | 3.2        |       |       |       |         |       |              |       |               |       | —                 |       |
| Tax impact of  stock-based compensation                                      |       |       |       |       |       | (4.5         | )          |              |       |               |       | (4.5                   | )          |
| Stock option  exercises                                                      |       |       |       |       |       | 0.9          |       |              |       |               |       | 0.9                    |       |
| Noncontrolling  interest in consolidated investment products                 |       |       |       |       |       |         |       |              |       | (1.2               | )          | (1.2                   | )          |
| Purchase of  noncontrolling interests                                        |       |       |       |       |       |         |       |              |       | (2.3               | )          | (2.3                   | )          |
| Distributions to  noncontrolling interests                                   |       |       |       |       |       |         |       |              |       | (3.0               | )          | (3.0                   | )          |
| Change in value  of redeemable noncontrolling interest                       |       |       |       |       |       | (10.9        | )          |              |       |               |       | (10.9                  | )          |
| Common stock dividends  ($0.04 per share)                                    |       |       |       |       |       | (6.5         | )          |              |       |               |       | (6.5                   | )          |
| **Balance  at September 30, 2009**                                           |       | 182.0      |       | $          | 1.8        |         | $          | 967.0             |       | $                  | 0.7        |                   | $          | 8.8 |   | $ | 978.3 |   |

 

The accompanying notesare an integral part of these consolidated financial statements.

 

4

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**JANUS CAPITAL GROUP INC.**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

***(Unaudited)***

 

**Note 1 – Basis of Presentation**

 

Inthe opinion of Janus Capital Group Inc. (collectively, “JCG” or the “Company”)management, the accompanying unaudited interim consolidated financialstatements contain all adjustments necessary to fairly present the financialposition, results of operations and cash flows of the Company in accordancewith accounting principles generally accepted in the United States of America (“GAAP”).  All such adjustments are of a normalrecurring nature.  Such unaudited interimfinancial statements have been prepared in accordance with the instructions to Form 10-Qpursuant to the rules and regulations of the Securities and ExchangeCommission (“SEC”).  Certain informationand footnote disclosures normally included in financial statements prepared inaccordance with GAAP have been condensed or omitted pursuant to such rules andregulations.  Events subsequent to thebalance sheet date have been evaluated for inclusion in the accompanyingfinancial statements through the issuance date, October 22, 2009.  These consolidated financial statementsshould be read in conjunction with the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2008, as updated for the retrospectiveapplication of new accounting guidance related to noncontrolling interests andredeemable noncontrolling interests.  Theupdated 2008 Form 10-K items were filed in a Current Report on Form 8-Kon July 14, 2009.

 

Theaccompanying consolidated financial statements have been prepared on aconsistent basis with the accounting policies described in Note 2 to theconsolidated financial statements that are presented in the Company’s AnnualReport on Form 10-K for the year ended December 31, 2008, as updatedfor the retrospective application of new guidance related to noncontrolling andredeemable noncontrolling interests.

 

**Note 2 – Recent AccountingGuidance**

 

In June 2009, theFinancial Accounting Standards Board (“FASB”) issued new accounting guidancerelated to the consolidation of variable interest entities which amendsguidance for identifying the primary beneficiary in variable interest entities,requires ongoing assessments for purposes of identifying the primarybeneficiary and eliminates the scope exception for qualifying special-purposeentities. This new guidance will be effective for JCG’s first quarter2010.  JCG is assessing the impact on itsconsolidated financial statements.

 

In June 2009, theFASB issued new guidance which establishes the Accounting StandardsCodification (the “Codification”) and SEC interpretive releases as the sourcesfor authoritative GAAP.  The Codificationwill supersede all existing non-SEC accounting and reporting standards underGAAP effective for JCG’s third quarter 2009. The Codification is not intended to change existing GAAP.

 

**Note 3 – Acquisition**

 

Each fiscal year through 2012, each of the twofounding members of INTECH Investment Management LLC (“INTECH”) has the optionto require JCG to purchase from him an ownership interest of up toapproximately 1.5% of INTECH at fair value. On April 30, 2009, the two INTECH founding members exercised theirput rights and JCG increased its ownership of INTECH to approximately 92% bypurchasing an additional 3% interest for $25.3 million in cash.  As a result of the new guidance related toredeemable noncontrolling interests effective January 1, 2009, theadditional interest in INTECH resulted in a reduction of redeemablenoncontrolling interests on the Consolidated Balance Sheets in an amount equalto the purchase price.  No assets will berecognized as a result of the April 2009 acquisition of an additionalinterest in INTECH or future acquisitions of noncontrolling interests. The proforma results of operations have not been presented as they would not have beenmaterially different from reported amounts.

 

5

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**Note 4 – Marketable Securities**

 

JCG’smarketable securities at September 30, 2009 and December 31, 2008,are summarized as follows (in millions):

 
| ** **                                                    | ** ** | **September 30, 2009** | ** ** | **December 31, 2008** | ** ** |
|---------------------------------------------------------------|------------|-----------------------------|------------|----------------------------|------------|
| ** **                                                    | ** ** | ** **                  | ** ** | **Gross**                  | ** ** | **Gross** | ** ** | **Estimated** | ** ** | ** ** | ** ** | **Gross** | ** ** | **Gross** | ** ** | **Estimated** | ** ** |
| ** **                                                    | ** ** | **Cost**                    | ** ** | **Unrealized**             | ** ** | **Unrealized** | ** ** | **Fair** | ** ** | **Cost** | ** ** | **Unrealized** | ** ** | **Unrealized** | ** ** | **Fair** | ** ** |
| ** **                                                    | ** ** | **Basis**                   | ** ** | **Gains**                  | ** ** | **Losses** | ** ** | **Value** | ** ** | **Basis** | ** ** | **Gains** | ** ** | **Losses** | ** ** | **Value** | ** ** |
|                                                          |       |                        |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **Trading securities (carried at****fair value)**             |       | $                           | 51.4       |                       | $          | 3.2 |   | $ | (6.0 | ) | $ | 48.6 |   | $ | 81.9 |   | $ | 1.0 |   | $ | (20.5 | ) | $ | 62.4 |   |
| **Available-for-sale securities  (carried****at fair value)** |       |                        |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Investments in advised funds                                  |       | 9.5                         |       | 2.3                        |       | (0.1 | ) | 11.7 |   | 14.7 |   | — |   | (4.8 | ) | 9.9 |   |
| Structured investment vehicle                                 |       | 40.2                        |       | —                     |       | — |   | 40.2 |   | 52.2 |   | — |   | — |   | 52.2 |   |
| **Derivative instruments**                                    |       | —                      |       | —                     |       | — |   | — |   | 0.8 |   | — |   | — |   | 0.8 |   |
|                                                          |       | $                           | 101.1      |                       | $          | 5.5 |   | $ | (6.1 | ) | $ | 100.5 |   | $ | 149.6 |   | $ | 1.0 |   | $ | (25.3 | ) | $ | 125.3 |   |

 

JCG periodically adds new investment strategies to itsinvestment product offerings by providing the initial cash investment or “seeding”of these investment products.  Seededinvestment products are initially consolidated and the individual securitieswithin the portfolio are accounted for as trading securities.  JCG will consolidate such investment productsas long as it holds a controlling interest, defined as greater than 50%ownership.  Upon deconsolidation, JCGaccounts for its investments as available-for-sale securities.

 

JCG may redeem investedseed capital for a variety of reasons, including when third-party capitalinvested in the relevant product is sufficient to sustain the given investmentstrategy.  JCG recognized gains of $1.0million from the redemption of seed capital investments for both the three andnine months ended September 30, 2009. There were no redemptions of seedcapital investments for the three months ended September 30, 2008.  Gains from the redemption of seed capitalinvestments for the nine months ended September 30, 2008 totaled $1.6million.

 

Investments in seed capital are classified as follows:

 

***TradingSecurities***

 

AtSeptember 30, 2009, seed capital investments classified as tradingsecurities totaled $48.6 million, representing $29.0 million of securitiesheld in separately managed accounts and $19.6 million of securities held in theportfolios of advised funds consolidated by the Company.  Trading securities are carried in JCG’sconsolidated financial statements at fair value, with changes in valuerecognized as gains and losses currently in earnings.  JCG recognized gains of $6.5 million and $8.5million in earnings on securities classified as trading for the three and ninemonths ended September 30, 2009, respectively. These gains were offset byrecognized losses of $6.1 million and $8.3 million on hedged seed capitalinvestments for the three and nine months ended September 30, 2009,respectively. Losses of $11.2 million and $19.4 million were recognized inearnings on securities classified as trading for the three and nine monthperiods ended September 30, 2008, respectively.

 

Proceedsfrom the sale of trading securities totaled $12.1 million and $19.0 million forthe three and nine months ended September 30, 2009, respectively. Proceedsfrom the sale of trading securities for the three and nine months ended September 30,2008 totaled $13.2 million and $23.2 million, respectively.

 

***Available-for-SaleSecurities***

 

*Investmentsin Advised Funds*

 

At September 30,2009, investments in advised funds totaled $11.7 million.  Investments in advised funds are carried inJCG’s consolidated financial statements at fair value, with changes in valuerecognized as gains and losses in other comprehensive income.  Accumulated gains and losses are reclassifiedto earnings when the securities are sold. JCG periodically reviews the carrying value of investments in advisedfunds for impairment by evaluating the nature, duration and extent of anydecline in fair value.  If the decline invalue is determined to be other-than-temporary, the carrying value of thesecurity is written down to fair value through earnings. No impairment chargeswere recognized during the three months ended September 30, 2009.Other-than-temporary impairment charges of $5.2 million were recognized duringthe 

 

6

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nine months ended September 30,2009.  No impairment charges wererecognized during the three and nine months ended September 30, 2008 for investmentsin advised funds.

 

Proceeds from the sale ofinvestments in advised funds totaled $3.6 million and $4.4 million for thethree and nine months ended September 30, 2009, respectively.  There were no proceeds from the sale ofinvestments in advised funds for the three months ended September 30,2008.  Proceeds from the sale ofinvestments in advised funds totaled $6.8 million for the nine months ended September 30,2008.

 

*StructuredInvestment Vehicle (“SIV”)*

 

JCG’s SIV investment represents securities originally issuedby Stanfield Victoria Funding LLC (“Stanfield”).  During September 2009, Stanfield wasrestructured whereby security holders were given the option to participate in anew structure, receive their proportionate share of each investment positionunderlying Stanfield, or auction their position.  JCG, along with a majority of Stanfieldsecurity holders, elected to participate in the new structure under which eachparticipating security holder’s proportionate share of positions underlying Stanfieldwere transferred to VFNC Trust (“VFNC”) and their Stanfield security interestswere exchanged for VFNC security interests. A manager for VFNC is expected to be hired during the fourth quarter2009.  

