**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

** **

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

 

**for the transition period from                 to                **

 

**Commission File Number 001-15253**

 

 

**JanusCapital Group Inc.**

(Exact name of registrant as specified in its charter)

 

| **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)

 

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

 

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

 

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

 

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

 

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

 

Asof July 21, 2009, there were 182,120,833 shares of the Company’s commonstock, $.01 par value per share, issued and outstanding.

 

 

 

----

 

**PART I- FINANCIAL INFORMATION**

**Item1.  Financial Statements**

 

**JANUS CAPITAL GROUP INC.**

 

**CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

**(Dollars in Millions)**

 
| ** **                                       | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                       | ** ** | **2009**          | ** ** | **2008**              | ** ** |
| **ASSETS**                                       |       |              |       |                  |       |
| ** **                                       |       |              |       |                  |       |
| **Current assets:**                              |       |              |       |                  |       |
| Cash  and cash equivalents                       |       | $                 | 218.7      |                  | $          | 282.6 |   |
| Marketable  securities                           |       | 112.1             |       | 125.3                 |       |
| Accounts  receivable                             |       | 95.0              |       | 101.1                 |       |
| Income  taxes receivable                         |       | 24.7              |       | 16.4                  |       |
| Other  current assets                            |       | 68.3              |       | 58.5                  |       |
| Total  current assets                            |       | 518.8             |       | 583.9                 |       |
|                                             |       |              |       |                  |       |
| **Other assets:**                                |       |              |       |                  |       |
| Other  assets                                    |       | 72.6              |       | 60.2                  |       |
| Property  and equipment, net                     |       | 53.3              |       | 51.1                  |       |
| Intangibles,  net                                |       | 1,205.4           |       | 1,321.2               |       |
| Goodwill                                         |       | 574.6             |       | 1,320.3               |       |
|                                             |       |              |       |                  |       |
| Total  assets                                    |       | $                 | 2,424.7    |                  | $          | 3,336.7 |   |
|                                             |       |              |       |                  |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**    |       |              |       |                  |       |
|                                             |       |              |       |                  |       |
| **Current liabilities:**                         |       |              |       |                  |       |
| Accounts  payable                                |       | $                 | 2.6        |                  | $          | 0.5 |   |
| Accrued  compensation and benefits               |       | 45.0              |       | 90.0                  |       |
| Current  portion of long-term debt               |       | —            |       | 22.0                  |       |
| Other  accrued liabilities                       |       | 51.7              |       | 44.1                  |       |
| Total  current liabilities                       |       | 99.3              |       | 156.6                 |       |
|                                             |       |              |       |                  |       |
| **Other liabilities:**                           |       |              |       |                  |       |
| Long-term  debt                                  |       | 1,106.1           |       | 1,106.0               |       |
| Deferred  income taxes                           |       | 352.4             |       | 388.1                 |       |
| Other  liabilities                               |       | 63.2              |       | 62.4                  |       |
| Total  liabilities                               |       | 1,621.0           |       | 1,713.1               |       |
|                                             |       |              |       |                  |       |
| Commitments  and contingencies                   |       |              |       |                  |       |
|                                             |       |              |       |                  |       |
| Redeemable  noncontrolling interests             |       | 85.6              |       | 106.8                 |       |
|                                             |       |              |       |                  |       |
| **STOCKHOLDERS’ EQUITY**                    |       |              |       |                  |       |
|                                             |       |              |       |                  |       |
| Preferred  stock                                 |       | —            |       | —                |       |
| Common  stock                                    |       | 1.6               |       | 1.6                   |       |
| Retained  earnings                               |       | 708.2             |       | 1,510.6               |       |
| Accumulated  other comprehensive income          |       | (0.2              | )          | (5.3                  | )          |
| Total  JCG Stockholders’ equity             |       | 709.6             |       | 1,506.9               |       |
| Noncontrolling  interests                        |       | 8.5               |       | 9.9                   |       |
| Total  stockholders’ equity                 |       | 718.1             |       | 1,516.8               |       |
|                                             |       |              |       |                  |       |
| Total  liabilities and stockholders’ equity |       | $                 | 2,424.7    |                  | $          | 3,336.7 |   |

 

The accompanying notes arean integral part of these consolidated financial statements.

 

----

 

**JANUS CAPITAL GROUP INC.**

 

**CONSOLIDATEDSTATEMENTS OF INCOME (UNAUDITED)**

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

 
| ** **                                                                         | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                                                                         | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **                                                                         | ** ** | **2009**               | ** ** | **2008**             | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                                                               |       |                   |       |                 |       |   |   |   |   |
| **Revenues:**                                                                      |       |                   |       |                 |       |   |   |   |   |
| Investment management  fees                                                        |       | $                      | 159.8      |                 | $          | 239.8 |   | $ | 296.6 |   | $ | 465.3 |   |
| Performance fees                                                                   |       | 6.5                    |       | 11.6                 |       | 9.9 |   | 17.2 |   |
| Shareowner servicing  fees and other                                               |       | 33.9                   |       | 52.8                 |       | 64.0 |   | 102.9 |   |
| Total                                                                              |       | 200.2                  |       | 304.2                |       | 370.5 |   | 585.4 |   |
|                                                                               |       |                   |       |                 |       |   |   |   |   |
| **Operating  Expenses:**                                                           |       |                   |       |                 |       |   |   |   |   |
| Employee compensation  and benefits                                                |       | 66.2                   |       | 91.6                 |       | 128.4 |   | 183.4 |   |
| Long-term incentive  compensation                                                  |       | 14.0                   |       | 12.5                 |       | 27.4 |   | 24.6 |   |
| Marketing and  advertising                                                         |       | 8.2                    |       | 8.7                  |       | 13.8 |   | 16.5 |   |
| Distribution                                                                       |       | 25.4                   |       | 38.2                 |       | 45.5 |   | 74.5 |   |
| Depreciation and  amortization                                                     |       | 8.0                    |       | 10.7                 |       | 16.9 |   | 20.6 |   |
| General, administrative  and occupancy                                             |       | 31.4                   |       | 37.4                 |       | 64.6 |   | 71.2 |   |
| Goodwill and intangible  asset impairments                                         |       | —                 |       | —               |       | 856.7 |   | — |   |
| Total                                                                              |       | 153.2                  |       | 199.1                |       | 1,153.3 |   | 390.8 |   |
|                                                                               |       |                   |       |                 |       |   |   |   |   |
| **Operating  income (loss)**                                                       |       | 47.0                   |       | 105.1                |       | (782.8 | ) | 194.6 |   |
|                                                                               |       |                   |       |                 |       |   |   |   |   |
| Interest expense                                                                   |       | (19.7                  | )          | (18.8                | )          | (39.6 | ) | (37.7 | ) |
| Investment gains  (losses), net                                                    |       | 0.3                    |       | 3.0                  |       | (6.9 | ) | (6.5 | ) |
| Other income, net                                                                  |       | 0.4                    |       | 1.0                  |       | 0.4 |   | 5.2 |   |
| Income (loss) before  taxes and equity earnings                                    |       | 28.0                   |       | 90.3                 |       | (828.9 | ) | 155.6 |   |
|                                                                               |       |                   |       |                 |       |   |   |   |   |
| Income tax provision                                                               |       | (8.8                   | )          | (23.8                | )          | 32.5 |   | (48.3 | ) |
| Equity in earnings of  unconsolidated affiliate                                    |       | —                 |       | 2.3                  |       | — |   | 4.3 |   |
|                                                                               |       |                   |       |                 |       |   |   |   |   |
| Income (loss) from  continuing operations                                          |       | 19.2                   |       | 68.8                 |       | (796.4 | ) | 111.6 |   |
|                                                                               |       |                   |       |                 |       |   |   |   |   |
| Income (loss) from  discontinued operations                                        |       | —                 |       | 0.7                  |       | — |   | (0.9 | ) |
|                                                                               |       |                   |       |                 |       |   |   |   |   |
| Net income (loss)                                                                  |       | 19.2                   |       | 69.5                 |       | (796.4 | ) | 110.7 |   |
| Noncontrolling interest                                                            |       | (3.4                   | )          | (3.2                 | )          | (5.9 | ) | (7.0 | ) |
|                                                                               |       |                   |       |                 |       |   |   |   |   |
| **Net  income (loss) attributable to JCG**                                         |       | $                      | 15.8       |                 | $          | 66.3 |   | $ | (802.3 | ) | $ | 103.7 |   |
|                                                                               |       |                   |       |                 |       |   |   |   |   |
| **Basic  earnings (loss) per share attributable to JCG common shareholders:**      |       |                   |       |                 |       |   |   |   |   |
| Income (loss) from  continuing operations                                          |       | $                      | 0.10       |                 | $          | 0.41 |   | $ | (5.12 | ) | $ | 0.65 |   |
| Income (loss) from  discontinued operations                                        |       | —                 |       | —               |       | — |   | (0.01 | ) |
| Net income (loss)                                                                  |       | $                      | 0.10       |                 | $          | 0.41 |   | $ | (5.12 | ) | $ | 0.64 |   |
|                                                                               |       |                   |       |                 |       |   |   |   |   |
| **Diluted earnings (loss) per share****attributable  to JCG common shareholders:** |       |                   |       |                 |       |   |   |   |   |
| Income (loss) from  continuing operations                                          |       | $                      | 0.10       |                 | $          | 0.40 |   | $ | (5.12 | ) | $ | 0.64 |   |
| Income (loss) from  discontinued operations                                        |       | —                 |       | —               |       | — |   | (0.01 | ) |
| Net income (loss)                                                                  |       | $                      | 0.10       |                 | $          | 0.41 |   | $ | (5.12 | ) | $ | 0.64 |   |
|                                                                               |       |                   |       |                 |       |   |   |   |   |
| **Amounts  attributable to JCG common shareholders:**                              |       |                   |       |                 |       |   |   |   |   |
| Income (loss) from  continuing operations                                          |       | $                      | 15.8       |                 | $          | 65.6 |   | $ | (802.3 | ) | $ | 104.6 |   |
| Income (loss) from  discontinued operations                                        |       | —                 |       | 0.7                  |       | — |   | (0.9 | ) |
| Net income (loss)                                                                  |       | $                      | 15.8       |                 | $          | 66.3 |   | $ | (802.3 | ) | $ | 103.7 |   |

 

The accompanying notes are an integral part of theseconsolidated financial statements.

