** **

**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

** **

x                               **QUARTERLY REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended March 31,2010**

 

**OR**

 

**o****                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

 

**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, including area code)

 

**Not applicable**

(Former name, former address and former fiscal year, if changed sincelast report)

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the Company was required to file such reports), and (2) has beensubject to the filing requirements for the past 90 days.  Yes x   Noo

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files). Yes o   No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company.  See the definitions of “large acceleratedfiler,” “accelerated filer,” “non-accelerated filer” and “smaller reportingcompany” in Rule 12b-2 of the Exchange Act.

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

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes o   Nox

 

As of April 26, 2010,there were 183,726,485 shares of the Company’s common stock, $.01 par value pershare, issued and outstanding.

 

 

 

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**PART I — FINANCIAL INFORMATION**

**Item 1. Financial Statements**

 

**JANUS CAPITAL GROUP INC.**

 

**CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

**(Dollars in Millions)**

 
| ** **                                      | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                      | ** ** | **2010**           | ** ** | **2009**              | ** ** |
| **ASSETS**                                      | ** ** | ** **         | ** ** | ** **            | ** ** |
|                                            |       |               |       |                  |       |
| **Current assets:**                             |       |               |       |                  |       |
| Cash and cash equivalents                       |       | $                  | 269.0      |                  | $          | 324.7 |   |
| Marketable securities                           |       | 105.5              |       | 106.8                 |       |
| Accounts receivable                             |       | 124.3              |       | 122.3                 |       |
| Income taxes receivable                         |       | 11.6               |       | 4.5                   |       |
| Other current assets                            |       | 65.4               |       | 72.3                  |       |
| Total current assets                            |       | 575.8              |       | 630.6                 |       |
|                                            |       |               |       |                  |       |
| **Other assets:**                               |       |               |       |                  |       |
| Property and equipment, net                     |       | 46.7               |       | 48.4                  |       |
| Intangible assets, net                          |       | 1,282.5            |       | 1,285.4               |       |
| Goodwill                                        |       | 488.2              |       | 488.2                 |       |
| Other assets                                    |       | 94.6               |       | 77.7                  |       |
|                                            |       |               |       |                  |       |
| Total assets                                    |       | $                  | 2,487.8    |                  | $          | 2,530.3 |   |
|                                            |       |               |       |                  |       |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**  |       |               |       |                  |       |
|                                            |       |               |       |                  |       |
| **Current liabilities:**                        |       |               |       |                  |       |
| Accounts payable                                |       | $                  | 7.2        |                  | $          | 8.4 |   |
| Accrued compensation and benefits               |       | 44.2               |       | 98.2                  |       |
| Other accrued liabilities                       |       | 76.5               |       | 80.5                  |       |
| Total current liabilities                       |       | 127.9              |       | 187.1                 |       |
|                                            |       |               |       |                  |       |
| **Other liabilities:**                          |       |               |       |                  |       |
| Long-term debt                                  |       | 793.9              |       | 792.0                 |       |
| Deferred income taxes                           |       | 388.8              |       | 390.1                 |       |
| Other liabilities                               |       | 55.7               |       | 48.4                  |       |
| Total liabilities                               |       | 1,366.3            |       | 1,417.6               |       |
|                                            |       |               |       |                  |       |
| Commitments and contingencies                   |       |               |       |                  |       |
|                                            |       |               |       |                  |       |
| Redeemable noncontrolling interests             |       | 77.5               |       | 101.1                 |       |
|                                            |       |               |       |                  |       |
| **STOCKHOLDERS’ EQUITY**                   |       |               |       |                  |       |
|                                            |       |               |       |                  |       |
| Preferred stock                                 |       | —             |       | —                |       |
| Common stock                                    |       | 1.8                |       | 1.8                   |       |
| Retained earnings                               |       | 1,031.3            |       | 998.3                 |       |
| Accumulated other comprehensive income          |       | 0.9                |       | 1.0                   |       |
| Total JCG stockholders’ equity             |       | 1,034.0            |       | 1,001.1               |       |
| Noncontrolling interests                        |       | 10.0               |       | 10.5                  |       |
| Total stockholders’ equity                 |       | 1,044.0            |       | 1,011.6               |       |
|                                            |       |               |       |                  |       |
| Total liabilities and stockholders’ equity |       | $                  | 2,487.8    |                  | $          | 2,530.3 |   |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements.

 

2

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**JANUS CAPITAL GROUP INC.**

** **

**CONDENSEDCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)**

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

 
| ** **                                                                 | ** ** | **Three months ended** | ** ** |
|----------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                 | ** ** | **March 31,**     | ** ** |
| ** **                                                                 | ** ** | **2010**               | ** ** | **2009** | ** ** |
|                                                                       |       |                   |       |   |   |
| **Revenues:**                                                              |       |                   |       |   |   |
| Investment  management fees                                                |       | $                      | 205.8      |   | $ | 136.8 |   |
| Performance  fees                                                          |       | 4.7                    |       | 3.4 |   |
| Shareowner  servicing fees and other                                       |       | 36.4                   |       | 30.1 |   |
| Total                                                                      |       | 246.9                  |       | 170.3 |   |
|                                                                       |       |                   |       |   |   |
| **Operating Expenses:**                                                    |       |                   |       |   |   |
| Employee  compensation and benefits                                        |       | 79.6                   |       | 62.2 |   |
| Long-term  incentive compensation                                          |       | 18.6                   |       | 13.4 |   |
| Marketing  and advertising                                                 |       | 6.8                    |       | 5.6 |   |
| Distribution                                                               |       | 35.1                   |       | 20.1 |   |
| Depreciation  and amortization                                             |       | 9.9                    |       | 8.9 |   |
| General,  administrative and occupancy                                     |       | 29.6                   |       | 33.2 |   |
| Goodwill  and intangible asset impairments                                 |       | —                 |       | 856.7 |   |
| Total                                                                      |       | 179.6                  |       | 1,000.1 |   |
|                                                                       |       |                   |       |   |   |
| **Operating income (loss)**                                                |       | 67.3                   |       | (829.8 | ) |
|                                                                       |       |                   |       |   |   |
| Interest  expense                                                          |       | (15.6                  | )          | (19.9 | ) |
| Investment  gains (losses), net                                            |       | 0.7                    |       | (7.2 | ) |
| Other  income, net                                                         |       | 0.2                    |       | — |   |
| Income  (loss) before taxes                                                |       | 52.6                   |       | (856.9 | ) |
|                                                                       |       |                   |       |   |   |
| Income  tax provision                                                      |       | (19.2                  | )          | 41.3 |   |
|                                                                       |       |                   |       |   |   |
| Net  income (loss)                                                         |       | 33.4                   |       | (815.6 | ) |
| Noncontrolling  interest                                                   |       | (2.1                   | )          | (2.5 | ) |
|                                                                       |       |                   |       |   |   |
| **Net income (loss) attributable to JCG**                                  |       | $                      | 31.3       |   | $ | (818.1 | ) |
|                                                                       |       |                   |       |   |   |
| **Earnings (loss) per share****attributable to  JCG common shareholders:** |       |                   |       |   |   |
| Basic                                                                      |       | $                      | 0.17       |   | $ | (5.22 | ) |
| Diluted                                                                    |       | $                      | 0.17       |   | $ | (5.22 | ) |

 

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

 

3

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**JANUS CAPITAL GROUP INC.**