 

The VFNC securities arecarried in JCG’s consolidated financial statements based on JCG’s estimate offair value.  JCG recognized impairmentcharges relating to the original Stanfield securities of $21.0 million and$18.2 million for the years ended December 31, 2008 and 2007,respectively.  See Note 6 for furtherdiscussion of the fair value of the VFNC securities.

 

***DerivativeInstruments***

 

JCG implemented aneconomic hedge strategy in December 2008 covering the majority of investedseed capital to mitigate a portion of the net income volatility created by themark-to-market accounting of seed capital investments.  The strategy utilizes futures contracts andcall options on various market indices to minimize market losses while allowingfor limited participation in market gains. These instruments are accounted for at fair value, with changes in fairvalue reported currently in earnings. Call options outstanding as of December 31, 2008 expired in early2009 and no additional call options have been purchased in 2009.

 

**Note 5 – Intangible Assets andGoodwill**

 

JCG’s intangible assetsand goodwill are summarized below *(in millions)*:

 

| ** **                           | ** ** | **December 31,** | ** **  | **Impairment** | ** ** | ** **    | ** ** | **September 30,** | ** ** |
|--------------------------------------|------------|-----------------------|-------------|----------------|------------|---------------|------------|------------------------|------------|
| ** **                           | ** ** | **2008**              | ** **  | **Charges**    | ** ** | **Additions** | ** ** | **2009**               | ** ** |
| ** **                           | ** ** | ** **            | ** **  | ** **     | ** ** | ** **    | ** ** | ** **             | ** ** |
| Indefinite-lived  intangible assets: |       |                  |        |           |       |          |       |                   |       |
| Mutual  fund advisory contracts      |       | $                     | 943.1       |           | $          | (109.7        | )          | $                      | —     |   | $ | 833.4 |   |
| Brand  name and trademark            |       | 270.5                 |        | —         |       | —        |       | 270.5                  |       |
| Amortized  intangible assets:        |       |                  |        |           |       |          |       |                   |       |
| Client  relationships                |       | 162.5                 |        | —         |       | —        |       | 162.5                  |       |
| Accumulated  amortization            |       | (54.9                 | )           | —         |       | (9.1          | )          | (64.0                  | )          |
| **Net intangible assets**            | ** ** | **$**                 | **1,321.2** | ** **     | **$**      | **(109.7**    | **)**      | **$**                  | **(9.1**   | **)** | **$** | **1,202.4** | ** ** |
|                                 |       |                  |        |           |       |          |       |                   |       |
| **Goodwill**                         | ** ** | **$**                 | **1,320.3** | ** **     | **$**      | **(747.0**    | **)**      | **$**                  | **1.3**    | ** ** | **$** | **574.6** | ** ** |

 

JCG conducts impairmentanalyses of indefinite-lived intangible assets and goodwill annually as of October 1st or morefrequently if events or circumstances indicate that the carrying value may notbe recoverable.  Indefinite-livedintangible assets represent mutual fund advisory contracts, brand name andtrademark.  In addition, amortizedintangible assets are evaluated for impairment when events or circumstancesindicate that the carrying value may not be recoverable.  JCG’s amortized intangible assets representclient relationships.  The October 2008tests of indefinite-lived intangible assets and goodwill indicated thatestimated fair values exceeded their respective book values and no impairmentcharges were recognized.

 

In response tosignificant declines in global markets, JCG’s stock price, assets undermanagement and revenues during the fourth quarter 2008, JCG re-evaluatedindefinite-lived intangible assets, amortized intangible assets and goodwillfor impairment as of December 31, 2008. The results of the assessments as of December 31, 2008, indicatedthat the estimated fair values of indefinite-lived intangible assets, amortizedintangible assets and goodwill continued to exceed book value, requiring noimpairment charges.

 

Based on further declinesin global markets, JCG’s stock price, assets under management and revenuessubsequent to December 31, 2008, JCG revised its operating forecastdownward and again evaluated indefinite-lived intangible assets, amortizedintangible assets and goodwill for impairment as of March 31, 2009.  As a result of these assessments, impairmentcharges of $109.7 million and $747.0 million were recognized on mutual fundadvisory contracts and 

 

7

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goodwill, respectively,in the first quarter 2009.  The partiallyimpaired assets were originally recognized in 2001 in connection with thecontractual obligation to buy out Janus Capital Management LLC’s founder.

 

**Note 6 – Fair Value Measurements**

 

Measurements of fairvalue are classified within a hierarchy based upon the transparency of inputsused in the valuation of an asset or liability. Classification within the hierarchy is based upon the lowest level ofinput that is significant to the fair value measurement. The valuationhierarchy contains three levels:

 

·                  Level 1 – Valuation inputs are unadjustedquoted market prices for identical assets or liabilities in active markets.

·                  Level 2 – Valuation inputs are quotedprices for identical assets or liabilities in markets that are not active,quoted market prices for similar assets and liabilities in active markets andother observable inputs directly or indirectly related to the asset orliability being measured.

·                  Level 3 – Valuation inputs areunobservable and significant to the fair value measurement.

 

The following table presents assets and liabilitiescarried at fair value as of September 30, 2009 *(inmillions)*:

 

| ** **                                | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
|-------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|-----------|------------|
| Trading  securities                       |       | $           | 37.7       |        | $          | 10.9        |       | $         | —     |   | $ | 48.6 |   |
|                                      |       |        |       |        |       |        |       |      |       |
| Available-for-sale  securities            |       |        |       |        |       |        |       |      |       |
| Investments  in advised funds             |       | 7.5         |       | 4.2         |       | —      |       | 11.7      |       |
| Structured  investment vehicle securities |       | —      |       | —      |       | 40.2        |       | 40.2      |       |
| Total  marketable securities              |       | 45.2        |       | 15.1        |       | 40.2        |       | 100.5     |       |
|                                      |       |        |       |        |       |        |       |      |       |
| Other  assets                             |       |        |       |        |       |        |       |      |       |
| Mutual  fund unit award hedge asset       |       | 60.5        |       | —      |       | —      |       | 60.5      |       |
| Deferred  compensation hedge asset        |       | 19.7        |       | —      |       | —      |       | 19.7      |       |
|                                      |       |        |       |        |       |        |       |      |       |
| Total  assets carried at fair value       |       | $           | 125.4      |        | $          | 15.1        |       | $         | 40.2       |   | $ | 180.7 |   |
|                                      |       |        |       |        |       |        |       |      |       |
| Redeemable  noncontrolling interests      |       | —      |       | —      |       | 87.5        |       | 87.5      |       |
|                                      |       |        |       |        |       |        |       |      |       |
| Total  liabilities carried at fair value  |       | $           | —     |        | $          | —      |       | $         | 87.5       |   | $ | 87.5 |   |

 

JCG’s Level 1 and Level 2fair value measurements consist of exchange-traded equity and debt securitiesunderlying separate accounts and consolidated mutual funds, and shares ofunconsolidated mutual funds.

 

JCG’s Level 3 recurringfair value measurements include SIV securities and redeemable noncontrollinginterests.  Nonrecurring Level 3 fairvalue measurements include goodwill and mutual fund advisory contracts valuedat $574.6 million and $833.4 million, respectively, as of March 31, 2009,the most recent valuation date.  Becauseof the significance of the unobservable inputs in the fair value measurementsof these assets and liabilities, such measurements have been classified asLevel 3.

 

The SIV securities wereissued by a structured investment vehicle that purchased high grade medium- andlong-term fixed-income instruments financed by issuing low-cost, short-termsenior debt instruments such as asset-backed commercial paper and asset-backedmedium-term notes.  To measure fairvalue, JCG undertook a detailed analysis of the assets underlying the SIVsecurities and benchmarked those assets against instruments of a similar typewith comparable yields, maturities and credit ratings for which quoted marketprices are readily available.  Discountshave been applied to the quoted market prices of the benchmark instruments toadjust for varying yields, credit ratings or other distinguishingcharacteristics.  The valuationmethodology for the SIV securities has been consistently applied since theiracquisition in 2007 and subsequent restructuring in 2009.

 

JCG measured the fairvalue of the SIV securities as of September 30, 2009, and determined thatthe valuation was consistent with the previously reported amount of $43.6million as of June 30, 2009, less subsequent distributions.  JCG received distributions totaling $3.4million in the third quarter 2009, which reduced the carrying value of the SIVsecurities to $40.2 million.

 

8

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Redeemable noncontrollinginterests in INTECH are measured at fair value using a discounted cash flowmethodology.  Significant inputs to thediscounted cash flow analysis include forecasted operating results, discountrate and terminal multiple of cash flows. Redeemable noncontrolling interests in Perkins are measured by acontractual formula intended to yield an amount representative of fairvalue.  See Note 9 for further discussionof redeemable noncontrolling interests.

 

The changes in carrying value of JCG’s recurring Level3 fair value measurements are as follows *(in millions)*:

 

| ** **                                 | ** ** | ** **     | ** ** | **Redeemable**     | ** ** |
|--------------------------------------------|------------|----------------|------------|--------------------|------------|
| ** **                                 | ** ** | **Stanfield**  | ** ** | **noncontrolling** | ** ** |
| ** **                                 | ** ** | **securities** | ** ** | **interests**      | ** ** |
| Carrying  value at December 31, 2008  |       | $              | 52.2       |               | $          | 106.8 |   |
| Distributions                              |       | (12.0          | )          | (11.2              | )          |
| Current  earnings                          |       | —         |       | 6.3                |       |
| Purchase  of noncontrolling interest       |       | —         |       | (25.3              | )          |
| Change  in redemption value                |       | —         |       | 10.9               |       |
|                                       |       |           |       |               |       |
| Carrying  value at September 30, 2009 |       | $              | 40.2       |               | $          | 87.5 |   |

 

JCG measured the fairvalue of intangible assets and goodwill using a discounted cash flowmethodology in connection with impairment analyses performed as of March 31,2009.  Significant inputs to thediscounted cash flow analysis include JCG’s forecasted operating results,discount rate and terminal multiple of cash flows.  See Note 5 for further discussion of the impairmentanalyses and the changes in carrying value of goodwill and intangible assets.