 

2

----

 

**JANUS CAPITAL GROUP INC.**

 

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS (UNAUDITED)**

**(Dollarsin Millions)**

 
| ** **                                                   | ** ** | **Six months ended** | ** ** |
|--------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                   | ** ** | **June 30,**    | ** ** |
| ** **                                                   | ** ** | **2009**             | ** ** | **2008** | ** ** |
| **CASH  FLOWS PROVIDED BY (USED FOR):**                      |       |                 |       |   |   |
| **Continuing  Operations**                                   |       |                 |       |   |   |
| **Operating  Activities:**                                   |       |                 |       |   |   |
| Net income (loss)                                            |       | $                    | (796.4     | ) | $ | 111.6 |   |
| Adjustments to net  income:                                  |       |                 |       |   |   |
| Depreciation and  amortization                               |       | 16.9                 |       | 20.6 |   |
| Deferred income taxes                                        |       | (33.1                | )          | (4.0 | ) |
| Amortization of  stock-based compensation                    |       | 18.0                 |       | 17.5 |   |
| Investment losses, net                                       |       | 6.9                  |       | 6.5 |   |
| Goodwill and intangible  asset impairments                   |       | 856.7                |       | — |   |
| Payment of deferred  commissions, net                        |       | (3.1                 | )          | (3.3 | ) |
| Other, net                                                   |       | (0.7                 | )          | 1.8 |   |
| Changes in working  capital items:                           |       |                 |       |   |   |
| Accounts receivable                                          |       | 5.9                  |       | 18.1 |   |
| Other current assets                                         |       | (10.1                | )          | 2.4 |   |
| Accounts payable and  accrued compensation payable           |       | (42.8                | )          | (51.4 | ) |
| Other liabilities                                            |       | 1.8                  |       | (39.1 | ) |
| Net operating                                                |       | 20.0                 |       | 80.7 |   |
|                                                         |       |                 |       |   |   |
| **Investing  Activities:**                                   |       |                 |       |   |   |
| Purchase of property  and equipment                          |       | (6.7                 | )          | (9.0 | ) |
| Acquisitions                                                 |       | (28.8                | )          | (67.7 | ) |
| Purchase of marketable  securities                           |       | (44.1                | )          | (52.2 | ) |
| Proceeds from sales and  maturities of marketable securities |       | 34.4                 |       | 45.9 |   |
| Distribution of cash  from discontinued operations           |       | —               |       | 13.5 |   |
| Net investing                                                |       | (45.2                | )          | (69.5 | ) |
|                                                         |       |                 |       |   |   |
| **Financing  Activities:**                                   |       |                 |       |   |   |
| Debt issuance costs                                          |       | (2.8                 | )          | — |   |
| Repayment of long-term  debt                                 |       | (22.0                | )          | — |   |
| Proceeds from stock  plans                                   |       | 0.5                  |       | 16.6 |   |
| Excess tax benefit from  equity-based compensation           |       | —               |       | 4.0 |   |
| Repurchase of common  stock                                  |       | —               |       | (217.8 | ) |
| Distributions to  noncontrolling interest                    |       | (7.9                 | )          | (12.5 | ) |
| Dividends paid to  shareholders                              |       | (6.5                 | )          | (6.5 | ) |
| Net financing                                                |       | (38.7                | )          | (216.2 | ) |
|                                                         |       |                 |       |   |   |
| **Cash  and Cash Equivalents:**                              |       |                 |       |   |   |
| Net decrease                                                 |       | (63.9                | )          | (205.0 | ) |
| At beginning of period                                       |       | 282.6                |       | 480.7 |   |
| At end of period                                             |       | $                    | 218.7      |   | $ | 275.7 |   |
|                                                         |       |                 |       |   |   |
| **Discontinued  Operations:**                                |       |                 |       |   |   |
| Operating activities                                         |       | $                    | —     |   | $ | (5.2 | ) |
| Investing activities                                         |       | —               |       | 2.3 |   |
|                                                         |       |                 |       |   |   |
| Cash and Cash  Equivalents:                                  |       |                 |       |   |   |
| Net increase (decrease)                                      |       | —               |       | (2.9 | ) |
| At beginning of period                                       |       | 0.4                  |       | 4.3 |   |
| At end of period                                             |       | $                    | 0.4        |   | $ | 1.4 |   |
|                                                         |       |                 |       |   |   |
| **Supplemental  Cash Flow Information:**                     |       |                 |       |   |   |
| Cash paid for interest                                       |       | $                    | 37.3       |   | $ | 35.9 |   |
| Cash paid for income  taxes                                  |       | $                    | 13.2       |   | $ | 60.6 |   |

 

The accompanying notes are an integral part of theseconsolidated financial statements.

 

3

----

 

**JANUS CAPITAL GROUP INC.**

 

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

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

 
| ** **                                                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **   | ** ** | **Accumulated**   | ** ** | ** **         | ** ** | ** **             | ** ** |
|------------------------------------------------------------------------------|------------|------------|------------|------------|------------|--------------|------------|-------------------|------------|--------------------|------------|------------------------|------------|
| ** **                                                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **   | ** ** | **Other**         | ** ** | **Nonredeemable**  | ** ** | **Total**              | ** ** |
| ** **                                                                   | ** ** | ** ** | ** ** | **Common** | ** ** | **Retained** | ** ** | **Comprehensive** | ** ** | **Noncontrolling** | ** ** | **Stockholders’** | ** ** |
| ** **                                                                   | ** ** | **Shares** | ** ** | **Stock**  | ** ** | **Earnings** | ** ** | **Income**        | ** ** | **Interest**       | ** ** | **Equity**             | ** ** |
|                                                                         |       |       |       |       |       |         |       |              |       |               |       |                   |       |
| **Balance  at December 31, 2007**                                       |       | 166.3      |       | $          | 1.7        |         | $          | 1,717.0           |       | $                  | 4.8        |                   | $          | — |   | $ | 1,723.5 |   |
| Cumulative-effect  adjustment for the adoption of a new accounting principle |       | —     |       | —     |       | (236.7       | )          | —            |       | 7.1                |       | (229.6                 | )          |
| **Balance  at January 1, 2008**                                         |       | 166.3      |       | 1.7        |       | 1,480.3      |       | 4.8               |       | 7.1                |       | 1,493.9                |       |
| Net income                                                                   |       |       |       |       |       | 136.9        |       |              |       | 2.4                |       | 139.3                  |       |
| Net unrealized loss on  marketable securities                                |       |       |       |       |       |         |       | (3.8              | )          |               |       | (3.8                   | )          |
| Amortization of net loss  on cash flow hedge                                 |       |       |       |       |       |         |       | 0.5               |       |               |       | 0.5                    |       |
| Reclassification for net  gains included in net income                       |       |       |       |       |       |         |       | (0.9              | )          |               |       | (0.9                   | )          |
| Foreign currency  translation adjustment                                     |       |       |       |       |       |         |       | (5.9              | )          |               |       | (5.9                   | )          |
| *Comprehensive  income*                                                      |       |       |       |       |       |         |       |              |       |               |       | 129.2                  |       |
| Amortization of stock-based  compensation                                    |       |       |       |       |       | 29.3         |       |              |       | 2.1                |       | 31.4                   |       |
| Issuance and forfeitures  of restricted stock awards                         |       | 1.6        |       |       |       |         |       |              |       |               |       | —                 |       |
| Tax impact of  stock-based compensation                                      |       |       |       |       |       | 3.4          |       |              |       |               |       | 3.4                    |       |
| Stock option exercises                                                       |       | 1.1        |       |       |       | 21.6         |       |              |       |               |       | 21.6                   |       |
| Common stock repurchased                                                     |       | (11.1      | )          | (0.1       | )          | (291.6       | )          |              |       |               |       | (291.7                 | )          |
| Noncontrolling interest  in consolidated investment products                 |       |       |       |       |       |         |       |              |       | 1.1                |       | 1.1                    |       |
| Noncontrolling interests  repurchased                                        |       |       |       |       |       |         |       |              |       | (0.3               | )          | (0.3                   | )          |
| Distributions to  noncontrolling interests                                   |       |       |       |       |       |         |       |              |       | (2.5               | )          | (2.5                   | )          |
| Change in value of  redeemable noncontrolling interest                       |       |       |       |       |       | 137.2        |       |              |       |               |       | 137.2                  |       |
| Common stock dividends  ($0.04 per share)                                    |       |       |       |       |       | (6.5         | )          |              |       |               |       | (6.5                   | )          |
| **Balance  at December 31, 2008**                                       |       | 157.9      |       | 1.6        |       | 1,510.6      |       | (5.3              | )          | 9.9                |       | 1,516.8                |       |
|                                                                         |       |       |       |       |       |         |       |              |       |               |       |                   |       |
| Net income (loss)                                                            |       |       |       |       |       | (802.3       | )          |              |       | 1.3                |       | (801.0                 | )          |
| Net unrealized gain on  marketable securities                                |       |       |       |       |       |         |       | 4.4               |       |               |       | 4.4                    |       |
| Amortization of net loss  on cash flow hedge                                 |       |       |       |       |       |         |       | 0.2               |       |               |       | 0.2                    |       |
| Foreign currency  translation adjustment                                     |       |       |       |       |       |         |       | 0.5               |       |               |       | 0.5                    |       |
| *Comprehensive  income*                                                      |       |       |       |       |       |         |       |              |       |               |       | (795.9                 | )          |
| Amortization of stock-based  compensation                                    |       |       |       |       |       | 15.7         |       |              |       | 2.3                |       | 18.0                   |       |
| Issuance and forfeitures  of restricted stock awards                         |       | 3.3        |       |       |       |         |       |              |       |               |       | —                 |       |
| Tax impact of  stock-based compensation                                      |       |       |       |       |       | (3.8         | )          |              |       |               |       | (3.8                   | )          |
| Stock option exercises                                                       |       |       |       |       |       | 0.5          |       |              |       |               |       | 0.5                    |       |
| Noncontrolling interest  in consolidated investment products                 |       |       |       |       |       |         |       |              |       | (0.9               | )          | (0.9                   | )          |
| Noncontrolling interests  repurchased                                        |       |       |       |       |       |         |       |              |       | (2.3               | )          | (2.3                   | )          |
| Distributions to  noncontrolling interests                                   |       |       |       |       |       |         |       |              |       | (1.8               | )          | (1.8                   | )          |
| Change in value of  redeemable noncontrolling interest                       |       |       |       |       |       | (6.0         | )          |              |       |               |       | (6.0                   | )          |
| Common stock dividends  ($0.04 per share)                                    |       |       |       |       |       | (6.5         | )          |              |       |               |       | (6.5                   | )          |
| **Balance  at June 30, 2009**                                           |       | 161.2      |       | $          | 1.6        |         | $          | 708.2             |       | $                  | (0.2       | )                      | $          | 8.5 |   | $ | 718.1 |   |

 

The accompanying notes are an integral part of theseconsolidated financial statements.