** **

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

**(Dollarsin Millions)**

** **
| ** **                                              | ** ** | **Three months ended** | ** ** |
|---------------------------------------------------------|------------|------------------------|------------|
| ** **                                              | ** ** | **March 31,**     | ** ** |
| ** **                                              | ** ** | **2010**               | ** ** | **2009** | ** ** |
| **CASH FLOWS PROVIDED BY (USED FOR):**                  |       |                   |       |   |   |
|                                                    |       |                   |       |   |   |
| **Operating Activities:**                               |       |                   |       |   |   |
| Net  income (loss)                                      |       | $                      | 33.4       |   | $ | (815.6 | ) |
| Adjustments  to net income (loss):                      |       |                   |       |   |   |
| Depreciation  and amortization                          |       | 9.9                    |       | 8.9 |   |
| Deferred  income taxes                                  |       | 11.3                   |       | (37.7 | ) |
| Amortization  of stock-based compensation               |       | 13.1                   |       | 9.2 |   |
| Investment  (gains) losses, net                         |       | (0.7                   | )          | 7.2 |   |
| Goodwill  and intangible asset impairments              |       | —                 |       | 856.7 |   |
| Amortization  of debt discount and deferred issue costs |       | 3.0                    |       | 0.6 |   |
| Payment  of deferred commissions, net                   |       | (2.7                   | )          | (1.1 | ) |
| Other,  net                                             |       | 0.5                    |       | (0.5 | ) |
| Changes  in working capital items:                      |       |                   |       |   |   |
| Accounts  receivable                                    |       | (2.0                   | )          | 10.9 |   |
| Other  current assets                                   |       | (10.0                  | )          | (7.1 | ) |
| Accounts  payable and accrued compensation payable      |       | (55.4                  | )          | (64.3 | ) |
| Other  liabilities                                      |       | (5.2                   | )          | 5.4 |   |
| Net  operating                                          |       | (4.8                   | )          | (27.4 | ) |
|                                                    |       |                   |       |   |   |
| **Investing Activities:**                               |       |                   |       |   |   |
| Purchase  of property and equipment                     |       | (2.4                   | )          | (4.2 | ) |
| Acquisitions                                            |       | —                 |       | (1.2 | ) |
| Purchase  of securities                                 |       | (47.1                  | )          | (39.5 | ) |
| Proceeds  from sales and maturities of securities       |       | 30.2                   |       | 27.3 |   |
| Net  investing                                          |       | (19.3                  | )          | (17.6 | ) |
|                                                    |       |                   |       |   |   |
| **Financing Activities:**                               |       |                   |       |   |   |
| Purchase  of noncontrolling interests                   |       | (31.4                  | )          | (0.7 | ) |
| Proceeds  from stock plans                              |       | 1.1                    |       | 0.2 |   |
| Excess  tax benefit from equity-based compensation      |       | 2.5                    |       | — |   |
| Distributions  to noncontrolling interest               |       | (3.5                   | )          | (5.0 | ) |
| Principal  payments under capital lease obligations     |       | (0.3                   | )          | — |   |
| Net  financing                                          |       | (31.6                  | )          | (5.5 | ) |
|                                                    |       |                   |       |   |   |
| **Cash and Cash Equivalents:**                          |       |                   |       |   |   |
| Net  decrease                                           |       | (55.7                  | )          | (50.5 | ) |
| At  beginning of period                                 |       | 324.7                  |       | 282.6 |   |
| At  end of period                                       |       | $                      | 269.0      |   | $ | 232.1 |   |
|                                                    |       |                   |       |   |   |
| **Supplemental Cash Flow Information:**                 |       |                   |       |   |   |
| Cash  paid for interest                                 |       | $                      | 5.5        |   | $ | 8.4 |   |
| Cash  paid for income taxes                             |       | $                      | 14.7       |   | $ | 4.3 |   |

 

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

 

4

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**JANUS CAPITAL GROUP INC.**

** **

**CONDENSED CONSOLIDATED STATEMENTS OF CHANGES INSTOCKHOLDERS’ EQUITY (UNAUDITED)**

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

 
| ** **                                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **   | ** ** | **Accumulated**   | ** ** | **Nonredeemable**  | ** ** | ** **             | ** ** |
|--------------------------------------------------------------|------------|------------|------------|------------|------------|--------------|------------|-------------------|------------|--------------------|------------|------------------------|------------|
| ** **                                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **   | ** ** | **Other**         | ** ** | **Noncontrolling** | ** ** | **Total**              | ** ** |
| ** **                                                   | ** ** | ** ** | ** ** | **Common** | ** ** | **Retained** | ** ** | **Comprehensive** | ** ** | **Interest in**    | ** ** | **Stockholders’** | ** ** |
| ** **                                                   | ** ** | **Shares** | ** ** | **Stock**  | ** ** | **Earnings** | ** ** | **Income (Loss)** | ** ** | **Subsidiary**     | ** ** | **Equity**             | ** ** |
|                                                         |       |       |       |       |       |         |       |              |       |               |       |                   |       |
| **Balance at December 31, 2008**                        |       | 157.9      |       | $          | 1.6        |         | $          | 1,510.6           |       | $                  | (5.3       | )                      | $          | 9.9 |   | 1,516.8 |   |
| Net  loss attributable to JCG                                |       |       |       |       |       | (757.1       | )          |              |       | 3.0                |       | (754.1                 | )          |
| Net  unrealized gain on available-for-sale securities        |       |       |       |       |       |         |       | 2.4               |       |               |       | 2.4                    |       |
| Amortization  of net loss on cash flow hedge                 |       |       |       |       |       |         |       | 1.2               |       |               |       | 1.2                    |       |
| Reclassification  for net gains included in net income       |       |       |       |       |       |         |       | (0.4              | )          |               |       | (0.4                   | )          |
| Impairment  of available-for-sale securities                 |       |       |       |       |       |         |       | 3.3               |       |               |       | 3.3                    |       |
| Foreign  currency translation adjustment                     |       |       |       |       |       |         |       | (0.2              | )          |               |       | (0.2                   | )          |
| *Comprehensive income*                                       |       |       |       |       |       |         |       |              |       |               |       | (747.8                 | )          |
| Common  stock issuance                                       |       | 20.9       |       | 0.2        |       | 217.9        |       |              |       |               |       | 218.1                  |       |
| Convertible  debt issuance                                   |       |       |       |       |       | 26.4         |       |              |       |               |       | 26.4                   |       |
| Amortization  of stock-based compensation                    |       |       |       |       |       | 34.7         |       |              |       | 4.0                |       | 38.7                   |       |
| Issuance  and forfeitures of restricted stock awards, net    |       | 3.2        |       |       |       |         |       |              |       |               |       | —                 |       |
| Tax  impact of stock-based compensation                      |       |       |       |       |       | (6.1         | )          |              |       |               |       | (6.1                   | )          |
| Employee  stock purchases                                    |       |       |       |       |       | 1.2          |       |              |       |               |       | 1.2                    |       |
| Noncontrolling  interest in consolidated investment products |       |       |       |       |       |         |       |              |       | (0.9               | )          | (0.9                   | )          |
| Purchase  of noncontrolling interests                        |       |       |       |       |       |         |       |              |       | (2.3               | )          | (2.3                   | )          |
| Distributions  to noncontrolling interests                   |       |       |       |       |       |         |       |              |       | (3.2               | )          | (3.2                   | )          |
| Change  in value of redeemable noncontrolling interest       |       |       |       |       |       | (22.8        | )          |              |       |               |       | (22.8                  | )          |
| Common  stock dividends ($0.04 per share)                    |       |       |       |       |       | (6.5         | )          |              |       |               |       | (6.5                   | )          |
| **Balance at December 31, 2009**                        |       | 182.0      |       | 1.8        |       | 998.3        |       | 1.0               |       | 10.5               |       | 1,011.6                |       |
| ** **                                                   |       |       |       |       |       |         |       |              |       |               |       |                   |       |
| Net  income attributable to JCG                              |       |       |       |       |       | 31.3         |       |              |       | 0.7                |       | 32.0                   |       |
| Net  unrealized gain on available-for-sale securities        |       |       |       |       |       |         |       | 0.3               |       |               |       | 0.3                    |       |
| Foreign  currency translation adjustment                     |       |       |       |       |       |         |       | (0.4              | )          |               |       | (0.4                   | )          |
| *Comprehensive income*                                       |       |       |       |       |       |         |       |              |       |               |       | 31.9                   |       |
| Amortization  of stock-based compensation                    |       |       |       |       |       | 8.1          |       |              |       | 1.2                |       | 9.3                    |       |
| Issuance  and forfeitures of restricted stock awards, net    |       | 1.5        |       |       |       |         |       |              |       |               |       | —                 |       |
| Tax  impact of stock-based compensation                      |       |       |       |       |       | 0.1          |       |              |       |               |       | 0.1                    |       |
| Stock  option exercises and employee stock purchases         |       | 0.2        |       |       |       | 1.1          |       |              |       |               |       | 1.1                    |       |
| Noncontrolling  interest in consolidated investment products |       |       |       |       |       |         |       |              |       | (0.1               | )          | (0.1                   | )          |
| Distributions  to noncontrolling interests                   |       |       |       |       |       |         |       |              |       | (1.1               | )          | (1.1                   | )          |
| Change  in fair value of redeemable noncontrolling interest  |       |       |       |       |       | (7.6         | )          |              |       | (1.2               | )          | (8.8                   | )          |
| **Balance at March 31, 2010**                           |       | 183.7      |       | $          | 1.8        |         | $          | 1,031.3           |       | $                  | 0.9        |                   | $          | 10.0 |   | $ | 1,044.0 |   |
|                                                              |            |            |            |            |            |              |            |                   |            |                    |            |                        |            |  |  |  |  |  |

 

The accompanyingnotes are an integral part of these condensed consolidated financialstatements.

 

5

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**JANUS CAPITAL GROUP INC.**

 

**NOTES TO CONDENSED 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 condensed 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 normal recurring 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 Exchange Commission(“SEC”). Certain information and footnote disclosures normally included infinancial statements prepared in accordance with GAAP have been condensed oromitted pursuant to such rules and regulations. These condensedconsolidated financial statements should be read in conjunction with theCompany’s Annual Report on Form 10-K for the year ended December 31,2009.

 

Theaccompanying condensed consolidated financial statements have been prepared ona consistent 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, 2009. Prior yearamounts related to the amortization of debt discount and deferred issue costson the Consolidated Statements of Cash Flows have been reclassified to conformto the 2010 presentation.