 

**Note 7 – Debt**

 

Debtat September 30, 2009 and December 31, 2008, consisted of thefollowing *(in millions)*:

 

| ** **                                | ** ** | **September 30, 2009** | ** ** | **December 31, 2008** | ** ** |
|-------------------------------------------|------------|-----------------------------|------------|----------------------------|------------|
| ** **                                | ** ** | **Carrying  Value**         | ** ** | **Fair  Value**            | ** ** | **Carrying  Value** | ** ** | **Fair  Value** | ** ** |
| 7.750%  Senior Notes due 2009             |       | $                           | —     |                       | $          | — |   | $ | 22.0 |   | $ | 21.8 |   |
| 5.875%  Senior Notes due 2011             |       | 92.2                        |       | 90.7                       |       | 275.0 |   | 234.3 |   |
| 6.250%  Senior Notes due 2012             |       | 120.8                       |       | 118.4                      |       | 299.8 |   | 240.5 |   |
| 6.119%  Senior Notes due 2014             |       | 82.2                        |       | 78.9                       |       | 82.2 |   | 63.9 |   |
| 3.250%  Convertible Senior Notes due 2014 |       | 127.2                       |       | 218.1                      |       | — |   | — |   |
| 6.700%  Senior Notes due 2017             |       | 367.8                       |       | 351.1                      |       | 449.0 |   | 346.9 |   |
| Total                                     |       | 790.2                       |       | 857.2                      |       | 1,128.0 |   | 907.4 |   |
| Less:  current maturities                 |       | —                      |       | —                     |       | (22.0 | ) | (21.8 | ) |
| Total  long-term debt                     |       | $                           | 790.2      |                       | $          | 857.2 |   | $ | 1,106.0 |   | $ | 885.6 |   |

 

*FairValue of Debt*

* *

The fair value of debtwas determined using broker quotes and recent trading activity for each of thenotes listed above.

 

*Convertible Senior NotesOfferings*

 

In July 2009, JCGcompleted an offering of 3.250% convertible senior notes (“convertible seniornotes”).  Proceeds, net of issuance costsfrom the offering, totaled approximately $164.3 million.  The convertible senior notes issued in July 2009pay interest semi-annually on July 15 and January 15 of each year andmature on July 15, 2014, unless earlier converted.  The convertible senior notes are convertibleunder certain circumstances into cash, shares of JCG common stock, or acombination of cash and shares of JCG common stock, at JCG’s election.  Such a conversion would be at an initialconversion rate of 71.3 shares of JCG common stock per $1,000 principal amountof convertible senior notes, which is equivalent to an initial conversion priceof approximately $14.03 per share of common stock, subject to adjustment incertain circumstances. The convertible senior notes are not callable by JCG.

 

9

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Because the convertible senior notes may be wholly orpartially settled in cash, the proceeds are required to be bifurcated into debtand equity components.  The $125.7million initial debt component was determined by discounting future contractualcash flows at a 10.0% rate which is consistent with the estimated market ratefor similar senior notes with no conversion option.  The debt component will accrete up to theface value over the five-year expected term through interest expense.  The $44.3 million (or $27.9 million, net ofdeferred taxes) equity component was determined using the difference betweenthe proceeds and the debt component.  Thefair value of the convertible notes in the above table is based on the outstandingprincipal balance while the carrying value represents the outstanding principalbalance exclusive of the unamortized discounts.

 

*Tender Offer for Certain Outstanding Senior Notes*

 

On August 13, 2009, the combined proceeds of the July 2009common stock (See Note 10) and convertible senior notes offering, together withavailable cash, were used to repurchase $443.3 million aggregate principalamount of the Company’s outstanding 2011, 2012 and 2017 senior notes in atender offer.  JCG recognized a $5.8million net gain on early extinguishment of debt related to the repurchase ofthese notes.Results of the tender offer were as follows:

 
| ** **                       | ** ** | **Aggregate  Principal  Outstanding** | ** ** | **Principal  Amount  Tendered** | ** ** | **Tender Offer  Consideration** | ** ** | **Gross Gain  on Debt  Tender** | ** ** | **Deferred  Costs** | ** ** | **Tender Costs** | ** ** | **Net Gain /  (Loss) on Debt  Tender** | ** ** |
|----------------------------------|------------|---------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|---------------------|------------|------------------|------------|----------------------------------------|------------|
|                             |       |                                  |       |                            |       |                            |       |                            |       |                |       |             |       |                                   |       |
| **5.875% Senior Notes due 2011** |       | $                                     | 275.0      |                            | $          | 182.8                           |       | $                               | 182.8      |                | $          | —           |       | $                                      | 1.8        |   | $ | 1.0 |   | $ | (2.8 | ) |
|                             |       |                                  |       |                            |       |                            |       |                            |       |                |       |             |       |                                   |       |
| **6.250% Senior Notes due 2012** |       | 300.0                                 |       | 179.1                           |       | 175.5                           |       | 3.6                             |       | 0.9                 |       | 1.0              |       | 1.7                                    |       |
|                             |       |                                  |       |                            |       |                            |       |                            |       |                |       |             |       |                                   |       |
| **6.700% Senior Notes due 2017** |       | 450.0                                 |       | 81.4                            |       | 73.3                            |       | 8.1                             |       | 0.8                 |       | 0.4              |       | 6.9                                    |       |
|                             |       |                                  |       |                            |       |                            |       |                            |       |                |       |             |       |                                   |       |
| **Total**                        |       | $                                     | 1,025.0    |                            | $          | 443.3                           |       | $                               | 431.6      |                | $          | 11.7             |       | $                                      | 3.5        |   | $ | 2.4 |   | $ | 5.8 |   |

 

Deferred costs include the write-off of previouslycapitalized bond discounts, issue costs and a deferred loss on interest rateswap.

 

*Interest Rate Adjustment Covenant*

 

All of JCG’s senior notes, excluding theconvertible senior notes, are subject to an interest rate adjustment covenantthat provides that the interest rate payable will increase by 25 basis pointsfor each level that the Company’s debt rating is decreased by Moody’s from Baa3or by S&P from BBB-, up to a maximum increase of 200 basis points.  If at any time after the interest has beenadjusted upward, either Moody’s or S&P increases its rating, then for each levelof such increase in the rating, the interest payable will be decreased by 25basis points, but in no event to a rate less than the interest rate payable onthe date of their issuance.  The interestrate adjustment covenant will permanently terminate if the Company’s debtratings increase to Baa2 by Moody’s and BBB by S&P (or higher), with astable or positive outlook regardless of any subsequent decrease in the ratingsby either or both rating agencies.  On February 23,2009, S&P lowered JCG’s credit rating to BB+, which resulted in a 25 basispoint increase in the interest rates payable on all of JCG’s senior notes,excluding the convertible senior notes.

 

*CreditFacility*

* *

On June 12, 2009,JCG and the syndicate of banks amended the existing $350 million Five-YearCompetitive Advance and Revolving Credit Facility Agreement (the “CreditFacility”).  Under the amended Credit Facility, the bank syndicate’scommitment has been decreased to $125 million, any borrowings will be securedby JCG’s assets, and the maturity date has been accelerated from June 1,2012 to December 1, 2010.  The covenants under the Credit Facilitywere amended to allow for a higher leverage ratio and a lower interest coverageratio.  In addition, a minimum assetsunder management covenant has been included in the amended CreditFacility.  At September 30, 2009, JCG was in compliance with allcovenants and there were no borrowings under the amended Credit Facility.

 

*Capital Lease Obligations*

 

JCG’s capital leaseobligations represent leased computer equipment. The carrying value of theobligations at September 30, 2009 total $2.1 million and are included inother accrued liabilities and other liabilities. The related lease terms extendthrough 2012.

 

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**Note 8 – Income Tax Contingencies**

 

As of September 30, 2009, JCG had $36.8 millionof accrued reserves for income tax contingencies, including interest.  JCG anticipates that its income taxcontingency reserves will decrease by approximately $10 million to $15 millionin the next 12 months primarily from the expiration of statute of limitationsas well as the resolution of audits.

 

**Note 9 – Noncontrolling Interests**

 

JCG adopted the newaccounting guidance related to noncontrolling interests and redeemablenoncontrolling interests effective January 1, 2009 and retrospectivelyapplied such provisions to reported prior periods.  As a result of the new guidance,noncontrolling interests that are not subject to put rights have beenreclassified to permanent equity with no change in the measurement principlespreviously applied to these interests. Redeemable noncontrolling interests remain classified in mezzanineequity and are measured at estimated fair value as of the balance sheetdate.  Earnings attributable tononcontrolling interests that are and are not subject to put rights have beencombined in the Consolidated Statements of Income.  Presentation of the noncontrolling interestsin the Consolidated Statements of Income has been changed to reflect net incomewith and without consideration of the noncontrolling interests.  Earnings per share continues to be calculatedafter consideration of the noncontrolling interests.

 

***NoncontrollingInterests that Are Not Subject to Put Rights***

 

Noncontrolling intereststhat are not subject to put rights consist of third party investors inconsolidated investment products, certain INTECH and Perkins interests grantedto employees, and undistributed earnings of $5.2 million attributable to suchinterests.  Certain of the INTECH andPerkins interests granted to employees will become subject to put rights uponvesting.

 

***RedeemableNoncontrolling Interests***

 

Redeemable noncontrollinginterests consist of INTECH and Perkins interests that are currently puttable toJCG or will become puttable at certain future dates and undistributed earningsof $2.7 million attributable to such interests. The recognition of the fair value of the redeemable noncontrollinginterests was effected through an increase to redeemable noncontrollinginterests and a charge to retained earnings. Future changes in fair value will be recognized as increases ordecreases to retained earnings.

 

*INTECH*

 

Each fiscal year through2012, each of the two INTECH founding members has the option to require JCG topurchase from him an ownership interest of up to approximately 1.5% of INTECHat fair value.  At September 30,2009, the two founders have an aggregate ownership interest of approximately 5%in INTECH.  In the event that eitherINTECH founder does not fully exercise his annual voluntary sale option in agiven year, JCG has the option to require the INTECH founder to sell theremaining balance of the option for that year at fair value.

 

In addition, each foundercan require JCG to purchase his INTECH interests when his employment isterminated.  The purchase price of thedeparting founder’s INTECH interests will be based on fair value.  Each founder is entitled to retainapproximately 1% of INTECH’s shares then outstanding after employment until hisdeath unless he is terminated for cause or leaves voluntarily while not in goodstanding.  An INTECH founder will bedeemed to be in good standing if he voluntarily leaves on or after January 1,2009, after providing 12 months’ prior notice and cooperation with thetransition.  Total INTECH interests heldby the two founders have an estimated value of approximately $42.2 million asof September 30, 2009.

 

Interests held by otherINTECH employees subject to put rights have an estimated value of approximately$3.2 million as of September 30, 2009.

 

*Perkins*

 

JCG also has the optionto acquire the majority of the remaining 22.2% interest of Perkins at fairvalue on the third, fifth, seventh or each subsequent anniversary of the December 31,2008 closing (“closing”).  The minorityowners of Perkins have the option to require JCG to purchase any or all oftheir remaining interests on the fourth or sixth anniversary of closing at fairvalue.  The total Perkins minorityinterest has an estimated value of approximately $39.4 million as of September 30,2009, based on a contractual formula driven by revenue and investmentperformance of products managed by Perkins. The formula is intended to yield an amount representative of fair value.

 

11

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**Note 10 – Common Stock Issuance**

 

In July 2009, JCG issued 20.9million shares of common stock, par value $0.01, at $11.00 per share in anunderwritten common stock offering for net proceeds of approximately $218.1million.