 

4

----

 

**JANUS CAPITAL GROUP INC.**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

***(Unaudited)***

 

**Note 1 — Basis of Presentation**

 

In the opinion of JanusCapital Group Inc. (collectively, “JCG” or the “Company”) management, theaccompanying unaudited interim consolidated financial statements contain alladjustments necessary to fairly present the financial position, results ofoperations and cash flows of the Company in accordance with accountingprinciples generally accepted in the United States of America (“GAAP”).  All such adjustments are of a normalrecurring nature.  Such unaudited interimconsolidated financial statements have been prepared in accordance with theinstructions to Form 10-Q pursuant to the rules and regulations ofthe 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.  Events subsequent to the balance sheet datehave been evaluated for inclusion in the accompanying financial statementsthrough the issuance date, July 22, 2009. These consolidated financial statements should be read in conjunctionwith the Company’s Annual Report on Form 10-K for the year ended December 31,2008 as updated for the retrospective application of Statement of FinancialAccounting Standards No. 160 “Noncontrolling Interests in ConsolidatedFinancial Statements, an amendment of Accounting Research Bulletin No 51” (“SFAS160”) and the amended provisions of Emerging Issues Task Force Topic D-98 “Classificationand Measurement of Redeemable Securities” (“EITF D-98”).  The updated 2008 consolidated financialstatements were filed in a Current Report on Form 8-K on July 14,2009.

 

The accompanying interimconsolidated financial statements have been prepared on a consistent basis withthe accounting policies described in Note 2 to the consolidated financialstatements that are presented in the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2008, as updated for the retrospectiveapplication of SFAS 160 and EITF D-98.

 

**Note 2 — Recent AccountingPronouncements**

 

In June 2009, theFinancial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R)”(“SFAS 167”) which amends the guidance for identifying the primary beneficiaryin variable interest entities, requires ongoing assessments for purposes ofidentifying the primary beneficiary and eliminates the scope exception forqualifying special-purpose entities. SFAS 167 will be effective for JCG’s firstquarter 2010.  JCG is assessing theimpact, if any, of SFAS 167 on its consolidated financial statements.

 

In June 2009, theFASB issued Statement of Financial Accounting Standards No. 168, “The FASBAccounting Standards Codification and Hierarchy of Generally AcceptedAccounting Principles, a replacement of FASB Statement No. 162” (“SFAS 168”)which establishes the Accounting Standards Codification (the “Codification”)and SEC interpretive releases as the sources for authoritative GAAP.  The Codification will supersede all existingnon-SEC accounting and reporting standards under GAAP effective for JCG’s thirdquarter 2009.  The Codification is notintended to change existing GAAP. Accordingly, JCG does not anticipate a material impact on itsconsolidated financial statements.

 

**Note 3 — Acquisition**

 

Each fiscal year through2012, each of the two founding members of INTECH Investment Management LLC (“INTECH”)has the option to require JCG to purchase from him an ownership interest of upto approximately 1.5% of INTECH (“Annual Option Shares”) at fair value.  On April 30, 2009, the two INTECHfounding members exercised their put rights and JCG increased its ownership ofINTECH to approximately 92% by purchasing an additional 3% interest for $25.3million in cash.  As a result of theadoption of the amended provisions of EITF D-98 effective January 1, 2009,the additional interest in INTECH will result in a reduction of redeemablenoncontrolling interests on the Consolidated Balance Sheets in an amount equalto the purchase price.  No assets will berecognized as a result of the April 2009 acquisition of an additionalinterest in INTECH or future acquisitions of noncontrolling interests. The proforma results of operations have not been presented as they would not have beenmaterially different from reported amounts.

 

5

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**Note 4 — Marketable Securities**

 

JCG’smarketable securities at June 30, 2009 and December 31, 2008, aresummarized as follows (in millions):

 
| ** **                                                | ** ** | **June 30, 2009** | ** ** | **December 31, 2008** | ** ** |
|-----------------------------------------------------------|------------|------------------------|------------|----------------------------|------------|
| ** **                                                | ** ** | ** **             | ** ** | **Gross**                  | ** ** | **Gross** | ** ** | **Estimated** | ** ** | ** ** | ** ** | **Gross** | ** ** | **Gross** | ** ** | **Estimated** | ** ** |
| ** **                                                | ** ** | **Cost**               | ** ** | **Unrealized**             | ** ** | **Unrealized** | ** ** | **Fair** | ** ** | **Cost** | ** ** | **Unrealized** | ** ** | **Unrealized** | ** ** | **Fair** | ** ** |
| ** **                                                | ** ** | **Basis**              | ** ** | **Gains**                  | ** ** | **Losses** | ** ** | **Value** | ** ** | **Basis** | ** ** | **Gains** | ** ** | **Losses** | ** ** | **Value** | ** ** |
|                                                      | ** ** | ** **             | ** ** | ** **                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Trading securities (carried at fair value)**            | ** ** | $                      | 68.8       | ** **                 | $          | 1.4 | ** ** | $ | (15.2 | ) | $ | 55.0 | ** ** | $ | 81.9 | ** ** | $ | 1.0 | ** ** | $ | (20.5 | ) | $ | 62.4 | ** ** |
| **Available-for-sale securities (carried at fair value)** |       |                   |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment in advised  funds                              |       | 11.9                   |       | 1.8                        |       | (0.2 | ) | 13.5 |   | 14.7 |   | — |   | (4.8 | ) | 9.9 |   |
| Structured investment  vehicle                            |       | 43.6                   |       | —                     |       | — |   | 43.6 |   | 52.2 |   | — |   | — |   | 52.2 |   |
| **Derivative  instruments**                               |       | —                 |       | —                     |       | — |   | — |   | 0.8 |   | — |   | — |   | 0.8 |   |
|                                                      |       | $                      | 124.3      |                       | $          | 3.2 |   | $ | (15.4 | ) | $ | 112.1 |   | $ | 149.6 |   | $ | 1.0 |   | $ | (25.3 | ) | $ | 125.3 |   |

 

JCG periodically adds newinvestment strategies to its investment product offerings by providing theinitial 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 willconsolidate such investment products as long as it holds a controllinginterest, defined as greater than 50% ownership.  Upon deconsolidation, JCG accounts for itsinvestments as available-for-sale securities.

 

JCG may redeem investedseed capital for a variety of reasons, including when third-party capitalinvested in the relevant product is sufficient to sustain the given investmentstrategy.  JCG recognized immateriallosses from the redemption of seed capital investments for the three and sixmonths ended June 30, 2009. Gains from the redemption of seed capitalinvestments for the three and six months ended June 30, 2008 totaled $1.5million and $1.6 million, respectively.

 

Investments in seedcapital are classified as follows:

 

***TradingSecurities***

 

AtJune 30, 2009, seed capital investments classified as trading securitiestotaled $55.0 million, representing $37.6 million of securities held inseparately managed accounts and $17.4 million of securities held in theportfolios of advised funds consolidated by the Company.  Trading securities are carried in JCG’sconsolidated financial statements at fair value, with changes in valuerecognized as gains and losses currently in earnings.  JCG recognized gains of $6.9 million and $2.2million in earnings on securities classified as trading for the three and sixmonths ended June 30, 2009, respectively. These gains were offset byrecognized losses of $6.4 million and $2.1 million on hedged seed capitalinvestments for the three and six months ended June 30, 2009,respectively. Gains of $1.2 million and losses of $8.5 million were recognizedin earnings on securities classified as trading for the three and six month periodsended June 30, 2008, respectively.

 

Proceedsfrom the sale of trading securities totaled $0.7 million and $6.9 million forthe three and six months ended June 30, 2009, respectively. Proceeds fromthe sale of trading securities for the six months ended June 30, 2008totaled $10.0 million. There were no sales of trading securities during thethree months ended June 30, 2008.

 

***Available-for-SaleSecurities***

 

*Investmentsin Advised Funds*

 

At June 30, 2009,investments in advised funds totaled $13.5 million.  Investments in advised funds are carried inJCG’s consolidated financial statements at fair value, with changes in valuerecognized as gains and losses in other comprehensive income.  Accumulated gains and losses are reclassifiedto earnings when the securities are sold. JCG periodically reviews the carrying value of investments in advisedfunds for impairment by evaluating the nature, duration and extent of anydecline in fair value.  If the decline invalue is determined to be other-than-temporary, the carrying value of thesecurity is written down to fair value through earnings. Other-than-temporaryimpairment charges of $5.2 million were recognized during the three monthsended March 31, 2009.  No impairmentcharges for investments in advised fund were recognized during the three monthsended June 30, 2009, or the six months ended June 30, 2008.

 

Proceeds from the sale ofinvestments in advised funds totaled $0.8 million for the six months ended June 30,2009.  There were no proceeds from thesale of investments in advised funds for the three months ended June 30,2009. Proceeds

 

6

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from the sale ofinvestment in advised funds totaled $6.7 million and $6.8 million for the threeand six months ended June 30, 2008, respectively.

 

*StructuredInvestment Vehicle (“SIV”)*

 

JCG’s SIV investmentrepresents securities issued by Stanfield Victoria Funding LLC (“Stanfieldsecurities”) which are carried in JCG’s consolidated financial statements basedon JCG’s estimate of fair value.  JCGrecognized impairment charges relating to the Stanfield securities of $21.0million and $18.2 million for the years ended December 31, 2008 and 2007,respectively.  See Note 6 for furtherdiscussion of the fair value of the Stanfield securities.