 

**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. In January 2010, the FASB deferred the provisions of thisguidance primarily for entities with attributes of an investment company untilthe FASB and International Accounting Standards Board develop convergedguidance on consolidating. This accounting guidance may otherwise have resultedin the consolidation of certain JCG investment products. An Exposure Draft isexpected to be published during 2010.

 

In January 2010,the FASB amended the previously issued guidance on fair value measurements torequire additional disclosures regarding the activity of measurements usingunobservable inputs. The effective date of this guidance is the Company’sfiscal year beginning January 1, 2011. The application of these provisionswill not impact JCG’s fair value measurements, but may result in additionaldisclosures.

 

6

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**Note 3 — Marketable Securities**

 

JCG’s marketable securities at March 31, 2010 andDecember 31, 2009, are summarized as follows (in millions):

 
| ** **                                                    | ** ** | **March 31, 2010** | ** ** | **December 31, 2009** | ** ** |
|---------------------------------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| ** **                                                    | ** ** | ** **              | ** ** | **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)**             |       | $                       | 55.9       |                       | $          | 5.0 |   | $ | (3.7 | ) | $ | 57.2 |   | $ | 57.8 |   | $ | 3.9 |   | $ | (4.8 | ) | $ | 56.9 |   |
| **Available-for-sale securities  (carried****at fair value)** |       |                    |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Investments in advised funds                                  |       | 9.6                     |       | 3.4                        |       | — |   | 13.0 |   | 9.7 |   | 2.9 |   | (0.1 | ) | 12.5 |   |
| Structured investment vehicle                                 |       | 35.3                    |       | —                     |       | — |   | 35.3 |   | 37.4 |   | — |   | — |   | 37.4 |   |
|                                                          |       | $                       | 100.8      |                       | $          | 8.4 |   | $ | (3.7 | ) | $ | 105.5 |   | $ | 104.9 |   | $ | 6.8 |   | $ | (4.9 | ) | $ | 106.8 |   |

 

JCG periodically adds new investment strategies to itsinvestment product offerings by providing the initial cash investment, or “seeding,”of these investment products. Seeded investment products are initiallyconsolidated and the individual securities within the portfolio are accountedfor as trading securities. JCG will consolidate such investment products as longas it holds a controlling interest, defined as greater than 50% ownership. Upondeconsolidation, JCG accounts for its investments as available-for-salesecurities.

 

JCG may redeem invested seed capital for a variety ofreasons, including when third-party capital invested in the relevant product issufficient to sustain the given investment strategy. JCG recognizedinsignificant gains and losses from the redemption of seed capital investmentsfor the three months ended March 31, 2010 and 2009, respectively.

 

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 utilizesfutures contracts on various market indices to minimize volatility in earnings.These instruments are accounted for at fair value, with changes in fair valuereported currently in earnings.

 

Investments in seed capital are classified as follows:

 

***TradingSecurities***

 

AtMarch 31, 2010, seed capital investments classified as trading securitiestotaled $57.2 million, representing $37.3 million of securities held inseparately managed accounts and $19.9 million of securities held in theportfolios of advised funds consolidated by the Company. Trading securities arecarried in JCG’s Consolidated Balance Sheets at fair value, with changes invalue recognized as gains and losses currently in earnings. JCG recognized netgains and (losses) of $2.1 million and $(4.8) million in earnings on securitiesclassified as trading for the three months ended March 31, 2010 and 2009,respectively. JCG recognized net gains and (losses) of $(1.5) million and $4.3million on hedged seed capital investments for the three months ended March 31,2010 and 2009, respectively.

 

Proceedsfrom the sale of trading securities totaled $1.6 million and $6.2 million forthe three months ended March 31, 2010 and 2009, respectively.

 

***Available-for-SaleSecurities***

 

*Investmentsin Advised Funds*

 

At March 31, 2010,investments in advised funds totaled $13.0 million. Investments in advisedfunds are carried in JCG’s Consolidated Balance Sheets at fair value, withchanges in value recognized as gains and losses in other comprehensive income.Accumulated gains and losses are reclassified to earnings when the securitiesare sold on a specific identification basis. JCG periodically reviews thecarrying value of investments in advised funds for impairment by evaluating thenature, duration and extent of any decline 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 March 31, 2010. Other-than-temporaryimpairment charges of $5.2 million were recognized during the three monthsended March 31, 2009.

 

7

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Proceeds from the sale ofinvestments in advised funds were not significant for the three months ended March 31,2010 and totaled $0.8 million for the three months ended March 31, 2009.

 

*Structured Investment Vehicle*

 

JCG’s structured investment vehicle (“SIV”) investmentrepresents securities originally issued by Stanfield Victoria Funding LLC (“Stanfield”).During September 2009, Stanfield was restructured whereby security holderswere given the option to participate in a new structure, receive theirproportionate share of each investment position underlying Stanfield or auctiontheir position. JCG, along with a majority of Stanfield security holders,elected to participate in the new structure under which each participatingsecurity holder’s proportionate share of positions underlying Stanfield wastransferred to VFNC Trust (“VFNC”) and their Stanfield security interests wereexchanged for VFNC security interests. The restructuring has not impacted the valuation of the securities.

 

The VFNC securities arecarried in JCG’s consolidated financial statements based on JCG’s estimate offair value. See Note 4 for further discussion of the fair value of the VFNCsecurities.

 

**Note 4 — 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 thehierarchy is based upon the lowest level of input that is significant to thefair value measurement. The valuation hierarchy contains three levels:

 
| · | Level 1 – Valuation  inputs are unadjusted quoted market prices for identical assets or  liabilities in active markets.                                                                                                                                                                              |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                      |
| · | Level  2 – Valuation inputs are quoted prices for identical assets or liabilities in  markets that are not active, quoted market prices for similar assets and  liabilities in active markets, and other observable inputs directly or  indirectly related to the asset or liability being measured. |
|   |                                                                                                                                                                                                                                                                                                      |
| · | Level 3 – Valuation  inputs are unobservable and significant to the fair value measurement.                                                                                                                                                                                                          |

 

The following table presents assets and liabilitiescarried at fair value as of March 31, 2010 *(inmillions)*:

 
| ** **                                | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
|-------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|-----------|------------|
| Trading  securities                       |       | $           | 51.2       |        | $          | 6.0         |       | $         | —     |   | $ | 57.2 |   |
|                                      |       |        |       |        |       |        |       |      |       |
| Available-for-sale  securities            |       |        |       |        |       |        |       |      |       |
| Investments  in advised funds             |       | 9.4         |       | 3.6         |       | —      |       | 13.0      |       |
| Structured  investment vehicle securities |       | —      |       | —      |       | 35.3        |       | 35.3      |       |
| Total  marketable securities              |       | 60.6        |       | 9.6         |       | 35.3        |       | 105.5     |       |
|                                      |       |        |       |        |       |        |       |      |       |
| Other  assets                             |       |        |       |        |       |        |       |      |       |
| Mutual  fund unit award hedge asset       |       | 85.2        |       | —      |       | —      |       | 85.2      |       |
| Deferred  compensation hedge asset        |       | 22.0        |       | —      |       | —      |       | 22.0      |       |
|                                      |       |        |       |        |       |        |       |      |       |
|                                      |       |        |       |        |       |        |       |      |       |
| Total  assets carried at fair value       |       | $           | 167.8      |        | $          | 9.6         |       | $         | 35.3       |   | $ | 212.7 |   |
|                                      |       |        |       |        |       |        |       |      |       |
| Redeemable  noncontrolling interests      |       | —      |       | —      |       | 77.5        |       | 77.5      |       |
|                                      |       |        |       |        |       |        |       |      |       |
| Total  liabilities carried at fair value  |       | $           | —     |        | $          | —      |       | $         | 77.5       |   | $ | 77.5 |   |

 

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. The underlying securities of mutual funds andseparate accounts can be denominated in a foreign currency. The closing priceof such securities may be adjusted to capture the effects of any post-closingactivity impacting the markets in which they trade. These adjustments result inthe securities being classified as Level 2 and can also create significantmovements between securities classified as Level 1 and Level 2.

 

JCG’s Level 3 recurringfair value measurements include SIV securities and redeemable noncontrollinginterests.  Nonrecurring Level 3 fairvalue measurements include goodwill and intangible assets.

8

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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 fair value, JCG undertakes a detailed analysis ofthe assets underlying the SIV securities and benchmarks those assets againstinstruments of a similar type with comparable yields, maturities and creditratings for which quoted market prices are readily available. Discounts havebeen applied to the quoted market prices of the benchmark instruments to adjustfor varying yields, credit ratings or other distinguishing characteristics. Thevaluation methodology for the SIV securities has been consistently appliedsince their acquisition in 2007 and subsequent restructuring in September 2009.