 

**Note 11 – Long-Term Incentive Compensation**

 

JCG granted $73.1 million in long-term incentiveawards during the first nine months of 2009, which generally vest and will berecognized ratably over a four-year period, and are not subject toperformance-based accelerated vesting. The 2009 awards consisted of $21.6 million of restricted stock (3.7million shares at a weighted average price of $6.09 per share), $15.1 millionof stock options and $36.4 million of mutual fund units.

 

A total of 6.3 millionstock options with a grant date fair value of $2.41 per option were awarded aspart of the February 2009 grant. The grant date fair value of stock options was determined using theBlack-Scholes model with the following assumptions: expected volatility of 54%,dividend yield of 0.75%, risk-free interest rate of 1.85% and an expected lifeof five years.

 

In addition to the awardsabove, Perkins granted $5.0 million of interests that vest ratably over fouryears.  The grant represents 2.8% oftotal Perkins interests.  INTECH granted$5.5 million of interests which generally vest over 10 years.  This grant represents less than 1.0% of totalINTECH interests.

 

**Note 12 – Other Income, Net**

 

The components of other income are as follows *(in millions)*:

 

| ** **                         | ** ** | **Three months ended** | ** ** | **Nine months ended**  | ** ** |
|------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                         | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                         | ** ** | **2009**               | ** ** | **2008**               | ** ** | **2009** | ** ** | **2008** | ** ** |
| Dividend  income                   |       | $                      | —     |                   | $          | 0.4 |   | $ | 0.4 |   | $ | 1.2 |   |
| Interest  income                   |       | —                 |       | 1.2                    |       | 0.2 |   | 5.1 |   |
| Translation  gains and losses, net |       | —                 |       | —                 |       | (1.0 | ) | — |   |
| Other,  net                        |       | 0.1                    |       | (0.2                   | )          | 0.9 |   | 0.3 |   |
| Total                              |       | $                      | 0.1        |                   | $          | 1.4 |   | $ | 0.5 |   | $ | 6.6 |   |

 

12

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**Note 13 –Earnings Per Share**

 

Basic earnings per common share is calculated bydividing net income attributable to JCG common shareholders by the weightedaverage number of common shares outstanding during the period.  Diluted earnings per common share adjusts theweighted average shares outstanding by the dilutive impact of shares underlyingstock options and unvested restricted stock awards.  The following is a summary of the earningsper share calculation *(in millions, except pershare data)*:

 

| ** **                                                                                       | ** ** | **Three months ended** | ** ** | **Nine months ended**  | ** ** |
|--------------------------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                                                       | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                                                       | ** ** | **2009**               | ** ** | **2008**               | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Amounts attributable to JCG common shareholders:**                                             |       |                   |       |                   |       |   |   |   |   |
| Income  (loss) from continuing operations                                                        |       | $                      | 8.2        |                   | $          | 26.0 |   | $ | (794.1 | ) | $ | 130.6 |   |
| Loss  from discontinued operations                                                               |       | —                 |       | (0.6                   | )          | — |   | (1.5 | ) |
|                                                                                             |       |                   |       |                   |       |   |   |   |   |
| **Net income (loss)**                                                                            |       | $                      | 8.2        |                   | $          | 25.4 |   | $ | (794.1 | ) | $ | 129.1 |   |
|                                                                                             |       |                   |       |                   |       |   |   |   |   |
| **Basic earnings (loss) per share****attributable  to JCG common shareholders:**                 |       |                   |       |                   |       |   |   |   |   |
| Weighted  average common shares outstanding                                                      |       | 173.6                  |       | 157.1                  |       | 162.5 |   | 160.0 |   |
|                                                                                             |       |                   |       |                   |       |   |   |   |   |
| Income  (loss) from continuing operations                                                        |       | $                      | 0.05       |                   | $          | 0.17 |   | $ | (4.89 | ) | $ | 0.82 |   |
| Loss  from discontinued operations                                                               |       | —                 |       | —                 |       | — |   | (0.01 | ) |
|                                                                                             |       |                   |       |                   |       |   |   |   |   |
| Basic  earnings (loss) per share                                                                 |       | $                      | 0.05       |                   | $          | 0.17 |   | $ | (4.89 | ) | $ | 0.81 |   |
|                                                                                             |       |                   |       |                   |       |   |   |   |   |
| **Diluted earnings per share attributable to JCG common  shareholders:**                         |       |                   |       |                   |       |   |   |   |   |
| Weighted  average common shares outstanding                                                      |       | 173.6                  |       | 157.1                  |       | 162.5 |   | 160.0 |   |
|                                                                                             |       |                   |       |                   |       |   |   |   |   |
| Dilutive  effect of stock options and unvested restricted stock using the treasury  stock method |       | 3.0                    |       | 2.5                    |       | — |   | 2.4 |   |
| Weighted  average diluted common shares outstanding                                              |       | 176.6                  |       | 159.6                  |       | 162.5 |   | 162.4 |   |
| Income  (loss) from continuing operations                                                        |       | $                      | 0.05       |                   | $          | 0.16 |   | $ | (4.89 | ) | $ | 0.80 |   |
| Loss  from discontinued operations                                                               |       | —                 |       | —                 |       | — |   | (0.01 | ) |
|                                                                                             |       |                   |       |                   |       |   |   |   |   |
| Diluted  earnings (loss) per share                                                               |       | $                      | 0.05       |                   | $          | 0.16 |   | $ | (4.89 | ) | $ | 0.79 |   |

 

The followingstock options and unvested restricted stock are anti-dilutive and have not beenincluded in the weighted average diluted shares outstanding calculation *(in millions)*:

 

| ** **                 | ** ** | **Three months ended** | ** ** | **Nine months ended**  | ** ** |
|----------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                 | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                 | ** ** | **2009**               | ** ** | **2008**               | ** ** | **2009** | ** ** | **2008** | ** ** |
| Stock  options             |       | 11.1                   |       | 4.0                    |       | 17.1 |   | 3.6 |   |
| Unvested  restricted stock |       | 1.1                    |       | —                 |       | 4.4 |   | 0.1 |   |

 

As aresult of JCG’s net loss for the nine months ended September 30, 2009, allstock options and unvested restricted stock are anti-dilutive.

 

13

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**Note 14 –Legal Proceedings**

 

JCGis subject to various legal proceedings arising from normal businessoperations. Although there can be no assurances, based on information currentlyavailable, management believes that it is probable that the ultimate outcome ofeach of the actions described below will not have a material adverse effect onJCG’s consolidated financial condition. However, an adverse outcome in any ofthe actions could have a material adverse effect on the Company’s financialposition or results of operations for the period in which it is recorded. Forthe nine months ended September 30, 2009, JCG recorded charges totaling$31.4 million related to a judgment and legal settlements of othermatters.  JCG has established a $2.0million litigation reserve for the remaining claims described below.  Management believes the remaining claims havelittle or no merit and intends to defend against them.

 

***MarketTiming Litigation***

 

Following themarket timing investigations by the New York Attorney General (“NYAG”) and theSEC in 2003, JCG and certain affiliates were named as defendants in aconsolidated lawsuit in the U.S. District Court in Baltimore, Maryland (*Case No. MDL No. 1586, 04-MD-15863*).  Five amended complaints were originally filedin these coordinated proceedings, two of which were previously dismissed withthe remaining still relevant, including: (i) derivative claims byinvestors in the Janus funds ostensibly on behalf of the Janus funds (*Steinberg et al. v. Janus Capital Management, LLC et al., U.S. DistrictCourt, District of Maryland, Case No. 04-CV-00518*); (ii) claimson behalf of participants in the JCG 401(k) plan (*Wangbergerv. Janus Capital Group Inc., 401(k) Advisory Committee, et al., U.S.District Court, District of Maryland, Case No. JFM-05-2711*);and (iii) claims by a putative class of JCG shareholders asserting claimson behalf of the shareholders (*Wiggins, et al. v. JanusCapital Group Inc., et al.*, *U.S. District Court,District of Maryland, Case No. 04-CV-00818).*

 

InAugust 2005, the U.S. District Court entered orders dismissing most of theclaims asserted against the Company and its affiliates by fund investors in the*Steinberg* case described above, exceptcertain claims under Section 36(b) of the Investment Company Act of1940.  In July 2009,Janus filed its motion for summary judgment to resolve the remainder of the Section 36(b) claimsin the *Steinberg*case.  The Court has not yet ruled the motion.  In the *Wiggins*matter, the U.S. District Court also entered anorder dismissing all claims in the *Wiggins*lawsuit.  Plaintiffs, however, appealedthat dismissal to the U.S. Court of Appeals for the Fourth Circuit.  In May 2009, the Fourth Circuitreversed the order of dismissal and remanded the case back to the U.S. DistrictCourt for further proceedings.  In August 2006, the U.S. District Courtin the *Wangberger* 401(k) plan class actiondismissed the action with prejudice, and the plaintiff appealed the dismissalto the U.S. Court of Appeals for the Fourth Circuit.  In June 2008, the Fourth Circuitreversed the U.S. District Court’s order of dismissal and remanded the case tothe U.S. District Court for further proceedings.  However, in July 2009, a Stipulation ofDismissal was filed, which dismissed the case with prejudice.  As a result of the above events, the Companyand Janus are the remaining defendants, in some capacity, in one or more of theactions described in the preceding paragraph.

 

TheAuditor of the State of West Virginia, in his capacity as securitiescommissioner, initiated administrative proceedings against many of the defendantsin the market timing cases (including JCG) and seeks disgorgement and othermonetary relief based on similar market timing allegations (*In the Matter of Janus Capital Group Inc. et al., Before the SecuritiesCommissioner, State of West Virginia, Summary Order No. 05-1320*).  In September 2006, JCG filed its answerto the Auditor’s summary order instituting proceedings, as well as a Motion toDischarge Order to Show Cause.  On July 31,2009, Janus filed a “Notice that Matter is Deemed Concluded.”  At this time, no further proceedings arescheduled in this matter.

 

14

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***Miscellaneous Proceedings***

 

During 2007, two former portfoliomanagers filed suit against a JCG subsidiary alleging that it implementedcertain changes to their compensation arrangements in violation of prioragreements *(Edward Keely v. Janus Management HoldingsCorporation, Denver District Court, Case No. 2007 CV 7366* and *Tom Malley v. Janus Management Holdings Corporation, Denver DistrictCourt, Case No. 2007 CV 10719)*. These complaints allege some or all of the following claims, in additionto other allegations: (1) breach of contract; (2) willful and wantonbreach of contract; (3) breach of good faith and fair dealing; and (4) estoppel.  JCG answered the complaints, denying anyliability and challenging the merits of Mr. Keely’s and Mr. Malley’sallegations.  After a four day trial inthe *Keely* matter, on May 8, 2009, thejury found in favor of Mr. Keely. The Court entered judgment in Mr. Keely’s favor for $4.8 million indamages plus pre- and post- trial interest, attorneys’ fees and damageenhancements under the Colorado Wage Act totaling $2.2 million, which Janussatisfied in full.  Following the *Keely* judgment, the above described *Malley*matter and additional similar claims made by former employees were resolvedduring the third quarter 2009 for a total of $22.2 million, of which $20.5million was expensed in the third quarter 2009. JCG is not aware of any additional claims by former employees of asimilar nature.