 

***DerivativeInstruments***

 

JCG implemented aneconomic hedge strategy in December 2008 covering the majority of investedseed capital to mitigate a portion of the net income volatility created by themark-to-market accounting of seed capital investments.  The strategy utilizes futures contracts andcall options on various market indices to minimize market losses while allowingfor limited participation in market gains. These instruments are accounted for at fair value under Statement ofFinancial Accounting Standard No. 133 (as amended and interpreted) “Accountingfor Derivatives and Hedging Activities” (“SFAS 133”), with changes in fairvalue reported currently in earnings but have not been designated as hedginginstruments under SFAS 133.  Call optionsoutstanding as of December 31, 2008 expired in early 2009 and noadditional call options have been purchased in 2009.

 

**Note 5 — Intangible Assets andGoodwill**

 

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

 
| ** **                           | ** ** | **December 31,** | ** **  | **Impairment** | ** ** | ** **    | ** ** | **June 30,** | ** ** |
|--------------------------------------|------------|-----------------------|-------------|----------------|------------|---------------|------------|-------------------|------------|
| ** **                           | ** ** | **2008**              | ** **  | **Charges**    | ** ** | **Additions** | ** ** | **2009**          | ** ** |
| ** **                           | ** ** | ** **            | ** **  | ** **     | ** ** | ** **    | ** ** | ** **        | ** ** |
| Indefinite-lived  intangible assets: |       |                  |        |           |       |          |       |              |       |
| Mutual fund advisory  contracts      |       | $                     | 943.1       |           | $          | (109.7        | )          | $                 | —     |   | $ | 833.4 |   |
| Brand name and  trademark            |       | 270.5                 |        | —         |       | —        |       | 270.5             |       |
| Amortized intangible assets:         |       |                  |        |           |       |          |       |              |       |
| Client relationships                 |       | 162.5                 |        | —         |       | —        |       | 162.5             |       |
| Accumulated  amortization            |       | (54.9                 | )           | —         |       | (6.1          | )          | (61.0             | )          |
| **Net  intangible assets**           | ** ** | **$**                 | **1,321.2** | ** **     | **$**      | **(109.7**    | **)**      | **$**             | **(6.1**   | **)** | **$** | **1,205.4** | ** ** |
|                                 |       |                  |        |           |       |          |       |              |       |
| **Goodwill**                         | ** ** | **$**                 | **1,320.3** | ** **     | **$**      | **(747.0**    | **)**      | **$**             | **1.3**    | ** ** | **$** | **574.6** | ** ** |

 

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

 

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

 

Based on further declinesin global markets, JCG’s stock price, assets under management and revenuessubsequent to December 31, 2008, JCG revised its operating forecastdownward and again evaluated indefinite-lived intangible assets, amortizedintangible assets and goodwill for impairment as of March 31, 2009.  As a result of these assessments, impairmentcharges of $109.7 million and $747.0 million were recognized on mutual fundadvisory contracts and goodwill, respectively, in the first quarter 2009.  The partially impaired assets were originallyrecognized in 2001 in connection with the contractual obligation to buy outJanus Capital Management LLC’s founder.

 

7

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**Note 6 — Fair Value Measurements**

 

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

 
| · | Level 1 — | Valuation inputs are  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 tablepresents assets and liabilities carried at fair value as of June 30, 2009 *(in millions)*:

 
| ** **                                | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
|-------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|-----------|------------|
| Trading securities                        |       | $           | 43.7       |        | $          | 11.3        |       | $         | —     |   | $ | 55.0 |   |
|                                      |       |        |       |        |       |        |       |      |       |
| Available-for-sale  securities            |       |        |       |        |       |        |       |      |       |
| Investments in advised  funds             |       | 7.5         |       | 6.0         |       | —      |       | 13.5      |       |
| Structured investment  vehicle securities |       | —      |       | —      |       | 43.6        |       | 43.6      |       |
| Total marketable  securities              |       | 51.2        |       | 17.3        |       | 43.6        |       | 112.1     |       |
|                                      |       |        |       |        |       |        |       |      |       |
| Other assets                              |       |        |       |        |       |        |       |      |       |
| Mutual fund unit award  hedge asset       |       | 57.0        |       | —      |       | —      |       | 57.0      |       |
| Deferred compensation  hedge asset        |       | 17.2        |       | —      |       | —      |       | 17.2      |       |
|                                      |       |        |       |        |       |        |       |      |       |
| Intangibles, net                          |       |        |       |        |       |        |       |      |       |
| Mutual fund advisory  contracts           |       | —      |       | —      |       | 833.4       |       | 833.4     |       |
| Goodwill                                  |       | —      |       | —      |       | 574.6       |       | 574.6     |       |
|                                      |       |        |       |        |       |        |       |      |       |
| Total assets carried at  fair value       |       | $           | 125.4      |        | $          | 17.3        |       | $         | 1,451.6    |   | $ | 1,594.3 |   |
|                                      |       |        |       |        |       |        |       |      |       |
| Redeemable  noncontrolling interests      |       | —      |       | —      |       | 85.6        |       | 85.6      |       |
|                                      |       |        |       |        |       |        |       |      |       |
| Total liabilities  carried at fair value  |       | $           | —     |        | $          | —      |       | $         | 85.6       |   | $ | 85.6 |   |

 

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

 

JCG’s Level 3 recurringfair value measurements include the Stanfield securities and redeemablenoncontrolling interests.  NonrecurringLevel 3 fair value measurements as of June 30, 2009 include goodwill andintangible assets.  Because of thesignificance of the unobservable inputs in the fair value measurements of theseassets and liabilities, such measurements have been classified as Level 3.

 

The Stanfield securitieswere issued by a structured investment vehicle that purchased high grademedium- and long-term fixed-income instruments financed by issuing low-cost,short-term senior debt instruments such as asset-backed commercial paper andasset-backed medium-term notes.  Tomeasure fair value, JCG undertook a detailed analysis of the assets underlyingthe Stanfield securities and benchmarked those assets against instruments of asimilar type with comparable yields, maturities and credit ratings for whichquoted market prices are readily available. Discounts have been applied to the quoted market prices of the benchmarkinstruments to adjust for varying yields, credit ratings or otherdistinguishing characteristics.  Thevaluation methodology for the Stanfield securities has been consistentlyapplied since their acquisition in 2007.

 

JCG measured the fairvalue of the Stanfield securities as of June 30, 2009, and determined thatthe valuation was consistent with the previously reported amount of $48.7million as of March 31, 2009, less subsequent distributions.  JCG received distributions totaling $5.1million in the second quarter 2009, which reduced the carrying value of theStanfield securities to $43.6 million.  Anew legal structure for the Stanfield SIV is expected to be announced in 2009at which time JCG may elect to receive its proportionate share of theunderlying assets or participate in the new structure.

 

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Redeemable noncontrollinginterests in INTECH are measured at fair value using a discounted cash flowmethodology.  Significant inputs to thediscounted cash flow analysis include forecasted operating results, discountrate and terminal multiple of cash flows. Redeemable noncontrolling interests in Perkins are measured by acontractual formula intended to yield an amount representative of fairvalue.  See Note 8 for a furtherdiscussion of redeemable noncontrolling interests.

 

The changes in carryingvalue of JCG’s recurring Level 3 fair value measurements are as follows *(in millions)*:

 

| ** **                                | ** ** | ** **     | ** ** | **Redeemable**     | ** ** |
|-------------------------------------------|------------|----------------|------------|--------------------|------------|
| ** **                                | ** ** | **Stanfield**  | ** ** | **noncontrolling** | ** ** |
| ** **                                | ** ** | **securities** | ** ** | **interests**      | ** ** |
| Carrying value at  December 31, 2008 |       | $              | 52.2       |               | $          | 106.8 |   |
| Distributions                             |       | (8.6           | )          | (6.1               | )          |
| Current earnings                          |       | —         |       | 4.3                |       |
| Repurchase of  noncontrolling interest    |       | —         |       | (25.3              | )          |
| Change in redemption  value               |       | —         |       | 5.9                |       |
|                                      |       |           |       |               |       |
| Carrying value at  June 30, 2009     |       | $              | 43.6       |               | $          | 85.6 |   |

 

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

 

**Note 7 — Debt**

 

Debt at June 30,2009 and December 31, 2008, consisted of the following *(in millions)*:

 

| ** **                    | ** ** | **June 30, 2009** | ** ** | **December 31, 2008** | ** ** |
|-------------------------------|------------|------------------------|------------|----------------------------|------------|
| ** **                    | ** ** | **Carrying  Value**    | ** ** | **Fair  Value**            | ** ** | **Carrying  Value** | ** ** | **Fair  Value** | ** ** |
| 7.750% Senior Notes due  2009 |       | $                      | —     |                       | $          | — |   | $ | 22.0 |   | $ | 21.8 |   |
| 5.875% Senior Notes due  2011 |       | 275.0                  |       | 255.4                      |       | 275.0 |   | 234.3 |   |
| 6.250% Senior Notes due  2012 |       | 299.8                  |       | 270.0                      |       | 299.8 |   | 240.5 |   |
| 6.119% Senior Notes due  2014 |       | 82.2                   |       | 72.6                       |       | 82.2 |   | 63.9 |   |
| 6.700% Senior Notes due  2017 |       | 449.1                  |       | 378.0                      |       | 449.0 |   | 346.9 |   |
| Total                         |       | 1,106.1                |       | 976.0                      |       | 1,128.0 |   | 907.4 |   |
| Less: current  maturities     |       | —                 |       | —                     |       | (22.0 | ) | (21.8 | ) |
| Total long-term debt          |       | $                      | 1,106.1    |                       | $          | 976.0 |   | $ | 1,106.0 |   | $ | 885.6 |   |

 

*Fair Value of Debt*

 

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

 

*Debt Repayment*

 

On June 15, 2009,the $22.0 million of 7.750% senior notes matured and were repaid.