 

JCG measured the fairvalue of the SIV securities as of March 31, 2010, and determined that thevaluation was consistent with the previously reported amount of $37.4 millionas of December 31, 2009, less subsequent distributions. JCG receiveddistributions totaling $2.1 million in the first quarter 2010, which reducedthe carrying value of the SIV securities to $35.3 million.

 

Redeemable noncontrollinginterests in INTECH Investment Management LLC (“INTECH”) are measured at fairvalue using a discounted cash flow methodology. Significant inputs to the discounted cash flow analysis includeforecasted operating results, discount rate and terminal multiple of futurecash flows. Redeemable noncontrolling interests in Perkins InvestmentManagement LLC (“Perkins”) are measured by a contractual formula intended torepresent fair value. See Note 7 for further discussion of redeemablenoncontrolling interests.

 

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

 
| ** **                                | ** ** | ** **     | ** ** | **Redeemable**     | ** ** |
|-------------------------------------------|------------|----------------|------------|--------------------|------------|
| ** **                                | ** ** | **VFNC**       | ** ** | **Noncontrolling** | ** ** |
| ** **                                | ** ** | **Securities** | ** ** | **Interests**      | ** ** |
| Carrying  value at December 31, 2009 |       | $              | 37.4       |               | $          | 101.1 |   |
| Distributions                             |       | (2.1           | )          | (2.4               | )          |
| Current  earnings                         |       | —         |       | 1.4                |       |
| Purchase  of noncontrolling interest      |       | —         |       | (31.4              | )          |
| Change  in fair value                     |       | —         |       | 8.8                |       |
|                                      |       |           |       |               |       |
| Carrying  value at March 31, 2010    |       | $              | 35.3       |               | $          | 77.5 |   |

 

JCG measures the fair valueof goodwill and intangible assets using a discounted cash flow model.Significant inputs to the discounted cash flow analysis include JCG’s forecasted operating results,discount rate and terminal multiple of cash flows. Because of the significance ofthe unobservable inputs in the fair value measurements of these assets, suchmeasurements have been classified as Level 3.

 

**Note 5 — Debt**

 

Debt consisted of the following *(in millions)*:

 
| ** **                                | ** ** | **March 31, 2010** | ** ** | **December 31, 2009** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| ** **                                | ** ** | **Carrying  Value**     | ** ** | **Fair  Value**            | ** ** | **Carrying  Value** | ** ** | **Fair  Value** | ** ** |
| 5.875%  Senior Notes due 2011             |       | $                       | 92.2       |                       | $          | 94.5 |   | $ | 92.2 |   | $ | 92.5 |   |
| 6.250%  Senior Notes due 2012             |       | 120.8                   |       | 125.7                      |       | 120.8 |   | 121.2 |   |
| 6.119%  Senior Notes due 2014             |       | 82.3                    |       | 83.6                       |       | 82.3 |   | 80.7 |   |
| 3.250%  Convertible Senior Notes due 2014 |       | 130.7                   |       | 217.6                      |       | 128.9 |   | 206.7 |   |
| 6.700%  Senior Notes due 2017             |       | 367.9                   |       | 368.6                      |       | 367.8 |   | 357.5 |   |
| Total  long-term debt                     |       | $                       | 793.9      |                       | $          | 890.0 |   | $ | 792.0 |   | $ | 858.6 |   |

 

***Fair Value of Debt***

* *

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

 

9

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***Convertible Senior Notes***

 

In July 2009, JCG issued $170.0 million of 3.250%convertible senior notes (“convertible senior notes”) which pay interestsemiannually on July 15 and January 15 of 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 aconversion would be at an initial conversion rate of 71.3 shares of JCG commonstock per $1,000 principal amount of convertible senior notes, which isequivalent to an initial conversion price of approximately $14.03 per share ofcommon stock, subject to adjustment in certain circumstances. The convertiblesenior notes are not callable by JCG.

 

Holders may convert theirnotes at their option prior to the close of business on the business dayimmediately preceding April 15, 2014, only under the followingcircumstances: (1) during any calendar quarter commencing after September 30,2009, if the last reported sale price of the common stock for at least 20trading days (whether or not consecutive) during a period of 30 consecutivetrading days ending on the last trading day of the preceding calendar quarteris greater than or equal to 130% of the applicable conversion price on eachapplicable trading day; or (2) upon the occurrence of other specifiedevents. On or after April 15, 2014, until maturity, holders may converttheir notes regardless of the preceding circumstances.

 

Because the convertiblesenior notes may be wholly or partially settled in cash, the proceeds arerequired to be bifurcated into debt and equity components. The $125.7 millioninitial debt component was determined by discounting future contractual cashflows at a 10.0% rate which is consistent with the estimated market rate at thetime of issuance for similar senior notes with no conversion option. The debtcomponent will accrete up to the face value over the five-year expected termthrough interest expense. The unamortized discount at March 31, 2010 is$39.3 million and will be amortized over the remaining period of 4.3 years. The$44.3 million (or $27.9 million, net of deferred taxes) initial equitycomponent was determined using the difference between the proceeds and the debtcomponent. The fair value of the convertible notes in the above table is basedon the outstanding principal balance while the carrying value represents theoutstanding principal balance exclusive of the unamortized discounts. Interestexpense related to the convertible senior notes includes interest on the outstandingprincipal balance as well as amortization of capitalized issuance costs andtotaled $3.3 million for the three months ended March 31, 2010.

 

***Change of Control and Rating Downgrade Covenant***

 

Ifthe Company experiences a change of control and in connection therewith the6.250% and 6.700% Senior Notes (“2007 Senior Notes”) and 5.875% Senior Notesbecome rated below investment grade by Standard & Poor’s (“S&P”)Rating Service and Moody’s Investors Service, Inc. (“Moody’s”), JCG mustoffer to repurchase all of the 2007 Senior Notes and 5.875% Senior Notes at aprice equal to 101% of the principal amount plus accrued and unpaid interest tothe repurchase date.

 

***Interest Rate 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 the interest has been adjusted upward eitherMoody’s or S&P increases its rating, then for each level of such increasein the rating, the interest payable will be decreased by 25 basis points, butin no event to a rate less than the interest rate payable on the date of theirissuance. The interest rate adjustment covenant will permanently terminate ifthe Company’s debt ratings increase to Baa2 by Moody’s and BBB by S&P (orhigher), with a stable or positive outlook regardless of any subsequentdecrease in the ratings by either or both rating agencies.  On February 23, 2009, S&P lowered JCG’scredit 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.

 

***CapitalLease Obligations***

 

JCG’s capital leaseobligations represent leased computer equipment. The carrying value of theobligations at March 31, 2010, totaled $2.0 million and was included inother accrued liabilities and other liabilities. The related lease terms extendthrough 2012.

 

10

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**Note 6 — Income Tax Contingencies**

 

As of March 31, 2010, JCG had $37.0 million ofaccrued reserves for income tax contingencies, including interest. JCGanticipates that its income tax contingency reserves will decrease byapproximately $24.6 million in the next 12 months, primarily from theexpiration of statute of limitations and the resolution of audits. Accordingly,this amount has been presented in other accrued liabilities.

 

**Note 7 — Noncontrolling Interests**

 

Noncontrolling intereststhat are not subject to put rights are classified in permanent equity.Redeemable noncontrolling interests are classified in mezzanine equity and aremeasured at estimated fair value as of the balance sheet date.  Earnings attributable to noncontrollinginterests that are and are not subject to put rights are combined in theConsolidated Statements of Income. Acquisitions of entities where JCG holds anexisting controlling interest are treated as a reduction of noncontrollinginterests in an amount equal to the purchase price.

 

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

 

Noncontrolling intereststhat are not subject to put rights consist of undistributed earnings related tothird-party investors in consolidated investment products and certain INTECHand Perkins ownership interests granted to employees which totaled $10.0million attributable to such interests as of March 31, 2010. Certain ofthe INTECH and Perkins ownership interests granted to employees become subjectto put rights upon vesting at which time such interests are reclassified toredeemable noncontrolling interests.

 

***RedeemableNoncontrolling Interests***

 

Redeemable noncontrollinginterests consist of INTECH and Perkins ownership interests that are currentlyputtable to JCG or will become puttable at certain future dates, andundistributed earnings of $3.5 million attributable to such interests as of March 31,2010. Changes in fair value of redeemable noncontrolling interests arerecognized as increases or decreases to redeemable noncontrolling interestswith an offsetting charge to retained earnings.