 

15

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**Item 2.    Management’s Discussion and Analysis of Financial Condition and Resultsof Operations**

 

**FORWARD-LOOKING STATEMENTS**

 

*Certainstatements in this Quarterly Report on Form 10-Q contain “forward-lookingstatements” within the meaning of the Private Securities Litigation Reform Actof 1995. Such forward-looking statements involve known and unknown risks,uncertainties, assumptions and other factors which may cause the actualresults, performance or achievements of the Company to be materially differentfrom any future results, performance or achievements expressed or implied bysuch forward-looking statements. Statements preceded by, followed by or thatotherwise include the words “believes”, “expects”, “anticipates”, “intends”, “projects”,“estimates”, “plans”, “may increase”, “may fluctuate”, “forecast” and similarexpressions or future or conditional verbs such as “will”, “should”, “would”, “may”and “could” are generally forward-looking in nature and not historical facts.Any statements that refer to expectations or other characterizations of futureevents, circumstances or results are forward-looking statements. Thesestatements are based on the beliefs and assumptions of Company management basedon information currently available to management.*

* *

*Variousrisks, uncertainties, assumptions and factors that could cause future resultsto differ materially from those expressed by the forward-looking statementsincluded in this Quarterly Report on Form 10-Q include, but are notlimited to, risks associated with the appointment of a CEO and JCG’s ability toidentify a permanent CEO and resulting potential disruptions to the Company andits business, and other risks, uncertainties, assumptions and factors specifiedin the Company’s Annual Report on Form 10-K for the year ended December 31,2008 included under headings such as  “Risk Factors” and “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”, andin the Prospectus Supplements, dated July 17, 2009, to the RegistrationStatement of Form S-3 (Registration No. 333-145310)  and in other filings and furnishings made bythe Company with the SEC from time to time. In light of these risks,uncertainties, assumptions and factors, the forward-looking events discussed inthis Quarterly Report on Form 10-Q may not occur.  Many of these factorsare beyond the control of the Company and its management.  You arecautioned not to place undue reliance on these forward-looking statements,which speak only as of the date stated, or if no date is stated, as of the dateof this Quarterly Report on Form 10-Q. Except for the Company’s ongoingobligations to disclose material information under the federal securities laws,the Company undertakes no obligation to release publicly any revisions to anyforward-looking statements, to report events or to report the occurrence ofunanticipated events unless required by law.*

 

**AVAILABLE INFORMATION**

 

Copies of Janus CapitalGroup Inc.’s (collectively, “JCG” or the “Company”) filings with the Securitiesand Exchange Commission (“SEC”) can be obtained from the SEC’s Public ReferenceRoom at 100 F Street, N.E., Washington, D.C. 20549.  Information can be obtained about theoperation of the Public Reference Room by calling the SEC at1-800-SEC-0330.  The SEC also maintainsan Internet site that contains reports, proxy and information statements, andother information regarding issuers that file electronically with the SEC athttp://www.sec.gov.

 

JCG makes available freeof charge its annual reports on Form 10-K, quarterly reports on Form 10-Qand current reports on Form 8-K and amendments thereto as soon asreasonably practical after such filing has been made with the SEC.  Reports may be obtained through the InvestorRelations section of JCG’s website (http://ir.janus.com) or by contacting JCGat (888) 834-2536.  The contents ofJCG’s website are not incorporated herein for any purpose.

 

JCG’s Officer Code ofEthics for Principal Executive Officer and Senior Financial Officers (includingits chief executive officer and chief financial officer) (the “Officer Code”);Corporate Code of Business Conduct and Ethics for all employees; corporategovernance guidelines; and the charters of key committees of the Board ofDirectors (including the Audit, Compensation, Nominating and CorporateGovernance, and Planning and Strategy committees) are available on its website(http://ir.janus.com/documents.cfm), and printed copies are available to anyshareholder upon request by calling JCG at (888) 834-2536.  Any futureamendments to or waivers of the Officer Code will be posted to the InvestorRelations section of JCG’s website.

 

16

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**RESULTS OF OPERATIONS**

 

**Overview**

 

JCG provides investment management and administrativeservices to mutual funds, separate accounts and institutional clients in bothdomestic and international markets through its primary subsidiaries, JanusCapital Management LLC (“Janus”), INTECH Investment Management LLC (“INTECH”)and Perkins Investment Management LLC (“Perkins”).

 

Revenues are generallybased upon a percentage of the market value of assets under management and arecalculated as a percentage of the daily average asset balance in accordancewith contractual agreements with the Company’s mutual funds, separate accountsand subadvised relationships (collectively referred to herein as “investmentproducts”).  Certain investment productsare also subject to performance fees which vary based on their relativeperformance as compared to a benchmark index and the level of assets subject tosuch fees.  Assets under managementprimarily consist of domestic and international equity and debtsecurities.  Accordingly, fluctuations indomestic and international financial markets, relative investment performance,sales and redemptions of investment products, and changes in the composition ofassets under management are all factors that have a direct effect on JCG’soperating results.

 

**INVESTMENT MANAGEMENT OPERATIONS (CONTINUINGOPERATIONS)**

 

**Third Quarter 2009 Summary**

 

Market conditionsimproved during the third quarter 2009, leading to an increase in ending assetsunder management of $19.2 billion, or 14.5%, from June 30, 2009, andhigher revenues.  Third quarter 2009includes legal settlements totaling $20.5 million, $12.1 million of severanceassociated with the former Chief Executive Officer (“CEO”) and a $5.8 millionnet gain from the extinguishment of debt.

 

**Investment Performance**

 

Investment products aregenerally evaluated based on their investment performance relative to otherinvestment products with similar disciplines and strategies.  Janus’ and Perkins’ relative investmentperformance is strong across all time periods while INTECH’s short- andintermediate-term performance continues to be weak.

 

·                  Relative long-term investment performanceremained strong with approximately 79%, 88% and 86% of JCG’s mutual funds inthe top half of their Lipper categories on a one-, three- and five-year totalreturn basis, respectively, as of September 30, 2009.  (See Exhibit 99.1 for complete Lipperrankings.)

·                  The Perkins Mid Cap Value and Small CapValue funds ranked in the top 19% and 9% of their respective Lipper peer groupsacross the one-, three- and five-year periods, as of September 30, 2009.

·                  INTECH’s relative performance continuedto be weak in the short- and intermediate-term, with 0%, 44% and 63% of productstrategies outperforming their respective benchmarks over the one-, three- andfive-year periods ended September 30, 2009.

 

**Assets Under Management and Flows**

 

***Valuation***

 

The value of assetsunder management is derived from the cash and investment securities underlyingJCG’s investment products.  Investmentsecurity values are determined using unadjusted or adjusted quoted marketprices and independent third-party price quotes in active markets. For debtsecurities with maturities of 60 days or less, the amortized cost method isused to determine the value.  Securitiesfor which market prices are not readily available or are considered unreliableare internally valued using appropriate methodologies for each security type orby engaging third-party specialists. Despite recent economic events andincreased market volatility, the value of the majority of the securitiesunderlying JCG’s investment products continues to be derived from readilyavailable and reliable market price quotations.

 

The pricing policies formutual funds advised by JCG’s subsidiaries (the “Funds”) are established by theFunds’ Independent Board of Trustees and are designed to test and validate fairvalue measurements.  Responsibility forpricing securities held within separate and subadvised accounts may bedelegated by the separate or subadvised client to JCG or another party.

 

17

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***Total Company Assets and Flows***

 

Total Company assets under management at September 30,2009 decreased $8.7 billion, or 5.4%, from the end of the third quarter2008.  The decrease was primarily drivenby adverse market conditions in the fourth quarter 2008 and first quarter 2009,partially offset by improving market conditions thereafter.

 

INTECH outflows for thethree and nine months ended September 30, 2009 are primarily attributableto the relative underperformance of certain key investment strategies.  Continued underperformance may lead toadditional INTECH outflows.

 

The following tablepresents the components of JCG’s assets under management *(inbillions)*:

 
| ** **                  | ** ** | **Three months ended September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
|-----------------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|
| ** **                  | ** ** | **2009**                                  | ** ** | **2008**                                 | ** ** | **2009** | ** ** | **2008** | ** ** |
| Beginning  of period assets |       | $                                         | 132.6      |                                     | $          | 191.8 |   | $ | 123.5 |   | $ | 206.7 |   |
| Long-term  sales            |       |                                      |       |                                     |       |   |   |   |   |
| Janus                       |       | 5.9                                       |       | 6.6                                      |       | 15.0 |   | 25.0 |   |
| INTECH                      |       | 1.1                                       |       | 6.2                                      |       | 3.6 |   | 10.5 |   |
| Perkins                     |       | 1.6                                       |       | 1.9                                      |       | 4.4 |   | 4.7 |   |
| Long-term  redemptions      |       |                                      |       |                                     |       |   |   |   |   |
| Janus                       |       | (4.6                                      | )          | (8.5                                     | )          | (12.7 | ) | (23.9 | ) |
| INTECH                      |       | (3.6                                      | )          | (6.0                                     | )          | (6.8 | ) | (11.2 | ) |
| Perkins                     |       | (1.0                                      | )          | (1.3                                     | )          | (2.7 | ) | (2.7 | ) |
| Long-term  net flows *      |       |                                      |       |                                     |       |   |   |   |   |
| Janus                       |       | 1.3                                       |       | (1.9                                     | )          | 2.3 |   | 1.1 |   |
| INTECH                      |       | (2.5                                      | )          | 0.2                                      |       | (3.2 | ) | (0.7 | ) |
| Perkins                     |       | 0.6                                       |       | 0.6                                      |       | 1.7 |   | 2.0 |   |
| Total  long-term net flows  |       | (0.6                                      | )          | (1.1                                     | )          | 0.8 |   | 2.4 |   |
| Net  money market flows     |       | (0.2                                      | )          | (4.0                                     | )          | (6.1 | ) | (5.0 | ) |
| Market  / fund performance  |       | 20.0                                      |       | (26.2                                    | )          | 33.6 |   | (43.6 | ) |
| End  of period assets       |       | $                                         | 151.8      |                                     | $          | 160.5 |   | $ | 151.8 |   | $ | 160.5 |   |

 
| ** **                                   | ** ** | **Three months ended September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
|----------------------------------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|
| ** **                                   | ** ** | **2009**                                  | ** ** | **2008**                                 | ** ** | **2009** | ** ** | **2008** | ** ** |
| Long-term  net flows by distribution channel |       |                                      |       |                                     |       |   |   |   |   |
| Retail  intermediary                         |       | $                                         | 1.7        |                                     | $          | (1.2 | ) | $ | 3.7 |   | $ | 2.9 |   |
| Institutional                                |       | (2.8                                      | )          | 0.4                                      |       | (3.1 | ) | (1.9 | ) |
| International                                |       | 0.5                                       |       | (0.3                                     | )          | 0.2 |   | 1.4 |   |
| Total                                        |       | $                                         | (0.6       | )                                        | $          | (1.1 | ) | $ | 0.8 |   | $ | 2.4 |   |
|                                         |       |                                      |       |                                     |       |   |   |   |   |
| Average  assets under management             |       |                                      |       |                                     |       |   |   |   |   |
| Janus                                        |       | $                                         | 82.9       |                                     | $          | 100.9 |   | $ | 71.9 |   | $ | 105.9 |   |
| INTECH                                       |       | 46.1                                      |       | 59.5                                     |       | 42.6 |   | 62.5 |   |
| Perkins                                      |       | 12.2                                      |       | 11.3                                     |       | 10.3 |   | 10.7 |   |
| Money  market                                |       | 1.9                                       |       | 11.0                                     |       | 2.8 |   | 11.7 |   |
| Total                                        |       | $                                         | 143.1      |                                     | $          | 182.7 |   | $ | 127.6 |   | $ | 190.8 |   |

 

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*       Excludes money market flows.  Sales and redemptions of money market fundsare presented net on a separate line due to the short-term nature of theinvestments.