 

*InterestRate Adjustment Covenant*

 

All of JCG’s outstandingdebt is subject to an interest rate adjustment covenant that provides that theinterest rate payable will increase by 25 basis points for each level that theCompany’s debt rating is decreased by Moody’s from its existing rating of Baa3or by S&P from its existing rating of BBB-, up to a maximum increase of 200basis points.  If at any time after theinterest has been adjusted upward, either Moody’s or S&P increases itsrating, then for each level of such increase in the rating, the interestpayable will be decreased by 25 basis points, but in no event to a rate lessthan the interest rate payable on the date of their issuance.  The interest rate adjustment covenant willpermanently terminate if the

 

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Company’s debt ratings increaseto Baa2 by Moody’s and BBB by S&P (or higher), with a stable or positiveoutlook regardless of any subsequent decrease in the ratings by either or bothrating 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 outstanding debt,or approximately $2.8 million of additional annual interest expense.

 

*Credit Facility*

* *

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

 

**Note 8 — Noncontrolling Interests**

 

JCG adopted theprovisions of SFAS 160 and the amended provisions of EITF D-98 effective January 1,2009 and retrospectively applied such provisions to reported priorperiods.  As a result of theimplementation of SFAS 160, noncontrolling interests that are not subject toput rights have been reclassified to permanent equity with no change in themeasurement principles previously applied to these interests.  Under the provisions of EITF D-98, redeemablenoncontrolling interests remain classified in mezzanine equity and are measuredat estimated fair value as of the balance sheet date.  Earnings attributable to noncontrollinginterests that are and are not subject to put rights have been combined in theconsolidated statements of income. Presentation of the noncontrolling interests in the ConsolidatedStatements of Income has been changed to reflect net income with and withoutconsideration of the noncontrolling interests. Earnings per share continues to be calculated after consideration of thenoncontrolling interest.

 

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

 

Noncontrollinginterests that are not subject to put rights consist of third party investorsin consolidated investment products, certain INTECH and Perkins interestsgranted to employees, and undistributed earnings of $5.2 million attributableto such interests.  Certain of the INTECHand Perkins interests granted to employees will become subject to put rightsupon vesting.

 

***RedeemableNoncontrolling Interests***

 

Redeemablenoncontrolling interests consist of INTECH and Perkins interests that arecurrently puttable to JCG or will become puttable at certain future dates andundistributed earnings of $4.8 million attributable to such interests.  The recognition of the fair value of theredeemable noncontrolling interests was effected through an increase toredeemable noncontrolling interests and a charge to retained earnings.  Future changes in fair value will berecognized as increases or decreases to retained earnings.

 

*INTECH*

 

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

 

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

 

Interests held by otherINTECH employees subject to put rights have an estimated value of approximately$4.1 million as of June 30, 2009.

 

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*Perkins*

 

JCG also has the optionto acquire any or all of the remaining 22.2% interest of Perkins at fair valueon the third, fifth, seventh or each subsequent anniversary of closing.  The minority owners of Perkins have theoption to require JCG to purchase any or all of their remaining interests onthe fourth or sixth anniversary of closing at fair value.  The total Perkins minority interest has anestimated value of approximately $34.5 million as of June 30, 2009, basedon a contractual formula driven by revenue and investment performance ofproducts managed by Perkins.  The formulais intended to yield an amount representative of fair value.

 

**Note 9 — Long-Term IncentiveCompensation**

 

JCG granted $72.5 millionin long-term incentive awards during the first six months of 2009, whichgenerally vest and will be recognized ratably over a four-year period, and arenot subject to performance-based accelerated vesting.  The 2009 awards consisted of $21.0 million ofrestricted stock (3.7 million shares at a weighted average price of $5.89 pershare), $15.1 million of stock options and $36.4 million of mutual fund units.

 

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

 

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

 

**Note 10 — Other Income, Net**

 

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

 
| ** **                         | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                         | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **                         | ** ** | **2009**               | ** ** | **2008**             | ** ** | **2009** | ** ** | **2008** | ** ** |
| Dividend income                    |       | $                      | 0.2        |                 | $          | — |   | $ | 0.4 |   | $ | 0.7 |   |
| Interest income                    |       | 0.1                    |       | 1.4                  |       | 0.2 |   | 3.9 |   |
| Translation gains and  losses, net |       | (0.4                   | )          | —               |       | (1.0 | ) | — |   |
| Other, net                         |       | 0.5                    |       | (0.4                 | )          | 0.8 |   | 0.6 |   |
| Total                              |       | $                      | 0.4        |                 | $          | 1.0 |   | $ | 0.4 |   | $ | 5.2 |   |

 

11

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**Note 11 — 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 commonshare adjusts the weighted average shares outstanding by the dilutive impact ofshares underlying stock options and unvested restricted stock awards.  The following is a summary of the earningsper share calculation *(in millions, except pershare data)*:

 
| ** **                                                                                       | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                                                                                       | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **                                                                                       | ** ** | **2009**               | ** ** | **2008**             | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Amounts  attributable to JCG common shareholders:**                                            |       |                   |       |                 |       |   |   |   |   |
| Income (loss) from  continuing operations                                                        |       | $                      | 15.8       |                 | $          | 65.6 |   | $ | (802.3 | ) | $ | 104.6 |   |
| Income (loss) from  discontinued operations                                                      |       | —                 |       | 0.7                  |       | — |   | (0.9 | ) |
|                                                                                             |       |                   |       |                 |       |   |   |   |   |
| **Net  income (loss)**                                                                           |       | $                      | 15.8       |                 | $          | 66.3 |   | $ | (802.3 | ) | $ | 103.7 |   |
|                                                                                             |       |                   |       |                 |       |   |   |   |   |
| **Basic earnings (loss) per share****attributable  to JCG common shareholders:**                 |       |                   |       |                 |       |   |   |   |   |
| Weighted average common  shares outstanding                                                      |       | 157.0                  |       | 160.4                |       | 156.8 |   | 161.5 |   |
|                                                                                             |       |                   |       |                 |       |   |   |   |   |
| Income (loss) from  continuing operations                                                        |       | $                      | 0.10       |                 | $          | 0.41 |   | $ | (5.12 | ) | $ | 0.65 |   |
| Income (loss) from  discontinued operations                                                      |       | —                 |       | —               |       | — |   | (0.01 | ) |
|                                                                                             |       |                   |       |                 |       |   |   |   |   |
| Basic earnings (loss)  per share                                                                 |       | $                      | 0.10       |                 | $          | 0.41 |   | $ | (5.12 | ) | $ | 0.64 |   |
|                                                                                             |       |                   |       |                 |       |   |   |   |   |
| **Diluted earnings per share****attributable to JCG  common shareholders:**                      |       |                   |       |                 |       |   |   |   |   |
| Weighted average common  shares outstanding                                                      |       | 157.0                  |       | 160.4                |       | 156.8 |   | 161.5 |   |
|                                                                                             |       |                   |       |                 |       |   |   |   |   |
| Dilutive  effect of stock options and unvested restricted stock using the treasury  stock method |       | 2.0                    |       | 2.0                  |       | — |   | 1.6 |   |
| Weighted average  diluted common shares outstanding                                              |       | 159.0                  |       | 162.4                |       | 156.8 |   | 163.1 |   |
| Income (loss) from  continuing operations                                                        |       | $                      | 0.10       |                 | $          | 0.40 |   | $ | (5.12 | ) | $ | 0.64 |   |
| Income (loss) from  discontinued operations                                                      |       | —                 |       | —               |       | — |   | (0.01 | ) |
|                                                                                             |       |                   |       |                 |       |   |   |   |   |
| Diluted earnings (loss)  per share                                                               |       | $                      | 0.10       |                 | $          | 0.41 |   | $ | (5.12 | ) | $ | 0.64 |   |

 

Thefollowing stock options and unvested restricted stock are anti-dilutive andhave not been included in the weighted average diluted shares outstandingcalculation *(in millions)*:

 

| ** **                 | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|----------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                 | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **                 | ** ** | **2009**               | ** ** | **2008**             | ** ** | **2009** | ** ** | **2008** | ** ** |
| Stock options              |       | 11.3                   |       | 3.6                  |       | 17.3 |   | 3.6 |   |
| Unvested restricted  stock |       | 1.2                    |       | —               |       | 4.7 |   | 0.5 |   |

 

As aresult of JCG’s net loss for the six months ended June 30, 2009, all stockoptions and unvested restricted stock are considered anti-dilutive.

 

**Note 12 —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. JCGdecreased its litigation reserves in the second quarter 2009 by a net $5.6million, as a result of payment of a judgment in a case brought by a formerportfolio manager, partially offset by increases for the potential settlementof other insignificant matters.

 

12

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***MarketTiming Litigation***

 

Followingthe market timing investigations by the New York Attorney General (“NYAG”) andthe SEC in 2003, JCG and certain affiliates were named as defendants in aconsolidated lawsuit in the U.S. District Court in Baltimore, Maryland (*Case No. MDL No. 1586, 04-MD-15863*).  Five amended complaints were originally filedin these coordinated proceedings, four of which still remain, including: (i) claimsby a putative class of Janus fund investors asserting claims on behalf of theinvestor class (*Marini, et al. v. Janus Investment Fund, etal., U.S. District Court, District of Maryland, Case No. 04-CV-00497*);  (ii) derivative claims by investors inthe Janus funds ostensibly on behalf of the Janus funds (*Steinberg etal. v. Janus Capital Management, LLC et al., U.S. District Court, District ofMaryland, Case No. 04-CV-00518*); (iii) claims on behalf ofparticipants in the JCG 401(k) plan (*Wangberger v. JanusCapital Group Inc., 401(k) Advisory Committee, et al., U.S. DistrictCourt, District of Maryland, Case No. JFM-05-2711*); and (iv) claimsby a putative class of JCG shareholders asserting claims on behalf of theshareholders (*Wiggins, et al. v. Janus Capital Group Inc.,et al.*, *U.S. District Court,District of Maryland, Case No. 04-CV-00818).*

 