 

*INTECH*

 

On February 19,2010, pursuant to contractual obligations, JCG acquired an additional 3%interest in INTECH from the two founding members for $31.4 million. Thistransaction reduced the two founders’ aggregate ownership interest toapproximately 2% of INTECH. Each founder is entitled to retain his remainingINTECH shares outstanding until his death unless he is terminated for cause orleaves voluntarily while not in good standing. An INTECH founder will beconsidered to be in good standing if he voluntarily leaves after providing 12months’ prior notice and cooperating with the transition. Each of the twoINTECH founding members has the option annually to require JCG to purchase fromhim his remaining ownership interest of INTECH at fair value. The followingtable discloses the effect on equity as a result of JCG’s acquisition of the additional3% interest in INTECH *(in millions):*

* *
| ** **                                                                                  | ** ** | **Three months ended**  | ** ** |
|---------------------------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                                                  | ** ** | **March 31, 2010** | ** ** |
|                                                                                        |       |                    |       |
| Net  income attributable to controlling interest                                            |       | $                       | 18.9       |   |
|                                                                                        |       |                    |       |
| Decrease  in JCG retained earnings from acquisition of noncontrolling interest              |       | (29.1                   | )          |
|                                                                                        |       |                    |       |
| Change  from net income (controlling interest) and acquisitions of noncontrolling  interest |       | $                       | (10.2      | ) |

 

Total INTECH ownershipinterests held by the two founders have an estimated value of approximately$20.8 million as of March 31, 2010. Ownership interests held by otherINTECH employees subject to put rights have an estimated value of approximately$4.0 million as of March 31, 2010.

 

11

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*Perkins*

 

JCG has the option to acquire the majority of the remaining22.2% interest of Perkins at fair value on the third, fifth, seventh or eachsubsequent anniversary of December 31, 2008 (“closing”), the date JCGacquired a majority ownership in Perkins.  The noncontrolling owners ofPerkins have the option to require JCG to purchase any or all of theirremaining ownership interests on the fourth or sixth anniversary of closing atfair value. The total Perkins noncontrolling interest has an estimatedvalue of approximately $49.2 million as of March 31, 2010, based on acontractual formula driven by revenue and investment performance of productsmanaged by Perkins. The formula is intended to represent fair value.

 

**Note 8 — Long-Term Incentive Compensation**

 

JCG granted $63.9 million in long-term incentiveawards during the first three months of 2010, which generally vest and will berecognized ratably over a four-year period. The 2010 awards consisted of $8.4million of restricted stock (0.7 million shares at a weighted average price of$11.78 per share), $13.4 million of stock options and $42.1 million of mutualfund units.

 

A total of 2.1 millionstock options with a grant date fair value of $6.40 per option were awarded aspart of the February 2010 grant. The grant date fair value of stockoptions was determined using the Black-Scholes model with the followingassumptions: expected volatility of 65%, dividend yield of 0.34%, risk-freeinterest rate of 2.29% and an expected life of five years.

 

In addition to theseawards, JCG granted a $10.0 million restricted stock award to its new chiefexecutive officer on February 5, 2010. This award will vest 50% on December 31,2010, and 25% in each of the second and third years commencing February 1,2012. INTECH also granted $5.1 million of ownership interests to its employees whichgenerally vest and will be recognized ratably over a four-year period. Thisgrant represents less than 1.0% of total INTECH ownership interests.

 

The 2010 annual grantutilized the majority of the remaining shares under the 2005 Long-TermIncentive Stock Plan. On April 29, 2010, Janus shareholders approved the2010 Long-Term Incentive Stock Plan, which allows JCG to grant up to 4.4million shares of equity-based awards, including stock options and restrictedstock.

 

**Note 9 — Other Income, Net**

 

The components of otherincome, net are as follows *(in millions)*:

 

| ** **                       | ** ** | **Three months ended** | ** ** |
|----------------------------------|------------|------------------------|------------|
| ** **                       | ** ** | **March 31,**     | ** ** |
| ** **                       | ** ** | **2010**               | ** ** | **2009** | ** ** |
| Dividend  income                 |       | $                      | —     |   | $ | 0.2 |   |
| Interest  income                 |       | 0.1                    |       | — |   |
| Translation  gains (losses), net |       | (0.1                   | )          | (0.2 | ) |
| Other,  net                      |       | 0.2                    |       | — |   |
| Total                            |       | $                      | 0.2        |   | $ | — |   |

 

12

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**Note 10 —Earnings Per Share**

 

Basic earnings per commonshare is calculated by dividing net income attributable to JCG commonshareholders by the weighted average number of common shares outstanding duringthe period. Diluted earnings per common share adjusts the weighted averageshares outstanding by the dilutive impact of shares underlying stock optionsand unvested restricted stock awards. The following is a summary of theearnings per share calculation *(in millions, except pershare data)*:

 
| ** **                                                                                       | ** ** | **Three months ended** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                                       | ** ** | **March 31,**     | ** ** |
| ** **                                                                                       | ** ** | **2010**               | ** ** | **2009** | ** ** |
| **Net income (loss) attributable to JCG common shareholders:**                                   |       | $                      | 31.3       |   | $ | (818.1 | ) |
|                                                                                             |       |                   |       |   |   |
| **Basic earnings (loss) per share****attributable  to JCG common shareholders:**                 |       |                   |       |   |   |
| Weighted  average common shares outstanding                                                      |       | 179.2                  |       | 156.6 |   |
|                                                                                             |       |                   |       |   |   |
| Basic  earnings (loss) per share                                                                 |       | $                      | 0.17       |   | $ | (5.22 | ) |
|                                                                                             |       |                   |       |   |   |
| **Diluted earnings (loss) per share****attributable  to JCG common shareholders:**               |       |                   |       |   |   |
| Weighted  average common shares outstanding                                                      |       | 179.2                  |       | 156.6 |   |
|                                                                                             |       |                   |       |   |   |
| Dilutive  effect of stock options and unvested restricted stock using the treasury  stock method |       | 2.7                    |       | — |   |
| Weighted  average diluted common shares outstanding                                              |       | 181.9                  |       | 156.6 |   |
| Diluted  earnings (loss) per share                                                               |       | $                      | 0.17       |   | $ | (5.22 | ) |

 

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** | ** ** |
|----------------------------|------------|------------------------|------------|
| ** **                 | ** ** | **March 31,**     | ** ** |
| ** **                 | ** ** | **2010**               | ** ** | **2009** | ** ** |
| Stock  options             |       | 12.9                   |       | 17.9 |   |
| Unvested  restricted stock |       | 0.6                    |       | 4.9 |   |

 

Allshares held in the JCG Employee Stock Ownership Plan are treated as outstandingfor purposes of computing basic earnings per share. The computation of dilutedearnings per share does not include the impact of the convertible senior notesbecause the effect would be anti-dilutive as the conversion requirements havenot been met. As a result of JCG’s net loss for the quarter ended March 31,2009, all stock options and unvested restricted stock were anti-dilutive.

 

13

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**Note 11 —Legal Proceedings**

 

JCG is subject tovarious legal proceedings arising from normal business operations. Althoughthere can be no assurances, based on information currently available,management believes that it is probable that the ultimate outcome of each ofthe actions described below will not have a material adverse effect on JCG’sconsolidated financial condition. However, an adverse outcome in any of theactions could have a material adverse effect on the Company’s financialposition or results of operations for the period in which it is recorded. JCGhas established a $2.0 million litigation accrual for the claims describedbelow. Management believes these claims have little or no merit and intends todefend 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 amendedcomplaints were originally filed in these coordinated proceedings, two of whichstill remain including (i) claims by a putative class of JCG shareholdersasserting claims on behalf of the shareholders (*FirstDerivative Traders, et al. v. Janus Capital Group Inc., et al.*, *U.S. District Court, District of Maryland, MDL 1586, formerly referredto as Wiggins, et al. v. Janus Capital Group Inc., et al., U.S. District Court,District of Maryland, Case No. 04-CV-00818); and (ii) *derivativeclaims by investors in certain Janus funds ostensibly on behalf of such funds (*Steinberg et al. v. Janus Capital Management, LLC et al., U.S. DistrictCourt, District of Maryland, Case No. 04-CV-00518*).

 

Inthe *First Derivative Traders*matter, theU.S. District Court entered an order dismissing all claims. Plaintiffs,however, appealed that dismissal to the U.S. Court of Appeals for the FourthCircuit. In May 2009, the Fourth Circuit reversed the order ofdismissal and remanded the case back to the U.S. District Court for furtherproceedings. In October 2009, JCG filed a petition for a writ ofcertiorari with the U.S. Supreme Court to review the order of the Fourth Circuit.On January 11, 2010, the U.S. Supreme Court asked the U.S. SolicitorGeneral to file a brief on the legal questions presented in JCG’s petition. Asa result of these developments at the U.S. Supreme Court, the U.S. DistrictCourt has stayed all proceedings until the U.S. Supreme Court rules on JCG’spetition for a writ of certiorari.In additionto the *First Derivative Traders*case, on January 20,2010, the U.S. District Court entered orders dismissing the remaining claimsasserted against JCG and its affiliates by fund investors in the *Steinberg* matter. However, on February 17, 2010,plaintiffs filed a Notice of Appeal in that action. Asa result of these events, JCG and its affiliates are the remaining defendants,in some capacity, in the actions described in the preceding paragraph.