 

18

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***Assets and Flows by InvestmentDiscipline***

 

JCG, through its primary subsidiaries, offersinvestment products based on a diversified set of investment disciplines.  Janus offers growth/blend andglobal/international equity, as well as fixed income, alternative and moneymarket investment products.  INTECH offersmathematical based investment products and Perkins offers value disciplinedinvestments.  Assets and flows byinvestment discipline are as follows *(in billions)*:

 
| ** **                  | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|-----------------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|
| ** **                  | ** ** | **2009**                                  | ** ** | **2008**                                 | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Growth/Blend**            |       |                                      |       |                                     |       |   |   |   |   |
| Beginning  of period assets |       | $                                         | 56.4       |                                     | $          | 81.8 |   | $ | 49.5 |   | $ | 83.5 |   |
| Sales                       |       | 3.4                                       |       | 5.5                                      |       | 9.1 |   | 20.3 |   |
| Redemptions                 |       | 3.4                                       |       | 6.0                                      |       | 9.4 |   | 16.3 |   |
| Net  sales (redemptions)    |       | —                                    |       | (0.5                                     | )          | (0.3 | ) | 4.0 |   |
| Market  / fund performance  |       | 8.7                                       |       | (15.0                                    | )          | 15.9 |   | (21.3 | ) |
| End  of period assets       |       | $                                         | 65.1       |                                     | $          | 66.2 |   | $ | 65.1 |   | $ | 66.2 |   |
|                        |       |                                      |       |                                     |       |   |   |   |   |
| **Global/International**    |       |                                      |       |                                     |       |   |   |   |   |
| Beginning  of period assets |       | $                                         | 14.7       |                                     | $          | 21.0 |   | $ | 10.9 |   | $ | 24.9 |   |
| Sales                       |       | 1.2                                       |       | 0.8                                      |       | 2.9 |   | 2.9 |   |
| Redemptions                 |       | 0.7                                       |       | 1.8                                      |       | 1.8 |   | 4.5 |   |
| Net  sales (redemptions)    |       | 0.5                                       |       | (1.0                                     | )          | 1.1 |   | (1.6 | ) |
| Market  / fund performance  |       | 3.0                                       |       | (4.3                                     | )          | 6.2 |   | (7.6 | ) |
| End  of period assets       |       | $                                         | 18.2       |                                     | $          | 15.7 |   | $ | 18.2 |   | $ | 15.7 |   |
|                        |       |                                      |       |                                     |       |   |   |   |   |
| **Mathematical**            |       |                                      |       |                                     |       |   |   |   |   |
| Beginning  of period assets |       | $                                         | 43.8       |                                     | $          | 61.3 |   | $ | 42.4 |   | $ | 69.7 |   |
| Sales                       |       | 1.1                                       |       | 6.2                                      |       | 3.6 |   | 10.5 |   |
| Redemptions                 |       | 3.6                                       |       | 6.0                                      |       | 6.8 |   | 11.2 |   |
| Net  sales (redemptions)    |       | (2.5                                      | )          | 0.2                                      |       | (3.2 | ) | (0.7 | ) |
| Market  / fund performance  |       | 6.0                                       |       | (6.0                                     | )          | 8.1 |   | (13.4 | ) |
| End  of period assets       |       | $                                         | 47.3       |                                     | $          | 55.6 |   | 47.3 |   | $ | 55.6 |   |
|                        |       |                                      |       |                                     |       |   |   |   |   |
| **Fixed Income**            |       |                                      |       |                                     |       |   |   |   |   |
| Beginning  of period assets |       | $                                         | 4.4        |                                     | $          | 3.7 |   | $ | 3.2 |   | $ | 4.9 |   |
| Sales                       |       | 1.3                                       |       | 0.3                                      |       | 3.0 |   | 1.0 |   |
| Redemptions                 |       | 0.4                                       |       | 0.4                                      |       | 1.2 |   | 2.5 |   |
| Net  sales (redemptions)    |       | 0.9                                       |       | (0.1                                     | )          | 1.8 |   | (1.5 | ) |
| Market  / fund performance  |       | 0.3                                       |       | (0.1                                     | )          | 0.6 |   | — |   |
| End  of period assets       |       | $                                         | 5.6        |                                     | $          | 3.4 |   | 5.6 |   | $ | 3.4 |   |
|                        |       |                                      |       |                                     |       |   |   |   |   |
| **Alternatives**            |       |                                      |       |                                     |       |   |   |   |   |
| Beginning  of period assets |       | $                                         | 0.3        |                                     | $          | 1.2 |   | $ | 0.5 |   | $ | 0.8 |   |
| Sales                       |       | —                                    |       | —                                   |       | — |   | 0.8 |   |
| Redemptions                 |       | 0.1                                       |       | 0.3                                      |       | 0.3 |   | 0.6 |   |
| Net  sales (redemptions)    |       | (0.1                                      | )          | (0.3                                     | )          | (0.3 | ) | 0.2 |   |
| Market  / fund performance  |       | 0.1                                       |       | (0.2                                     | )          | 0.1 |   | (0.2 | ) |
| End  of period assets       |       | $                                         | 0.3        |                                     | $          | 0.8 |   | 0.3 |   | $ | 0.8 |   |
|                        |       |                                      |       |                                     |       |   |   |   |   |
| **Value**                   |       |                                      |       |                                     |       |   |   |   |   |
| Beginning  of period assets |       | $                                         | 11.0       |                                     | $          | 10.9 |   | $ | 9.1 |   | $ | 10.1 |   |
| Sales                       |       | 1.6                                       |       | 1.9                                      |       | 4.4 |   | 4.7 |   |
| Redemptions                 |       | 1.0                                       |       | 1.3                                      |       | 2.7 |   | 2.7 |   |
| Net  sales                  |       | 0.6                                       |       | 0.6                                      |       | 1.7 |   | 2.0 |   |
| Market  / fund performance  |       | 1.9                                       |       | (0.6                                     | )          | 2.7 |   | (1.1 | ) |
| End  of period assets       |       | $                                         | 13.5       |                                     | $          | 10.9 |   | 13.5 |   | $ | 10.9 |   |
|                        |       |                                      |       |                                     |       |   |   |   |   |
| **Money Market**            |       |                                      |       |                                     |       |   |   |   |   |
| Beginning  of period assets |       | $                                         | 2.0        |                                     | $          | 11.8 |   | $ | 7.9 |   | $ | 12.8 |   |
| Sales                       |       | 0.2                                       |       | 28.1                                     |       | 3.4 |   | 76.1 |   |
| Redemptions                 |       | 0.4                                       |       | 32.1                                     |       | 9.5 |   | 80.9 |   |
| Net  redemptions            |       | (0.2                                      | )          | (4.0                                     | )          | (6.1 | ) | (5.0 | ) |
| Market  / fund performance  |       | —                                    |       | —                                   |       | — |   | — |   |
| End  of period assets       |       | $                                         | 1.8        |                                     | $          | 7.9 |   | 1.8 |   | $ | 7.9 |   |

 

19

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**Results of Investment Management Operations**

 

##### ***ThreeMonths Ended September 30, 2009, Compared with Three Months Ended September 30,2008***

##### *** ***

***Revenues***

 

Investment management fees decreased $33.5 million, or15.3%, primarily as a result of the 21.7% decrease in average assets undermanagement.  Revenue declined at a lowerrate than average assets under management as a result of a decrease in loweryielding money market assets and the impact of the consolidation of Perkins beginningJanuary 1, 2009.  The equity methodof accounting was used for Perkins prior to December 31, 2008, as JCG hadsignificant influence but did not have the ability to exercise control.  The decline in money market assets reflectsJCG’s previously announced plan to exit its institutional money market businessby April 30, 2009.

 

Performance fee revenueis derived from certain mutual funds and separate accounts.  The $1.4 million decrease in performance feerevenue was primarily due to a decline of $4.2 million on INTECH privateaccounts as a result of investment underperformance, partially offset by a $3.2million increase in fees earned on mutual funds from improved performance.

 

Shareowner servicing feesand other revenue declined $12.9 million, or 27.0%, over the comparable prioryear period primarily as a result of a decrease in transfer agent fees andmoney market administration fees. Transfer agent fees are based on average assets under management inJanus’ retail share class, excluding money market assets, which decreased 19.2%over the comparable prior year period. Money market administration fees declined as a result of lower moneymarket assets from exiting the institutional money market business.

 

***Expenses***

 

Employee compensation andbenefits increased $4.5 million, or 5.5%, principally due to severance chargesand the consolidation of Perkins, partially offset by a decline in investmentteam incentive compensation, base salaries and the company-wide bonusaccrual.  Severance charges of $6.8 millionwere incurred from the departure of the former CEO.  The investment team incentive compensationplan is linked to individual performance, but also ties the aggregate level ofcompensation to revenue, which declined over the comparable prior year period.  Base salaries and the company-wide bonusaccrual decreased as a result of the reduction in workforce in the fourthquarter 2008 and lower anticipated 2009 operating results.

 

Long-term incentivecompensation increased $8.8 million, or 82.2%, primarily from the $5.3 milliondeparture-related acceleration of the former CEO’s awards and from new awardsgranted in 2009, partially offset by the vesting of previous awards.

 

Distribution expensedecreased $7.3 million, or 20.0%, as a result of a similar decline in assetsunder management subject to third-party concessions.  Distribution fees are calculated based on acontractual percentage of the market value of assets under managementdistributed through third-party intermediaries.