InAugust 2005, the U.S. District Court entered orders dismissing most of theclaims asserted against the Company and its affiliates by fund investors in the*Marini* and *Steinberg*cases described above, except certain claims under Section 10(b) ofthe Securities Exchange Act of 1934 and under Section 36(b) of theInvestment Company Act of 1940.  On December 30,2008, the court granted, at least in part, summary judgment in the Company’sfavor with respect to plaintiffs’ damage demands in the *Marini*and*Steinberg*cases**as it relatesto “approved” market timing because there was no evidence that investorssuffered damages that exceed the $50 million they are entitled to receive underthe regulatory settlement.  The court didnot grant summary judgment on the remaining causes of action and requested theparties to submit additional briefing with respect to “unapproved” markettiming.  After theparties completed the supplemental briefing in the *Marini*case, on June 12, 2009, the Court granted judgment in Janus’ favor on theremaining claims. In July 2009, Janus submitted additional briefing in the*Steinberg* case, which seeks entry ofsummary judgment on the  remaining claimsin that case. In the *Wiggins*matter, the U.S. District Court also entered anorder dismissing all claims in the *Wiggins*lawsuit.  Plaintiffs, however, appealedthat dismissal to the U.S. Court of Appeals for the Fourth Circuit.  In May 2009, the Fourth Circuitreversed the order of dismissal and remanded the case back to the U.S. DistrictCourt for further proceedings.  In August 2006, the U.S. District Courtin the *Wangberger* 401(k) plan class actiondismissed the action with prejudice, and the plaintiff appealed the dismissalto the U.S. Court of Appeals for the Fourth Circuit.  In June 2008, the Fourth Circuitreversed the U.S. District Court’s order of dismissal and remanded the case tothe U.S. District Court for further proceedings.  As a result of the above events, the Companyand Janus are the remaining defendants, in some capacity, in one or more of theactions described in the preceding paragraph.

 

TheAuditor of the State of West Virginia, in his capacity as securitiescommissioner, initiated administrative proceedings against many of thedefendants in the market timing cases (including JCG) and seeks disgorgementand other monetary relief based on similar market timing allegations (*In the Matter of Janus Capital Group Inc. et al., Before the SecuritiesCommissioner, State of West Virginia, Summary Order No. 05-1320*).  In September 2006, JCG filed its answerto the Auditor’s summary order instituting proceedings, as well as a Motion toDischarge Order to Show Cause.  Thisaction is still pending.

 

***Miscellaneous Proceedings***

 

During 2007, two formerportfolio managers filed suit against a JCG subsidiary alleging that itimplemented certain changes to their compensation arrangements in violation ofprior agreements *(Edward Keely v. Janus Management HoldingsCorporation, Denver District Court, Case No. 2007 CV 7366* and *Tom Malley v. Janus Management Holdings Corporation, Denver DistrictCourt, Case No. 2007 CV 10719)*. These complaints allege some or all of the following claims, in additionto other allegations: (1) breach of contract; (2) willful and wantonbreach of contract; (3) breach of good faith and fair dealing; and (4) estoppel.  JCG answered the complaints, denying anyliability and challenging the merits of Mr. Keely’s and Mr. Malley’sallegations.  After a four day trial inthe *Keely* matter, on May 8, 2009, thejury found in favor of Mr. Keely. The Court entered judgment in Mr. Keely’s favor for $4.8 million indamages plus $2.2 million of pre- and post- trial interest, attorneys’ fees anddamage enhancements under the Colorado Wage Act.  The pre- and post-trial interest, attorneys’fees and damage enhancements were originally estimated at $2.7 million.  No appeal has been filed. Mr. Malley’strial was scheduled to commence in December 2008 but was subsequentlyre-set for April 2009.  At therequest of Mr. Malley, the trial was again continued and no new trial datehas yet been set.

 

13

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**Note 13 — Subsequent Events**

 

*Common Stock and ConvertibleSenior Notes Offerings, and Tender Offer for Certain Outstanding Senior Notes*

 

In July 2009, JCGcompleted concurrent common stock and 3.250% convertible senior notes offerings.  Proceeds, net of underwriting fees anddiscounts from the common stock and convertible senior notes offerings, totaledapproximately $218.5 million and $164.9 million, respectively.  The combined net proceeds, together withavailable cash, will be used to repurchase up to $400 million of aggregateprincipal amount of its outstanding 2011, 2012 and 2017 senior notes in atender offer and for general corporate purposes, including the repayment orrepurchase of any of the foregoing series of notes that remain outstanding.

 

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

 

Because the convertiblesenior notes may be wholly or partially settled in cash, the proceeds arerequired to be bifurcated into debt and equity components.  The estimated $125.7 million debt componentwas determined by discounting future contractual cash flows at a 10.0% ratewhich is consistent with the estimated market rate for similar senior noteswith no conversion option.  The debtcomponent will accrete up to the face value over the five-year expected termthrough interest expense.  The $44.3million (or $27.9 million, net of deferred taxes) equity component wasdetermined using the difference between the proceeds and the debt component.

 

The tender offer for theapplicable outstanding senior notes expires on August 11, 2009 with theearly tender period ending on July 27, 2009.  Details of the tender offer are as follows:

 
| ** **                        | ** ** | ** **                      | ** ** | ** **                            | ** **  | ** **                  | ** ** | **Dollar per $1,000 Face Amount** | ** ** |
|-----------------------------------|------------|---------------------------------|------------|---------------------------------------|-------------|-----------------------------|------------|-----------------------------------|------------|
| ** **                        | ** ** | **Acceptance  Priority  Level** | ** ** | **Aggregate  Principle  Outstanding** | ** **  | **Maximum  Tender  Amount** | ** ** | **Total  Consideration**          | ** ** | **Early  Tender  Payment** | ** ** | **Late  Tender  Payment** | ** ** |
|                              |       |                            |       |                                  |        |                        |       |                              |       |   |   |   |   |
| **5.875%  Senior Notes due 2011** |       | 1                               |       | $                                     | 275,000,000 |                        | $          | —                            |       | $ | 1,000.00 |   | $ | 40.00 |   | $ | 960.00 |   |
|                              |       |                            |       |                                  |        |                        |       |                              |       |   |   |   |   |
| **6.250%  Senior Notes due 2012** |       | 2                               |       | $                                     | 300,000,000 |                        | $          | —                            |       | $ | 980.00 |   | $ | 40.00 |   | $ | 940.00 |   |
|                              |       |                            |       |                                  |        |                        |       |                              |       |   |   |   |   |
| **6.700%  Senior Notes due 2017** |       | 3                               |       | $                                     | 450,000,000 |                        | $          | 75,000,000                        |       | $ | 900.00 |   | $ | 40.00 |   | $ | 860.00 |   |

 

*Departure of Chief ExecutiveOfficer*

 

On July 13, 2009,Gary D. Black stepped down as chief executive officer.  In connection with Mr. Black’sdeparture, JCG will incur a $12.1 million charge, including approximately $6.8million of cash and $5.3 million for the acceleration of unvested stock,options and mutual fund share awards. The charge will be reflected in JCG’s third quarter results. 

 

14

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**Item 2.     Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

 

**FORWARD-LOOKING STATEMENTS**

 

*Certain statements in thisQuarterly Report on Form 10-Q contain “forward-looking statements” withinthe meaning of the Private Securities Litigation Reform Act of 1995. Suchforward-looking statements involve known and unknown risks, uncertainties,assumptions and other factors which may cause the actual results, performanceor achievements of the Company to be materially different from any futureresults, performance or achievements expressed or implied by suchforward-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.  *

* *

*Various risks, uncertainties,assumptions and factors that could cause future results to differ materiallyfrom those expressed by the forward-looking statements included in thisQuarterly Report on Form 10-Q include, but are not limited to, risksassociated with the appointment of a CEO and our ability to identify apermanent CEO and resulting potential disruptions to the Company and ourbusiness, risks associated with our capital raising transaction and relateddebt tender offer, including whether such tender offer will be successful andon what terms it may be completed, and other risks, uncertainties, assumptionsand factors specified in the Company’s Annual Report on Form 10-K for theyear ended December 31, 2008 included under headings such as  “RiskFactors” and “Management’s Discussion and Analysis of Financial Condition andResults of Operations”, and in the Prospectus Supplements, dated July 14,2009, to the Registration Statement of Form S-3 (Registration No. 333-145310)  and in other filings and furnishings made bythe Company with the SEC from time to time. In light of these risks,uncertainties, assumptions and factors, the forward-looking events discussed inthis press release may not occur.  Many of these factors are beyond thecontrol of the Company and its management.  You are cautioned not to placeundue reliance on these forward-looking statements, which speak only as of thedate stated, or if no date is stated, as of the date of this Quarterly Reporton Form 10-Q. Except for the Company’s ongoing obligations to disclosematerial information under the federal securities laws, the Company undertakesno obligation to release publicly any revisions to any forward-lookingstatements, to report events or to report the occurrence of unanticipatedevents unless required by law.*

 

**AVAILABLE INFORMATION**

 

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

 

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

 

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

 

15

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**RESULTS OF OPERATIONS**

 

**Overview**

 

JCG provides investmentmanagement and administrative services to mutual funds, separate accounts andinstitutional clients in both domestic and international markets through itsprimary subsidiaries, Janus Capital Management LLC (“Janus”), INTECH InvestmentManagement LLC (“INTECH”) and Perkins Investment Management LLC (“Perkins”).

 

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

 

**INVESTMENT MANAGEMENT OPERATIONS(CONTINUING OPERATIONS)**

 

**Second Quarter 2009 Summary**

 

Market conditionsimproved during the second quarter 2009, leading to an increase in endingassets under management of $21.7 billion, or 19.6% from March 31, 2009,and higher revenues and operating margin. Year-over-year, assets under management, revenues and operating margindeclined primarily as a result of the significant deterioration in globalmarkets in the second half of 2008 and first quarter 2009.  Second quarter 2009 long-term net inflowstotaled $2.3 billion compared with $5.0 billion of long-term net inflows forthe second quarter 2008.

 

**Significant Events Subsequent tothe Second Quarter 2009**

 

On July 14, 2009,JCG announced the departure of Gary D. Black and the appointment of ChiefExecutive Officer, Timothy K. Armour effective July 13, 2009.  In connection with Mr. Black’sdeparture, JCG will incur a $12.1 million charge, including approximately $6.8million of cash and $5.3 million for the acceleration of unvested stock,options and mutual fund share awards. The charge will be reflected in JCG’s third quarter results.