 

The Auditor of the Stateof West Virginia, in his capacity as securities commissioner, initiatedadministrative proceedings against many of the defendants in the market timingcases (including JCG) and seeks disgorgement and other monetary relief based onsimilar market timing allegations*(In the Matter of Janus CapitalGroup Inc. et al., Before the Securities Commissioner, State of West Virginia,Summary Order No. 05-1320).* In September 2006, JCGfiled its answer to the Auditor’s summary order instituting proceedings as wellas a Motion to Discharge Order to Show Cause. On July 31, 2009, JCG fileda “Notice that Matter is Deemed Concluded.” At this time, no furtherproceedings are scheduled in this matter.

 

14

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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, uncertainties,assumptions and factors specified in the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2009 included under headings such as  “RiskFactors” and “Management’s Discussion and Analysis of Financial Condition andResults of Operations,”  and in otherfilings and furnishings made by the Company with the SEC from time to time. Inlight of these risks, uncertainties, assumptions and factors, theforward-looking events discussed in this Quarterly Report on Form 10-Q maynot occur. Many of these factors are beyond the control of the Company and itsmanagement. You are cautioned not to place undue reliance on theseforward-looking statements, which speak only as of the date stated, or if nodate is stated, as of the date of this Quarterly Report on Form 10-Q.Except for the Company’s ongoing obligations to disclose material informationunder the federal securities laws, the Company undertakes no obligation torelease publicly any revisions to any forward-looking statements, to reportevents or to report the occurrence of unanticipated events unless required bylaw.*

 

**AVAILABLE INFORMATION**

 

Copies of Janus Capital Group Inc.’s (collectively, “JCG”or the “Company”) filings with the Securities and Exchange Commission (“SEC”)can be obtained from the SEC’s Public Reference Room at 100 F Street,N.E., Washington, D.C. 20549. Information can be obtained about the operationof the Public Reference Room by calling the SEC at (800) SEC-0330. The SECalso maintains an Internet site that contains reports, proxy and informationstatements, and other information regarding issuers that file electronicallywith the SEC at http://www.sec.gov.

 

JCG makes available free of charge its annual reportson Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-Kand amendments thereto as soon as reasonably practical after such filing hasbeen made with the SEC.  Reports may beobtained through the Investor Relations section of JCG’s website(http://ir.janus.com) or by contacting JCG at (888) 834-2536. The contentsof JCG’s website are not incorporated herein for any purpose.

 

JCG’s Officer Code of Ethics for Principal ExecutiveOfficer and Senior Financial Officers (including its chief executive officerand chief financial officer) (the “Officer Code”); Corporate Code of BusinessConduct and Ethics for all employees; corporate governance guidelines; and thecharters of key committees of the board of directors (including the Audit,Compensation, Nominating, Corporate Governance, and Planning and Strategycommittees) are available on its website (http://ir.janus.com/documents.cfm),and printed copies are available to any shareholder upon request by calling JCGat (888) 834-2536.  Any future amendments to or waivers of the OfficerCode will be posted to the Investor Relations section of JCG’s website.

 

15

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**RESULTSOF OPERATIONS**

 

**Overview**

** **

JCG provides investment management, administration,distribution and related services to individual and institutional investorsthrough mutual funds, separate accounts and subadvised relationships(collectively referred to as “investment products”) in both domestic andinternational markets. Over the last several years, JCG has expanded itsbusiness to become a more diversified manager with increased product offeringsand distribution capabilities. JCG provides investment advisory servicesthrough its primary subsidiaries, Janus Capital Management LLC (“Janus”),INTECH Investment Management LLC (“INTECH”) and Perkins Investment ManagementLLC (“Perkins”). Each of JCG’s three primary subsidiaries specializes inspecific investment styles and disciplines. JCG’s investment products aredistributed through three channels: retail intermediary, institutional and international. Each distributionchannel focuses on specific investor groups and the unique requirements of eachgroup.

 

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 investment products. Certain investmentproducts are also subject to performance fees which vary based on a product’srelative performance as compared to a benchmark index and the level of assetssubject to such fees. Assets under management primarily consist of domestic andinternational equity and debt securities. Accordingly, fluctuations in domesticand international financial markets, relative investment performance, sales andredemptions of investment products, and changes in the composition of assetsunder management are all factors that have a direct effect on JCG’s operatingresults.

 

**First Quarter 2010 Summary**

 

Ending assets undermanagement of $165.5 billion increased $5.8 billion, or 3.6%, from December 31,2009, as a result of favorable market conditions during the first quarter 2010. Average assets under management of$160.0 billion increased $4.8 billion, or 3.1%, from December 31,2009.  Significant events in the firstquarter 2010 included the appointment of Richard M. Weil as chief executiveofficer (“CEO”) effective February 1, 2010, and the acquisition of anadditional 3% interest in INTECH for $31.4 million on February 19, 2010.

 

**Investment Performance**

 

Investment products aregenerally evaluated based on their investment performance relative to otherinvestment products with similar disciplines and strategies.

 

Relative long-terminvestment performance remained strong with approximately 67%, 84% and 84% ofcomplex-wide mutual funds in the top half of their Lipper categories on a one-,three- and five-year total return basis, respectively, as of March 31,2010.

 

Janus-managed equitymutual funds continue to outperform the majority of peers with 81%, 88% and 86%of equity mutual funds ranking in the top half of their Lipper categories on aone-,three- and five-year total return basis, respectively, as of March 31,2010. Additionally, 25%, 100% and 100% of Janus-managed fixed income fundsranked in the top half of their Lipper categories on a one-, three- andfive-year total return basis, respectively, for the same time period.

 

INTECH’s strategiescontinued to underperform over longer periods, with 0%, 42% and 56% of productstrategies outperforming their respective benchmarks, net of fees, over theone-, three- and five-year periods ended March 31, 2010.However, INTECH’s near-term investmentperformance improved with 75% of strategies outperforming their respectivebenchmarks over the last six months.

 

Perkins delivered stronglong-term investment performance with 50%, 100% and 100% of mutual fundsranking in the top half of their Lipper categories on a one-, three- andfive-year total return basis, respectively, as of March 31, 2010.

 

16

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**Assets Under Management and Flows**

 

***Valuation***

 

The value of assets under management isderived from the cash and investment securities held by JCG’s investmentproducts. Investment security values are determined using unadjusted oradjusted quoted market prices and independent third-party price quotes inactive markets. For debt securities with maturities of 60 days or less, theamortized cost method is used to determine the value. Securities for whichmarket prices are not readily available or are considered unreliable areinternally valued using appropriate methodologies for each security type or byengaging third-party specialists. The value of the majority of the securitiesunderlying JCG’s investment products is derived from readily available andreliable 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 for pricing securities held within separateand subadvised accounts may be delegated by the separate or subadvised clientto JCG or another party.

 

***Assets Under Management and Flows***

 

Total Company assets under management of$165.5 billion at March 31, 2010, increased $54.6 billion, or 49.2%, from March 31,2009. The increase was primarily driven by improving market conditionscommencing in the second quarter 2009.

 

Janus’ long-term netinflows were $1.4 billion in the first quarter 2010 compared to long-term netoutflows of $0.7 billion in the first quarter 2009. Perkins’ long-term netinflows were $1.0 billion in the first quarter 2010 and $0.3 billion in thefirst quarter 2009. The increase in Janus and Perkins long-term net flows isprimarily due to improved sales in the retail intermediary channel as marketconditions improved combined with strong investment performance.

 

INTECH’s long-term netoutflows were $4.3 billion in the first quarter 2010 and $0.5 billion in thefirst quarter 2009.  Net outflows in thefirst quarter 2010 were primarily attributable to increased redemptions as aresult of the relative underperformance in INTECH’s large cap growth strategiesand domestic plan sponsors generally allocating away from large cap equities.