 

General, administrativeand occupancy expense increased $12.8 million, or 36.0%, primarily as a resultof legal settlements totaling $20.5 million, which were paid during the thirdquarter 2009, partially offset by the impact of cost reduction measuresimplemented in the fourth quarter 2008.

 

JCG recognized a $5.8million net gain on early extinguishment of debt as a result of the retirementof $443.3 million of outstanding debt. The extinguishment of debt, combined with the July convertible bondissuance of $170.0 million, is expected to result in lower annual interestexpense of approximately $16 million.

 

Mark-to-market gains ontrading securities for the three months ended September 30, 2009, werelargely offset by losses generated by a hedging strategy implemented in late2008.  Net investment losses for thethree months ended September 30, 2008 include a $21.0 million impairmentcharge on securities originally issued by Stanfield Victoria Funding LLC (“Stanfield”)and $11.3 million of mark-to-market adjustments on consolidated investmentproducts.

 

During September 2009,Stanfield was restructured whereby security holders were given the option toparticipate in a new structure, receive their proportionate share of eachinvestment position underlying Stanfield, or auction their position.  JCG, along with a majority of Stanfieldsecurity holders, elected to participate in the new structure under which

 

20

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each participating security holder’s proportionate share of positionsunderlying Stanfield were transferred to VFNC Trust (“VFNC”) and theirStanfield security interests were exchanged for VFNC security interests.  A manager for VFNC is expected to be hiredduring the fourth quarter 2009.  

 

##### ***NineMonths Ended September 30, 2009, Compared with Nine Months Ended September 30,2008***

##### *** ***

***Revenues***

 

Investment management fees decreased $202.2 million,or 29.6%, primarily as a result of the 33.1% decrease in average assets undermanagement and a decline in lower yielding money market assets, partiallyoffset by the impact of the consolidation of Perkins.

 

Performance fee revenue decreased $8.7 million, or33.5%, primarily as a result of lower performance fees on separate accounts asa result of a decline in short-term relative investment performance and oneseparate account reaching its one-year anniversary in the second quarter 2008on which the first contractual performance fee was recognized for the previous12 months.

 

Shareowner servicing feesand other revenue decreased $51.8 million, or 34.4%, primarily as a result of adecrease in transfer agent fees and money market administration fees.  Transfer agent fees declined over thecomparable prior period as a result a 34.3% decline in average assets undermanagement in Janus’ retail share class. Money market administration fees decreased as a result of exiting theinstitutional money market business in second quarter 2009.

 

***Expenses***

 

Employee compensation andbenefits decreased $50.5 million, or 19.1%, primarily from lower incentivecompensation.  Investment teamcompensation and sales commissions declined as result of lower revenues andsales, respectively.  The annualcompany-wide bonus accrual decreased as a result of anticipated lower 2009operating results.

 

Long-term incentivecompensation increased $11.6 million, or 32.9%, as a result of new awardsgranted in 2009 and the departure-related acceleration of the former CEO’sawards, partially offset by the vesting of previous awards. Long-term incentiveawards granted in 2009 totaled $83.6 million and will be recognized ratablyover four years. Awards granted in 2009 are not subject to performance-basedacceleration.

 

Marketing and advertisingexpenses decreased $4.2 million, or 17.1%, primarily due to cost reductionmeasures implemented in the fourth quarter 2008, partially offset by $3.8million of costs associated with JCG’s merging of two of its domestic mutualfund trusts effective July 6, 2009. An additional $1.0 million to $2.0 million of merger related costs isexpected to be incurred in fourth quarter 2009.

 

Distribution expensedecreased $36.3 million, or 32.7%, from a similar decline in assets undermanagement subject to third-party concessions.

 

Depreciation andamortization expenses decreased $5.1 million, or 16.6%, primarily as a resultof lower amortization of deferred commissions from a decline in sales of JanusInvestment Fund C shares.

 

General, administrativeand occupancy expense increased $6.2 million, or 5.8%, primarily as a result ofan unfavorable judgment and settlements of other matters totaling $31.4 million,partially offset by cost reduction measures implemented in the fourth quarter2008.

 

Goodwill and intangibleasset impairment charges of $747.0 million and $109.7 million, respectively,were recognized as of March 31, 2009. JCG revised its operating forecast downward as a result of continueddeterioration in global market conditions, assets under management and revenuesduring the first quarter 2009.  Theseconditions combined with JCG’s market capitalization remaining below net bookvalue caused management to reassess goodwill and all intangible assets forimpairment as of March 31, 2009. Based on these assessments, JCG partially impaired goodwill and mutualfund advisory contracts associated with the 2001 contractual obligation to buyout Janus’ founder.  The goodwillimpairment charge is not deductible for income tax purposes.  A tax benefit of $40.6 million was recognizedas a result of the impairment of mutual fund advisory contracts.

 

Mark-to-market gains ontrading securities for the nine months ended September 30, 2009, werelargely offset by losses generated by a hedging strategy implemented in late2008.  Net investment losses of $38.8million for the nine months ended September 30, 2008 include a $21.0million impairment charge on the Stanfield securities and $19.4 million ofmark-to-market losses, net of $1.6 million of realized gains.

 

21

----

 

Other income, net,decreased $6.1 million, or 92.4%, from a decline in interest and dividendincome earned on corporate cash and investments.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

**CashFlows**

 

A summary of cashflow data from continuing operations for the nine-months ended September 30,2009 and 2008 is as follows *(in millions)*:

 

| ** **                               | ** ** | **2009** | ** ** | **2008** | ** ** |
|------------------------------------------|------------|----------|------------|----------|------------|
| Cash  flows provided by (used for):      |       |     |       |     |       |
| Operating  activities                    |       | $        | 80.9       |     | $          | 168.1 |   |
| Investing  activities                    |       | (3.3     | )          | (66.2    | )          |
| Financing  activities                    |       | (123.8   | )          | (285.0   | )          |
| Net  change in cash and cash equivalents |       | (46.2    | )          | (183.1   | )          |
| Balance  beginning of period             |       | 282.6    |       | 480.7    |       |
| Balance  end of period                   |       | $        | 236.4      |     | $          | 297.6 |   |

 

On an annual basis, JCG’scash flow from operations historically has been positive and sufficient to fundordinary operations and capital requirements. Fluctuations in operating cash flows are attributable to changes in net incomeand working capital items, which can vary from period to period based on theamount and timing of cash receipts and payments.  The decline in cash flow from operations fromthe comparable prior year period was driven by lower revenues as a result ofthe decline in average assets under management.

 

Cash used for investingactivities for the nine months ended September 30, 2009, primarilyrepresents proceeds of $6.1 million for the net sale of investments, offset by$8.1 million for the purchase of property and equipment.  Purchases and sales of investments arerelated to seed capital as well as hedging and vesting of mutual fund shareawards.  Cash used for investing activitiesfor the comparable prior year period primarily represents $67.7 million for thepurchase of an additional 3% interest in INTECH. Based on the implementation ofnew guidance related to noncontrolling interests and redeemable noncontrollinginterests, the acquisitions of noncontrolling interests are classified asfinancing activities on the 2009 Consolidated Statements of Cash Flows.

 

Cash used for financingactivities for the nine months ended September 30, 2009, primarilyrepresents the repayment of $456.0 million of long-term debt, partially offsetby the issuance of $218.1 million and $170.0 million of common stock and debt,respectively.  Cash used for financingactivities for the comparable prior year period primarily represents stockbuybacks of $289.8 million.

 

**Common Stock and Convertible Senior NotesOfferings, and Tender Offer for Certain Outstanding Senior Notes**

 

In July 2009, JCG completed concurrent commonstock and 3.250% convertible senior notes offerings (“convertible senior notes”).  Proceeds, net of issuance costs from thecommon stock and convertible senior notes offerings totaled approximately$218.1 million and $164.3 million, respectively.

 

The convertible seniornotes issued in July 2009 pay interest semi-annually on July 15 and January 15of each year and mature on July 15, 2014, unless earlier converted.  The convertible senior notes are convertibleunder certain circumstances into cash, shares of JCG common stock, or acombination of cash and shares of JCG common stock, at JCG’s election.  Such a conversion would be at an initialconversion rate of 71.3 shares of JCG common stock per $1,000 principal amountof convertible senior notes, which is equivalent to an initial conversion priceof approximately $14.03 per share of common stock, subject to adjustment incertain circumstances. The convertible senior notes are not callable by JCG.

 

22

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Because the convertible senior notes may be wholly orpartially settled in cash, the proceeds are required to be bifurcated into debtand equity components.  The estimated$125.7 million debt component was determined by discounting future contractualcash flows at a 10.0% rate which is consistent with the estimated market ratefor similar senior notes with no conversion option.  The debt component will accrete up to theface value over the five-year expected term through interest expense.  The $44.3 million (or $27.9 million, net ofdeferred taxes) equity component was determined using the difference betweenthe proceeds and the debt component.  Thefair value of the convertible senior notes in the above table is based on theoutstanding principal balance while the carrying value represents theoutstanding principal balance exclusive of the unamortized discounts.

 

On August 13, 2009, the combined proceeds of thecommon stock and convertible senior notes offerings, together with availablecash, were used to repurchase $443.3 million aggregate principal amount of theCompany’s outstanding 2011, 2012 and 2017 senior notes in a tender offer.  JCG recognized a $5.8 million net gain on earlyextinguishment of debt related to the tender of these notes.   Results of the tender offer are as follows:

 
| ** **                       | ** ** | **Aggregate  Principal  Outstanding** | ** ** | **Principal  Amount  Tendered** | ** ** | **Tender Offer  Consideration** | ** ** | **Gross Gain  on Debt  Tender** | ** ** | **Deferred  Costs** | ** ** | **Tender Costs** | ** ** | **Net Gain /  (Loss) on Debt  Tender** | ** ** |
|----------------------------------|------------|---------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|---------------------|------------|------------------|------------|----------------------------------------|------------|
|                             |       |                                  |       |                            |       |                            |       |                            |       |                |       |             |       |                                   |       |
| **5.875% Senior Notes due 2011** |       | $                                     | 275.0      |                            | $          | 182.8                           |       | $                               | 182.8      |                | $          | —           |       | $                                      | 1.8        |   | $ | 1.0 |   | $ | (2.8 | ) |
|                             |       |                                  |       |                            |       |                            |       |                            |       |                |       |             |       |                                   |       |
| **6.250% Senior Notes due 2012** |       | 300.0                                 |       | 179.1                           |       | 175.5                           |       | 3.6                             |       | 0.9                 |       | 1.0              |       | 1.7                                    |       |
|                             |       |                                  |       |                            |       |                            |       |                            |       |                |       |             |       |                                   |       |
| **6.700% Senior Notes due 2017** |       | 450.0                                 |       | 81.4                            |       | 73.3                            |       | 8.1                             |       | 0.8                 |       | 0.4              |       | 6.9                                    |       |
|                             |       |                                  |       |                            |       |                            |       |                            |       |                |       |             |       |                                   |       |
| **Total**                        |       | $                                     | 1,025.0    |                            | $          | 443.3                           |       | $                               | 431.6      |                | $          | 11.7             |       | $                                      | 3.5        |   | $ | 2.4 |   | $ | 5.8 |   |

 

Deferred costs include the write-off of previouslycapitalized bond discounts, issue costs and a deferred loss on interest rateswap.