 

On July 14, 2009,JCG undertook a capital raise and launched a tender offer for certainoutstanding senior notes.  The capitalraise was completed on July 15 and included common stock and convertiblesenior notes offerings, resulting in net proceeds of approximately $218.5million and $164.9 million, respectively. The proceeds, along with available cash, will be used to repurchase upto $400 million aggregate principal amount of JCG’s outstanding senior notesdue 2011, 2012 and 2017 through a tender offer and for general corporatepurposes, including the repayment or repurchase of any of the foregoing seriesof notes that remain outstanding.  Thetender offer expires August 11, 2009.

 

Effective July 6,2009, JCG merged two of its domestic mutual fund trusts, Janus Investment Fund(“JIF”) and Janus Advisor Series (“JAD”) into a single trust.  The merger is designed to simplify JCG’sproduct offerings and provide mutual fund investors with a broader range ofinvestment strategies.  Merger relatedcosts totaled $3.2 million in the second quarter 2009. An additional $5.0million to $6.0 million is expected to be incurred in the second half of 2009to finalize the merger.

 

**Investment Performance**

 

Investment products aregenerally evaluated based on their investment performance relative to otherinvestment products with similar disciplines and strategies.  Despite challenging market conditions, JCG’srelative investment performance continues to outperform the majority of peersover multiple time periods.

 

·                  Relative long-term investment performance remainedstrong with approximately 65%, 84% and 85% of JCG’s mutual funds in the tophalf of their Lipper categories on a one-, three- and five-year total returnbasis, respectively, as of June 30, 2009. (See Exhibit 99.1 for complete Lipper rankings.)

 

16

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·                  INTECH’s near-term relative investment performance wasweak, while longer-term performance remained strong, with 33%, 56% and 86% ofproduct strategies outperforming their respective benchmarks over the one-,three- and five-year periods ended June 30, 2009.

·                  The Perkins Mid Cap Value and Small Cap Value mutualfunds ranked in the top 16% and 10%, respectively, of their Lipper categoriesacross the one-, three- and five-year total-return basis, as of June 30,2009.

 

**Assets Under Management and Flows**

 

***Valuation***

 

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

 

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

 

***TotalCompany Assets and Flows***

 

Total Company assetsunder management at June 30, 2009 decreased $59.2 billion, or 30.9%, fromthe end of the second quarter 2008.  Thedecrease was primarily driven by adverse market conditions in the last half of2008.

 

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

 
| ** **                  | ** ** | **Three months ended June 30,** | ** ** | **Six months ended June 30,** | ** ** |
|-----------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                  | ** ** | **2009**                             | ** ** | **2008**                           | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                  | ** ** | ** **                           | ** ** | ** **                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Beginning of period  assets |       | $                                    | 110.9      |                               | $          | 187.6 |   | $ | 123.5 |   | $ | 206.7 |   |
| Long-term sales             |       |                                 |       |                               |       |   |   |   |   |
| Janus                       |       | 5.4                                  |       | 10.2                               |       | 9.1 |   | 18.4 |   |
| INTECH                      |       | 1.6                                  |       | 2.5                                |       | 2.5 |   | 4.3 |   |
| Perkins                     |       | 1.4                                  |       | 1.5                                |       | 2.8 |   | 2.8 |   |
| Long-term redemptions       |       |                                 |       |                               |       |   |   |   |   |
| Janus                       |       | (3.7                                 | )          | (6.3                               | )          | (8.1 | ) | (15.4 | ) |
| INTECH                      |       | (1.8                                 | )          | (2.3                               | )          | (3.2 | ) | (5.2 | ) |
| Perkins                     |       | (0.6                                 | )          | (0.6                               | )          | (1.7 | ) | (1.4 | ) |
| Long-term net flows *       |       |                                 |       |                               |       |   |   |   |   |
| Janus                       |       | 1.7                                  |       | 3.9                                |       | 1.0 |   | 3.0 |   |
| INTECH                      |       | (0.2                                 | )          | 0.2                                |       | (0.7 | ) | (0.9 | ) |
| Perkins                     |       | 0.8                                  |       | 0.9                                |       | 1.1 |   | 1.4 |   |
| Total long-term net  flows  |       | 2.3                                  |       | 5.0                                |       | 1.4 |   | 3.5 |   |
| Net money market flows      |       | (0.6                                 | )          | (0.4                               | )          | (5.9 | ) | (1.0 | ) |
| Market / fund  performance  |       | 20.0                                 |       | (0.4                               | )          | 13.6 |   | (17.4 | ) |
| End of period assets        |       | $                                    | 132.6      |                               | $          | 191.8 |   | $ | 132.6 |   | $ | 191.8 |   |

 

----

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

 

17

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| ** **                                   | ** ** | **Three months ended June 30,** | ** **  | **Six months ended June 30,** | ** ** |
|----------------------------------------------|------------|--------------------------------------|-------------|------------------------------------|------------|
| ** **                                   | ** ** | **2009**                             | ** **  | **2008**                           | ** ** | **2009** | ** ** | **2008** | ** ** |
| Long-term net flows by  distribution channel |       |                                 |        |                               |       |   |   |   |   |
| Retail intermediary                          |       | $                                    | 2.5         |                               | $          | 3.5 |   | $ | 2.0 |   | $ | 4.0 |   |
| Institutional                                |       | 0.2                                  |        | —                             |       | (0.3 | ) | (2.3 | ) |
| International                                |       | (0.4                                 | )           | 1.5                                |       | (0.3 | ) | 1.8 |   |
| Total                                        |       | $                                    |  2.3   |                               | $          | 5.0 |   | $ | 1.4 |   | $ | 3.5 |   |
|                                         |       |                                 |        |                               |       |   |   |   |   |
| Average assets under  management             |       |                                 |        |                               |       |   |   |   |   |
| Janus                                        |       | $                                    | 71.7        |                               | $          | 112.6 |   | $ | 66.4 |   | $ | 108.5 |   |
| INTECH                                       |       | 42.6                                 |        | 64.8                               |       | 40.8 |   | 63.9 |   |
| Perkins                                      |       | 10.3                                 |        | 11.0                               |       | 9.4 |   | 10.4 |   |
| Money market                                 |       | 2.1                                  |        | 11.7                               |       | 3.4 |   | 12.0 |   |
| Total                                        |       | $                                    |  126.7 |                               | $          | 200.1 |   | $ | 120.0 |   | $ | 194.8 |   |

 

***Assetsand Flows by Investment Discipline***

 

JCG, through its primarysubsidiaries, offers investment products based on a diversified set ofinvestment disciplines.  Janus offersgrowth/blend and global/international equity, as well as fixed income,alternative and money market investment products.  INTECH offers mathematical based investmentproducts and Perkins offers value disciplined investments.  Assets and flows by investment discipline areas follows *(in billions)*:

 
| ** **                  | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|-----------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                  | ** ** | **2009**                             | ** ** | **2008**                           | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Growth/Blend**            |       |                                 |       |                               |       |   |   |   |   |
| Beginning of period  assets |       | $                                    | 46.6       |                               | $          | 76.8 |   | $ | 49.5 |   | $ | 83.5 |   |
| Sales                       |       | 3.3                                  |       | 8.9                                |       | 5.7 |   | 14.8 |   |
| Redemptions                 |       | 2.6                                  |       | 4.7                                |       | 6.0 |   | 10.3 |   |
| Net sales (redemptions)     |       | 0.7                                  |       | 4.2                                |       | (0.3 | ) | 4.4 |   |
| Market / fund  performance  |       | 9.1                                  |       | 0.9                                |       | 7.2 |   | (6.0 | ) |
| End of period assets        |       | $                                    | 56.4       |                               | $          | 81.8 |   | $ | 56.4 |   | $ | 81.8 |   |
|                        |       |                                 |       |                               |       |   |   |   |   |
| **Global/International**    |       |                                 |       |                               |       |   |   |   |   |
| Beginning of period  assets |       | $                                    | 10.7       |                               | $          | 22.1 |   | $ | 10.9 |   | $ | 24.9 |   |
| Sales                       |       | 1.2                                  |       | 1.0                                |       | 1.7 |   | 2.1 |   |
| Redemptions                 |       | 0.5                                  |       | 0.9                                |       | 1.1 |   | 2.7 |   |
| Net sales (redemptions)     |       | 0.7                                  |       | 0.1                                |       | 0.6 |   | (0.6 | ) |
| Market / fund  performance  |       | 3.3                                  |       | (1.2                               | )          | 3.2 |   | (3.3 | ) |
| End of period assets        |       | $                                    | 14.7       |                               | $          | 21.0 |   | $ | 14.7 |   | $ | 21.0 |   |
|                        |       |                                 |       |                               |       |   |   |   |   |
| **Mathematical**            |       |                                 |       |                               |       |   |   |   |   |
| Beginning of period  assets |       | $                                    | 38.3       |                               | $          | 61.2 |   | $ | 42.4 |   | $ | 69.7 |   |
| Sales                       |       | 1.6                                  |       | 2.5                                |       | 2.5 |   | 4.3 |   |
| Redemptions                 |       | 1.8                                  |       | 2.3                                |       | 3.2 |   | 5.2 |   |
| Net sales (redemptions)     |       | (0.2                                 | )          | 0.2                                |       | (0.7 | ) | (0.9 | ) |
| Market / fund  performance  |       | 5.7                                  |       | —                             |       | 2.2 |   | (7.5 | ) |
| End of period assets        |       | $                                    | 43.8       |                               | $          | 61.3 |   | 43.8 |   | $ | 61.3 |   |
|                        |       |                                 |       |                               |       |   |   |   |   |
| **Fixed  Income**           |       |                                 |       |                               |       |   |   |   |   |
| Beginning of period  assets |       | $                                    | 3.7        |                               | $          | 3.8 |   | $ | 3.2 |   | $ | 4.9 |   |
| Sales                       |       | 0.9                                  |       | 0.2                                |       | 1.7 |   | 0.7 |   |
| Redemptions                 |       | 0.5                                  |       | 0.5                                |       | 0.8 |   | 2.1 |   |
| Net sales (redemptions)     |       | 0.4                                  |       | (0.2                               | )          | 0.9 |   | (1.3 | ) |
| Market / fund  performance  |       | 0.3                                  |       | —                             |       | 0.3 |   | — |   |
| End of period assets        |       | $                                    | 4.4        |                               | $          | 3.7 |   | 4.4 |   | $ | 3.7 |   |