 

17

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The following table presents the components of JCG’s assetsunder management *(in billions)*:

 
| ** **                  | ** ** | **Three months ended March 31,** | ** ** |
|-----------------------------|------------|---------------------------------------|------------|
| ** **                  | ** ** | **2010**                              | ** ** | **2009** | ** ** |
| Beginning  of period assets |       | $                                     | 159.7      |   | $ | 123.5 |   |
| Long-term  sales            |       |                                  |       |   |   |
| Janus                       |       | 6.6                                   |       | 3.7 |   |
| INTECH                      |       | 0.5                                   |       | 0.9 |   |
| Perkins                     |       | 2.3                                   |       | 1.4 |   |
| Long-term  redemptions      |       |                                  |       |   |   |
| Janus                       |       | (5.2                                  | )          | (4.4 | ) |
| INTECH                      |       | (4.8                                  | )          | (1.4 | ) |
| Perkins                     |       | (1.3                                  | )          | (1.1 | ) |
| Long-term  net flows*       |       |                                  |       |   |   |
| Janus                       |       | 1.4                                   |       | (0.7 | ) |
| INTECH                      |       | (4.3                                  | )          | (0.5 | ) |
| Perkins                     |       | 1.0                                   |       | 0.3 |   |
| Total  long-term net flows  |       | (1.9                                  | )          | (0.9 | ) |
| Net  money market flows     |       | (0.1                                  | )          | (5.3 | ) |
| Market/fund  performance    |       | 7.8                                   |       | (6.4 | ) |
| End  of period assets       |       | $                                     | 165.5      |   | $ | 110.9 |   |

 

----

*     Excludes money market flows. Sales andredemptions of money market funds are presented net on a separate line due tothe short-term nature of the investments.

 
| ** **                       | ** ** | **Three months ended March 31,** | ** ** |
|----------------------------------|------------|---------------------------------------|------------|
| ** **                       | ** ** | **2010**                              | ** ** | **2009** | ** ** |
| Average  assets under management |       |                                  |       |   |   |
| Janus                            |       | $                                     | 96.2       |   | $ | 61.0 |   |
| INTECH                           |       | 46.4                                  |       | 39.0 |   |
| Perkins                          |       | 15.7                                  |       | 8.6 |   |
| Money  market                    |       | 1.7                                   |       | 4.5 |   |
| Total                            |       | $                                     | 160.0      |   | $ | 113.1 |   |

 

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 and money market investmentproducts. INTECH offers mathematical-based investment products and Perkinsoffers value-disciplined investments. Assets and flows by investment discipline are as follows *(in billions)*:

 

| ** **                  | ** ** | **Three Months Ended March 31,** | ** ** |
|-----------------------------|------------|---------------------------------------|------------|
| ** **                  | ** ** | **2010**                              | ** ** | **2009** | ** ** |
| **Growth/Blend**            |       |                                  |       |   |   |
| Beginning  of period assets |       | $                                     | 68.9       |   | $ | 50.0 |   |
| Sales                       |       | 3.5                                   |       | 2.4 |   |
| Redemptions                 |       | 3.4                                   |       | 3.5 |   |
| Net  sales (redemptions)    |       | 0.1                                   |       | (1.1 | ) |
| Market/fund  performance    |       | 3.1                                   |       | (1.9 | ) |
| End  of period assets       |       | $                                     | 72.1       |   | $ | 47.0 |   |
|                        |       |                                  |       |   |   |
| **Global/International**    |       |                                  |       |   |   |
| Beginning  of period assets |       | $                                     | 19.4       |   | $ | 10.9 |   |
| Sales                       |       | 1.4                                   |       | 0.5 |   |
| Redemptions                 |       | 1.0                                   |       | 0.6 |   |
| Net  sales (redemptions)    |       | 0.4                                   |       | (0.1 | ) |
| Market/fund  performance    |       | 1.4                                   |       | (0.1 | ) |
| End  of period assets       |       | $                                     | 21.2       |   | $ | 10.7 |   |
|                        |       |                                  |       |   |   |
| **Mathematical**            |       |                                  |       |   |   |
| Beginning  of period assets |       | $                                     | 48.0       |   | $ | 42.4 |   |
| Sales                       |       | 0.5                                   |       | 0.9 |   |
| Redemptions                 |       | 4.8                                   |       | 1.4 |   |
| Net  redemptions            |       | (4.3                                  | )          | (0.5 | ) |
| Market/fund  performance    |       | 2.2                                   |       | (3.6 | ) |
| End  of period assets       |       | $                                     | 45.9       |   | $ | 38.3 |   |
|                        |       |                                  |       |   |   |
| **Fixed Income**            |       |                                  |       |   |   |
| Beginning  of period assets |       | $                                     | 6.8        |   | $ | 3.2 |   |
| Sales                       |       | 1.7                                   |       | 0.8 |   |
| Redemptions                 |       | 0.8                                   |       | 0.3 |   |
| Net  sales                  |       | 0.9                                   |       | 0.5 |   |
| Market/fund  performance    |       | 0.1                                   |       | — |   |
| End  of period assets       |       | $                                     | 7.8        |   | $ | 3.7 |   |
|                        |       |                                  |       |   |   |
| **Value**                   |       |                                  |       |   |   |
| Beginning  of period assets |       | $                                     | 14.9       |   | $ | 9.1 |   |
| Sales                       |       | 2.3                                   |       | 1.4 |   |
| Redemptions                 |       | 1.3                                   |       | 1.1 |   |
| Net  sales                  |       | 1.0                                   |       | 0.3 |   |
| Market/fund  performance    |       | 0.9                                   |       | (0.8 | ) |
| End  of period assets       |       | $                                     | 16.8       |   | $ | 8.6 |   |
|                        |       |                                  |       |   |   |
| **Money Market**            |       |                                  |       |   |   |
| Beginning  of period assets |       | $                                     | 1.7        |   | $ | 7.9 |   |
| Sales                       |       | 0.1                                   |       | 3.0 |   |
| Redemptions                 |       | 0.2                                   |       | 8.3 |   |
| Net  redemptions            |       | (0.1                                  | )          | (5.3 | ) |
| Market/fund  performance    |       | —                                |       | — |   |
| End  of period assets       |       | $                                     | 1.6        |   | $ | 2.6 |   |

 

19

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**Results of Operations**

 

##### ***ThreeMonths Ended March 31, 2010, Compared with Three Months Ended March 31,2009***

##### *** ***

***Revenues***

 

Investment management fees increased $69.0 million, or50.4%, primarily as a result of the 41.5% increase in average assets undermanagement driven by investment performance and favorable market conditions.

 

Performance fee revenueis derived from certain mutual funds and separate accounts. The increase of$1.3 million, or 38.2%, in performance fee revenue was primarily due to higherfees earned on mutual funds from improved performance.  At March 31, 2010, $26.8 billion and$6.8 billion mutual fund and private account assets, respectively, were subjectto performance fees. Pending mutual fund shareholder approval in the 2010mutual fund proxy, additional mutual funds representing $42.0 billion, orapproximately 25% of assets under management at March 31, 2010, willbecome subject to performance fees over the next three years, with the firstfee recognized in 2011.

 

Shareowner servicing feesand other revenue increased $6.3 million, or 20.9%, primarily as a result of anincrease in transfer agent fees, partially offset by a decrease in money marketadministration fees. Transfer agent fees increased $9.3 million, or 41.9%, overthe comparable prior period. Transfer agent fees are based on average assetsunder management distributed directly to investors by Janus, excluding moneymarket assets, which increased 53.4% over the comparable prior period. Moneymarket administration fees declined $2.7 million due to lower money marketassets as a result of JCG’s exit from its institutional money market businesseffective April 30, 2009.

 

***Expenses***

 

Employee compensation andbenefits increased $17.4 million, or 28.0%, principally due to higher incentivecompensation for investment and non-investment personnel. The investment teamincentive compensation plan is linked to individual performance, but also tiesthe aggregate level of compensation to revenue, which increased significantlyover the comparable prior year period. Compensation for non-investmentpersonnel, including sales commissions and companywide bonuses, increased fromhigher sales volumes primarily in the retail intermediary channel and higheranticipated 2010 company financial results.

 

Long-term incentivecompensation increased $5.2 million, or 38.8%, primarily from $3.8 million ofexpense related to Perkins senior profit interest awards and from new awardsgranted in 2010, partially offset by the vesting of awards granted in prioryears. JCG expects to incur an additional $6 million to $8 million of expenserelated to Perkins senior profit interest awards during the remainder of 2010.These awards have a formula-driven terminal value based on revenue growth andrelative investment performance of products managed by Perkins.

 

Long-term incentiveawards granted during 2010 totaled $63.9 million and will be recognized ratablyover a four-year period. In addition to these awards, JCG granted a $10.0million restricted stock award to the new CEO on February 5, 2010. Thisaward will vest 50% on December 31, 2010, and 25% in each of the secondand third years, commencing February 1, 2012. INTECH also granted $5.1million of ownership interests, which generally vest and will be recognizedratably over a four-year period.

 

Marketing and advertisingincreased $1.2 million, or 21.4%, primarily due to $1.0 million of fund proxycosts for the election of the mutual fund trustees in JCG’s domestic mutualfunds. Marketing expense in the second quarter 2010 is expected to include anadditional $6 million to $9 million of mutual fund proxy costs. JCG is requiredby the SEC to pay for such elections every five years.

 

Distribution expenseincreased $15.0 million, or 74.6%, as a result of a similar increase in assetsunder management subject to third-party concessions. Distribution fees arecalculated based on a contractual percentage of the market value of assetsunder management distributed through third-party intermediaries.

 

General, administrativeand occupancy expense decreased $3.6 million, or 10.8%, primarily as a resultof lower legal expenses. The first quarter 2009 included a $7.5 millionlitigation reserve as a result of an adverse decision in a case brought by aformer portfolio manager.

 

JCG recognized goodwilland intangible asset impairment charges of $747.0 million and $109.7 million,respectively, as of March 31, 2009. The goodwill impairment charge was notdeductible for income tax purposes. A tax benefit of $40.6 million was recognizedas a result of the impairment of mutual fund advisory contracts.