 

*InterestRate Adjustment Covenant*

 

All of JCG’s seniornotes, excluding the convertible senior notes, are subject to an interest rateadjustment covenant that provides that the interest rate payable will increaseby 25 basis points for each level that the Company’s debt rating is decreasedby Moody’s from Baa3 or by S&P from BBB-, up to a maximum increase of 200basis points.  If at any time after theinterest has been adjusted upward, either Moody’s or S&P increases itsrating, then for each level of such increase in the rating, the interestpayable will be decreased by 25 basis points, but in no event to a rate lessthan the interest rate payable on the date of their issuance.  The interest rate adjustment covenant willpermanently terminate if the Company’s debt ratings increase to Baa2 by Moody’sand BBB by S&P (or higher), with a stable or positive outlook regardless ofany subsequent decrease in the ratings by either or both rating agencies.  On February 23, 2009, S&P loweredJCG’s credit rating to BB+, which resulted in a 25 basis point increase in theinterest rates payable on all of JCG’s senior notes, excluding the convertiblesenior notes.

 

**Other Sources of Liquidity**

 

*Shelf Registration*

 

The Company has effective a Shelf RegistrationStatement with the SEC under which JCG registered the July 2009 commonstock and convertible senior notes offerings. JCG’s effective Shelf Registration allows it to register the sale of anindeterminate amount of preferred stock and additional common stock and debtsecurities.

 

*Credit Facility*

 

On June 12, 2009,JCG and the syndicate of banks amended the existing $350 million Five-YearCompetitive Advance and Revolving Credit Facility Agreement (the “CreditFacility”).  Under the amended Credit Facility, the bank syndicate’scommitment has been decreased to $125 million, any borrowings will be securedby JCG’s assets, and the maturity date has been accelerated from June 1,2012 to December 1, 2010.  The covenants under the Credit Facilitywere amended to allow for a higher leverage ratio and a lower interest coverageratio.  In addition, a minimum assetsunder management covenant has been included in the amended CreditFacility.  At September 30, 2009, JCG was in compliance with allcovenants and there were no borrowings under the amended Credit Facility.

 

23

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The covenants and the calculation of the ratios, asdefined in the amended Credit Facility, are as follows *(inmillions)*:

 

| ** **                                                                                | ** ** | **Last Four**               | ** ** |
|-------------------------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                                                | ** ** | **Quarters Ended**          | ** ** |
| ** **                                                                                | ** ** | **September 30, 2009** | ** ** |
|                                                                                      | ** ** | ** **                  | ** ** |
| Net income (loss)                                                                         |       | $                           | (786.3     | ) |
| Add back:                                                                                 |       |                        |       |
| Gain on early extinguishment of debt                                                      |       | (5.8                        | )          |
| Tender costs                                                                              |       | 20.0                        |       |
| Goodwill and intangible asset impairment charges                                          |       | 856.7                       |       |
| Interest expense                                                                          |       | 77.1                        |       |
| Income tax provision                                                                      |       | (35.2                       | )          |
| Depreciation and amortization                                                             |       | 35.1                        |       |
| Non-cash amortization of long-term incentive  compensation                                |       | 55.1                        |       |
| Unrealized gains or losses on investments                                                 |       | 8.5                         |       |
| Other nonrecurring cash charges                                                           |       | 38.7                        |       |
| Cash paid for deferred commissions and mutual fund  share awards                          |       | (41.0                       | )          |
| Adjusted EBITDA                                                                           |       | $                           | 222.9      |   |
|                                                                                      |       |                        |       |
| Debt (including capital leases and letters of  credit)                                    |       | $                           | 797.0      |   |
|                                                                                      |       |                        |       |
| Leverage Ratio (Debt divided by Adjusted EBITDA)                                          |       | 3.58                        |       |
| **Cannot exceed 8.00**                                                                    |       |                        |       |
|                                                                                      |       |                        |       |
| Interest Coverage Ratio (Adjusted EBITDA divided by  Last Four Quarters Interest Expense) |       | 2.9                         |       |
| **Must equal or exceed 2.0**                                                              |       |                        |       |
|                                                                                      |       |                        |       |
| Minimum long-term assets under management (in  billions)                                  |       | $                           | 150.0      |   |
| **Must exceed $80.0 billion**                                                             |       |                        |       |

 

**Item 3.       Quantitative and Qualitative Disclosuresabout Market Risk**

 

The Company has had nomaterial changes in its exposure to market risks from that previously reportedin the Company’s Annual Report on Form 10-K for the year ended December 31,2008.

 

**Item 4.       Controlsand Procedures**

 

JCG’s management evaluated the effectiveness of thedesign and operation of its disclosure controls and procedures (as such term isdefined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)as of September 30, 2009. Disclosure controls and procedures are the controls and other proceduresthat the Company designed to ensure that it records, processes, summarizes andreports in a timely manner the information it must disclose in reports that itfiles with or submits to the SEC. Timothy K. Armour, Chief Executive Officer, and Gregory A. Frost,Executive Vice President and Chief Financial Officer, reviewed and participatedin this evaluation.  Based on thisevaluation, Messrs. Armour and Frost concluded that as of the date oftheir evaluation, JCG’s disclosure controls and procedures were effective.

 

There has been no changein JCG’s internal controls over financial reporting (as such term is defined inRules 13a-15(e) and 15d-15(e) under the Exchange Act) during thethree months ended September 30, 2009, that has materially affected, or isreasonably likely to materially affect, JCG’s internal controls over financialreporting.

 

24

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**PART II– OTHER INFORMATION**

 

**Item1.     Legal Proceedings**

 

See Part I, Item 1.Financial Statements, Note 14 – Legal Proceedings.

 

**Item1A.     Risk Factors**

 

TheCompany has had no material changes in its risk factors from those previouslyreported in the Company’s Annual Report on Form 10-K for the year ended December 31,2008 and Prospectus Supplements dated July 17, 2009, to the RegistrationStatement on Form S-3 (Registration No. 333-143510).

 

**Item2.     Unregistered Sales of EquitySecurities and Use of Proceeds**

 

On July 22, 2008,the Board of Directors authorized a fifth $500 million stock repurchase programto take effect when the current authorization is utilized.  Given the current market conditions, JCGsuspended stock buybacks in the fourth quarter 2008 to preserve liquidity.  The amount that may yet be repurchased underthe current authorizations as of September 30, 2009 is $521 million.  There were no share repurchases for the ninemonths ended September 30, 2009 under the current authorization or fromemployees as part of the share withholding program (established under Rule 10b5-1of the Securities Exchange Act of 1934). JCG no longer purchases shares from employees under Rule 10b5-1.  Tax withholdings on vesting employeestock-based compensation are satisfied by employees selling shares on the openmarket.

 

25

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**Item6.     Exhibits**

 
| 10.1   |   | Term Sheet  setting forth the terms of employment of Timothy K. Armour                                                                                                                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                          |
| 10.2   |   | $125  million Competitive Advance and Revolving Credit Facility Agreement, dated as  of June 12, 2009, with Citibank, N.A., as administrative agent and swingline  lender and JPMorgan Chase Bank, N.A., as syndication agent for the lenders |
|   |   |                                                                                                                                                                                                                                          |
| 31.1   |   | Certification of  Timothy K. Armour, Chief Executive Officer of Registrant                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                          |
| 31.2   |   | Certification of  Gregory A. Frost, Executive Vice President and Chief Financial Officer of  Registrant                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                          |
| 32.1   |   | Certification of  Timothy K. Armour, Chief Executive Officer of Registrant, pursuant to 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002                                              |
|   |   |                                                                                                                                                                                                                                          |
| 32.2   |   | Certification of  Gregory A. Frost, Executive Vice President and Chief Financial Officer of  Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002                  |
|   |   |                                                                                                                                                                                                                                          |
| 99.1   |   | Lipper Rankings                                                                                                                                                                                                                               |

 

26

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
| Date: October 22,  2009 |
|------------------------------|
|                         |
|                         |
|                         | Janus Capital Group  Inc. |   |
|                         |   |   |
|                         |   |   |
|                         | /s/ Timothy K.  Armour |   |
|                         | Timothy K.  Armour, |   |
|                         | Chief Executive  Officer |   |
|                         |   |   |
|                         |   |   |
|                         | /s/ Gregory A.  Frost |   |
|                         | Gregory A.  Frost, |   |
|                         | Executive Vice  President and |   |
|                         | Chief Financial  Officer |   |
|                         | (Principal  Financial Officer and |   |
|                         | Principal  Accounting Officer) |   |

 

27

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**JANUS CAPITAL GROUP INC.**

**INDEX TO EXHIBITS**

 
| **Exhibit  No.** | ** ** | **Document**                                                                                                                                                                                                                                  | ** ** | **Regulation S-K  Item 601(b)  Exhibit No.** |
|------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------|
|             |       |                                                                                                                                                                                                                                          |       |                                              |
| 10.1             |       | Term Sheet setting forth the terms of employment of Timothy K.  Armour                                                                                                                                                                        |       | 10                                                |
|             |       |                                                                                                                                                                                                                                          |       |                                              |
| 10.2             |       | $125 million Competitive Advance and Revolving Credit Facility  Agreement, dated as of June 12, 2009, with Citibank, N.A., as administrative  agent and swingline lender and JPMorgan Chase Bank, N.A., as syndication  agent for the lenders |       | 10                                                |
|             |       |                                                                                                                                                                                                                                          |       |                                              |
| 31.1             |       | Certification of  Timothy K. Armour, Chief Executive Officer of Registrant                                                                                                                                                                    |       | 31                                                |
|             |       |                                                                                                                                                                                                                                          |       |                                              |
| 31.2             |       | Certification of  Gregory A. Frost, Executive Vice President and Chief Financial Officer of  Registrant                                                                                                                                       |       | 31                                                |
|             |       |                                                                                                                                                                                                                                          |       |                                              |
| 32.1             |       | Certification of  Timothy K. Armour, Chief Executive Officer of Registrant, pursuant to 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002                                              |       | 32                                                |
|             |       |                                                                                                                                                                                                                                          |       |                                              |
| 32.2             |       | Certification of  Gregory A. Frost, Executive Vice President and Chief Financial Officer of  Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002                  |       | 32                                                |
|             |       |                                                                                                                                                                                                                                          |       |                                              |
| 99.1             |       | Lipper Rankings                                                                                                                                                                                                                               |       | 99                                                |

 

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