 

Interest expense declined$4.3 million, or 21.6%, primarily due to $7.3 million of lower interest expenseas a result of the August 2009 tender offer which reduced long-term debt byapproximately $443.3 million, partially offset by $3.3 million 

 

20

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of interest expenseassociated with the July 2009 issuance of $170.0 million 3.250%convertible senior notes (“convertible senior notes”).

 

Mark-to-market gains ontrading securities for the three months ended March 31, 2010, were largelyoffset by losses generated by a hedging strategy implemented in late 2008,covering the majority of seed capital, to mitigate a portion of the earnings volatilitycreated by the mark-to-market accounting of seed capital investments. Netinvestment losses of $7.2 million for the three months ended March 31,2009 include impairment charges totaling $6.6 million, which were primarilyrelated to securities classified as available-for-sale.

 

Noncontrolling interestdecreased $0.4 million, or 16.0%, primarily from a decline in thenoncontrolling ownership interests in INTECH as a result of JCG’s 2009 and 2010acquisitions of INTECH.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

**Cash Flows**

 

A summary of cashflow data for the three months ended March 31, 2010 and 2009, is asfollows *(in millions)*:

 
| ** **                               | ** ** | **2010**   | ** ** | **2009**   | ** ** |
|------------------------------------------|------------|------------|------------|------------|------------|
| Cash  flows used for:                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Operating  activities                    |       | $          | (4.8       | )          | $          | (27.4 | ) |
| Investing  activities                    |       | (19.3      | )          | (17.6      | )          |
| Financing  activities                    |       | (31.6      | )          | (5.5       | )          |
| Net  change in cash and cash equivalents |       | (55.7      | )          | (50.5      | )          |
| Balance  beginning of period             |       | 324.7      |       | 282.6      |       |
| Balance  end of period                   |       | $          | 269.0      |       | $          | 232.1 |   |

 

On an annual basis, JCG’scash flow from operations historically has been positive and sufficient to fundordinary operations and capital requirements. Fluctuations in operating cashflows are attributable to changes in net income and working capital items,which can vary from period to period based on the amount and timing of cash receiptsand payments. Cash flow from operations in the first quarter of each yeartypically includes the payment of annual bonuses for investment andnon-investment personnel. The increase in cash flow from operations from thecomparable prior year period was driven by higher revenues as a result of theincrease in average assets under management.

 

Cash used for investingactivities for the three months ended March 31, 2010, primarily represents$16.9 million for the net purchase of investments. Purchases and sales ofinvestments are related to seed capital as well as hedging and vesting ofmutual fund share awards. Cash used for investing activities for the comparableprior year period primarily represents $12.2 million for the net purchase ofinvestments.

 

Cash used for financingactivities for the three months ended March 31, 2010, primarily represents$31.4 million for the purchase of an additional 3% interest in INTECH. Cashused for financing activities for the comparable prior year period primarilyrepresents $5.0 million of distributions to noncontrolling interest members ofINTECH and Perkins.

 

***Interest Rate 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 Investors Service, Inc. (“Moody’s”) from Baa3 or by Standard &Poor’s (“S&P”) Rating Service from BBB-, up to a maximum increase of 200basis points. If at any time after the interest has been adjusted upward eitherMoody’s or S&P increases its rating, then for each level of such increasein the rating, the interest payable will be decreased by 25 basis points, butin no event to a rate less than the interest rate payable on the date of theirissuance. For each 25 basis point increase or decrease, JCG’s interest expensewill increase or decrease by approximately $1.7 million on an annualized basis.The interest rate adjustment covenant will permanently terminate if the Company’sdebt ratings 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.

 

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**Other Sources of Liquidity**

 

*Shelf Registration*

 

The Company has effective a Shelf RegistrationStatement with the SEC that allows it to register the sale of an indeterminateamount of preferred stock and additional common stock and debt securities.

 

*Credit Facility*

 

JCG has a $125 million CompetitiveAdvance and Revolving Credit Facility Agreement (the “Credit Facility”) with asyndicate of banks which terminates on December 1, 2010. The CreditFacility contains two financial covenants: a specified maximum financingleverage ratio and a minimum interest coverage ratio. In addition, the CreditFacility contains a minimum assets under management covenant and any borrowingsare secured by a majority of JCG’s assets. At March 31, 2010, JCG was incompliance with all covenants and there were no borrowings under the amendedCredit Facility.

 

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

 
| ** **                                                                                    | ** ** | **Last Four**           | ** ** |
|-----------------------------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                                                    | ** ** | **Quarters Ended**      | ** ** |
| ** **                                                                                    | ** ** | **March 31, 2010** | ** ** |
|                                                                                          | ** ** | ** **              | ** ** |
| Net income attributable to JCG                                                                |       | $                       | 92.3       |   |
| Add back:                                                                                     |       |                    |       |
| Gain on early extinguishment of debt                                                          |       | (5.8                    | )          |
| Tender costs                                                                                  |       | 17.6                    |       |
| Interest expense                                                                              |       | 69.7                    |       |
| Income tax provision                                                                          |       | 54.2                    |       |
| Depreciation and amortization                                                                 |       | 36.9                    |       |
| Non-cash amortization of long-term incentive  compensation                                    |       | 66.2                    |       |
| Unrealized gains or losses on investments                                                     |       | (15.5                   | )          |
| Other nonrecurring cash charges                                                               |       | 25.9                    |       |
| Cash paid for deferred commissions and mutual fund  share awards                              |       | (52.9                   | )          |
| Adjusted net income                                                                           |       | $                       | 288.6      |   |
|                                                                                          |       |                    |       |
| Debt (including capital leases and letters of  credit)                                        |       | $                       | 796.0      |   |
|                                                                                          |       |                    |       |
| Leverage Ratio (debt divided by adjusted net  income)                                         |       | 2.76                    |       |
| **Cannot exceed 8.00**                                                                        |       |                    |       |
|                                                                                          |       |                    |       |
| Interest Coverage Ratio  (adjusted net income divided by last four quarters interest expense) |       | 4.1                     |       |
| **Must equal or exceed 2.0**                                                                  |       |                    |       |
|                                                                                          |       |                    |       |
| Minimum assets under management  Ending long-term assets under management (in billions)       |       | $                       | 163.9      |   |
| **Must exceed $80.0 billion**                                                                 |       |                    |       |

 

JCG intends to negotiatea new credit facility during the second half of 2010.

 

22

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**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 31,2009.

 

**Item4.     Controls and 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 March 31, 2010. Disclosure controls and procedures are the controlsand other procedures that the Company designed to ensure that it records,processes, summarizes and reports in a timely manner the information it mustdisclose in reports that it files with or submits to the SEC. Richard M. Weil,Chief Executive Officer, and Gregory A. Frost, Executive Vice President andChief Financial Officer, reviewed and participated in this evaluation. Based onthis evaluation, Messrs. Weil 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 March 31, 2010, that has materially affected, or isreasonably likely to materially affect, JCG’s internal controls over financialreporting.

 

**PART II— OTHER INFORMATION**

 

**Item1.     Legal Proceedings**

 

See Part I, Item 1.Financial Statements, Note 11**—** LegalProceedings.

 

**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 31,2009.

 

**Item2.     Unregistered Sales of Equity Securities andUse of Proceeds**

 

On July 22, 2008,JCG’s Board of Directors authorized a fifth $500 million stock repurchaseprogram with no expiration date to take effect when the current authorizationis utilized. The amount that may yet be repurchased under current unexpiredauthorizations as of March 31, 2010, is $521.2 million. There were noshare repurchases for the three months ended March 31, 2010, under thecurrent authorization or from employees as part of a share withholding program(established under Rule 10b5-1 of the Securities Exchange Act of 1934).Currently, tax withholdings on vesting employee stock-based compensation aresatisfied by employees selling shares on the open market and JCG does notrepurchase shares under a share withholding program.

 

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**Item6.     Exhibits**

 
| 31.1   |   | Certification of  Richard M. Weil, 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  Richard M. Weil, 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 |

 

24

 

**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:April 29, 2010

 

 
| Janus Capital Group  Inc.                                      |   |
|----------------------------------------------------------------|--------|
|                                                           |   |
|                                                           |   |
| /s/ Richard M.  Weil                                           |   |
| Richard M. Weil,                                               |   |
| Chief Executive  Officer                                       |   |
|                                                           |   |
|                                                           |   |
| /s/ Gregory A.  Frost                                          |   |
| Gregory A.  Frost,                                             |   |
| Executive Vice  President andChief Financial Officer           |   |
| (Principal  Financial Officer andPrincipal Accounting Officer) |   |

 

25

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**JANUS CAPITAL GROUP INC.**

**INDEX TO EXHIBITS**

 
| **Exhibit  No.** | ** ** | **Document**                                                                                                                                                                                                                 | ** ** | **Regulation S-K  Item 601(b)  Exhibit No.** |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------|
| 31.1             |       | Certification of  Richard M. Weil, 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  Richard M. Weil, 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                                                |

 

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