 

18

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| ** **                  | ** ** | **Three Months Ended March 31,** | ** ** | **Six Months Ended June 30,** | ** ** |
|-----------------------------|------------|---------------------------------------|------------|------------------------------------|------------|
| ** **                  | ** ** | **2009**                              | ** ** | **2008**                           | ** ** | **2009** | ** ** | **2008** | ** ** |
|                        |       |                                  |       |                               |       |   |   |   |   |
| **Alternatives**            |       |                                  |       |                               |       |   |   |   |   |
| Beginning of period  assets |       | $                                     | 0.4        |                               | $          | 1.4 |   | $ | 0.5 |   | $ | 0.8 |   |
| Sales                       |       | —                                |       | 0.1                                |       | — |   | 0.8 |   |
| Redemptions                 |       | 0.1                                   |       | 0.2                                |       | 0.2 |   | 0.3 |   |
| Net sales (redemptions)     |       | (0.1                                  | )          | —                             |       | (0.2 | ) | 0.6 |   |
| Market / fund  performance  |       | —                                |       | (0.1                               | )          | (0.1 | ) | (0.1 | ) |
| End of period assets        |       | $                                     | 0.3        |                               | $          | 1.2 |   | 0.3 |   | $ | 1.2 |   |
|                        |       |                                  |       |                               |       |   |   |   |   |
| **Value**                   |       |                                  |       |                               |       |   |   |   |   |
| Beginning of period  assets |       | $                                     | 8.6        |                               | $          | 10.1 |   | $ | 9.1 |   | $ | 10.1 |   |
| Sales                       |       | 1.4                                   |       | 1.5                                |       | 2.8 |   | 2.8 |   |
| Redemptions                 |       | 0.6                                   |       | 0.6                                |       | 1.7 |   | 1.4 |   |
| Net sales (redemptions)     |       | 0.8                                   |       | 0.9                                |       | 1.1 |   | 1.4 |   |
| Market / fund  performance  |       | 1.6                                   |       | —                             |       | 0.8 |   | (0.5 | ) |
| End of period assets        |       | $                                     | 11.0       |                               | $          | 10.9 |   | 11.0 |   | $ | 10.9 |   |
|                        |       |                                  |       |                               |       |   |   |   |   |
| **Money  Market**           |       |                                  |       |                               |       |   |   |   |   |
| Beginning of period  assets |       | $                                     | 2.6        |                               | $          | 12.2 |   | $ | 7.9 |   | $ | 12.8 |   |
| Sales                       |       | 0.2                                   |       | 23.0                               |       | 3.2 |   | 47.9 |   |
| Redemptions                 |       | 0.8                                   |       | 23.4                               |       | 9.1 |   | 48.9 |   |
| Net sales (redemptions)     |       | (0.6                                  | )          | (0.4                               | )          | (5.9 | ) | (1.0 | ) |
| Market / fund  performance  |       | —                                |       | —                             |       | — |   | — |   |
| End of period assets        |       | $                                     | 2.0        |                               | $          | 11.8 |   | 2.0 |   | $ | 11.8 |   |

 

**Results of Investment ManagementOperations**

 

**Three Months Ended June 30,2009, Compared with Three Months Ended June 30, 2008**

 

***Revenues***

 

Investment managementfees decreased $80.0 million, or 33.4%, primarily as a result of the decreasein average assets under management.

 

Performance fee revenueis derived from certain mutual funds and separate accounts.  The $5.1 million decrease in revenue wasprimarily due to one separate account reaching its one-year anniversary in theprior year period, on which the first contractual performance fee wasrecognized for the prior 12 months. Subsequent performance fees on this account have been recognizedquarterly, consistent with a majority of separate account performance fees.

 

Shareowner servicing feesand other revenue declined $18.9 million, or 35.8%, over the comparable prioryear period primarily as a result of a decrease in transfer agent fees.  Transfer agent fees are based on averageassets under management in Janus’ retail fund series (JIF), excluding moneymarket assets, which decreased 37.8% over the comparable prior year period.

 

***Expenses***

 

Employee compensation andbenefits decreased $25.4 million, or 27.7%, principally due to lower incentivecompensation.  Investment teamcompensation decreased $9.2 million as a result of lower revenue.  The investment team compensation plan islinked to individual investment performance, but also ties the aggregate levelof compensation to revenue.  Salescommissions decreased $3.5 million due to lower sales while the annualcompany-wide bonus accrual decreased $5.5 million as a result of anticipatedlower 2009 operating results.

 

Distribution expensedecreased $12.8 million, or 33.5%, as a result of a similar decline in assetsunder management subject to third-party concessions.  Distribution fees are calculated based on acontractual percentage of the market value of assets under managementdistributed through third-party intermediaries.

 

Depreciation andamortization expenses decreased $2.7 million, or 25.2%, primarily as a resultof the amortization of deferred commissions from lower sales of JAD C shares.

 

19

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General, administrativeand occupancy expense decreased $6.0 million, or 16.0%, primarily from costreduction measures implemented in the fourth quarter 2008.

 

The income tax provisionfor the second quarter 2008 includes a $10.8 million tax benefit as a result ofapplying a lower tax rate to deferred tax assets and liabilities expected to berealized or settled on or after January 1, 2009.

 

**Six Months Ended June 30,2009, Compared with Six Months Ended June 30, 2008**

 

***Revenues***

 

Investment managementfees decreased $168.7 million, or 36.3%, primarily as a result of the decreasein average assets under management.

 

Performance fee revenuedecreased primarily as a result of lower performance fees on separate accountsas a result of a decline in short-term relative investment performance and oneseparate account reaching its one-year anniversary in the prior year.

 

Shareowner servicing feesand other revenue decreased $38.9 million, or 37.8%, primarily as a result of adecrease in transfer agent fees. Transfer agent fees are based on average assets under management inJanus’ retail fund series (JIF), excluding money market assets, which decreased40.9% over the comparable prior period.

 

***Expenses***

 

Employee compensation andbenefits decreased $55.0 million, or 30.0%, primarily from lower incentivecompensation.  Investment teamcompensation and sales commissions declined as result of lower revenues andsales, respectively.  The annualcompany-wide bonus accrual decreased as a result of anticipated lower 2009operating results.

 

Long-term incentivecompensation increased $2.8 million, or 11.4%, as a result of new awardsgranted in 2009 partially offset by the vesting of previous awards. Long-termincentive awards granted in 2009 totaled $83.0 million and will be recognizedratably over four years. Awards granted in 2009 are not subject toperformance-based acceleration.

 

Marketing and advertisingexpenses decreased $2.7 million, or 16.4%, primarily due to cost reductionmeasures implemented in the fourth quarter 2008.

 

Distribution expensedecreased $29.0 million, or 38.9%, from a similar decline in assets undermanagement subject to third-party concessions.

 

Depreciation andamortization expenses decreased $3.7 million, or 18.0%, primarily as a resultof the amortization of deferred commissions from lower sales of JAD C shares.

 

General andadministrative expenses decreased $6.6 million, or 9.3%, as a result of costreduction initiatives implemented in the fourth quarter 2008 partially offsetby the establishment of litigation reserves totaling $8.9 million during thecurrent year.

 

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

 

Net investment losses of$6.9 million for the six months ended June 30, 2008, include a $6.6million impairment charge primarily on securities classified as available forsale.

 

Mark-to-market gains ontrading securities were largely offset by losses generated by a hedgingstrategy implemented in late 2008.

 

20

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The overall decrease innoncontrolling interest is largely the result of a decline in INTECH earningsassociated with lower performance fees earned on separate accounts and loweraverage assets under management in the relevant investment products.  This was offset by an increase innoncontrolling interest in Perkins earnings which became a consolidatedsubsidiary of JCG as of December 31, 2008.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

**Cash Flows**

 

A summary of cash flowdata from continuing operations for the six-months ended June 30, 2009 and2008 is as follows *(in millions)*:

 

| ** **                               | ** ** | **2009** | ** ** | **2008** | ** ** |
|------------------------------------------|------------|----------|------------|----------|------------|
| Cash flows provided by  (used for):      |       |     |       |     |       |
| Operating activities                     |       | $        | 20.0       |     | $          | 80.7 |   |
| Investing activities                     |       | (45.2    | )          | (69.5    | )          |
| Financing activities                     |       | (38.7    | )          | (216.2   | )          |
| Net change in cash and  cash equivalents |       | (63.9    | )          | (205.0   | )          |
| Balance beginning of  period             |       | 282.6    |       | 480.7    |       |
| Balance end of period                    |       | $        | 218.7      |     | $          | 275.7 |   |

 

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

 

Cash used for investingactivities for the six months ended June 30, 2009, primarily represents$28.8 million for the purchase of noncontrolling interests in INTECH, combinedwith $9.7 million for the net purchase of investments.  Purchases and sales of investments arerelated to seed capital as well as hedging and vesting of mutual fund shareawards.  Cash used for investingactivities for the comparable prior year period includes $67.7 million for thepurchase of an additional 3% interest in INTECH.

 

Cash used for financingactivities for the six months ended June 30, 2009, primarily representsthe $22.0 million principal repayment of the Company’s 7.750% Senior Notes in June 2009combined with $7.9 million of distributions to noncontrolling interests and$6.5 million of dividends paid to shareholders. Cash used for financing activities for the comparable prior year periodprimarily represents stock buybacks of $217.8 million.

 

**Common Stock and ConvertibleSenior Notes Offerings, and Tender Offer for Certain Outstanding Senior Notes**

 

In July 2009, JCGcompleted concurrent common stock and 3.250% convertible senior notesofferings.  Proceeds, net of underwritingfees and discounts from the common stock and convertible senior notesofferings, totaled approximately $218.5 million and $164.9 million,respectively.  The combined net proceeds,together with available cash, will be used to repurchase up to $400 million ofaggregate principal amount of its outstanding 2011, 2012 and 2017 senior notesin a tender offer and for general corporate purposes, including the repaymentor repurchase of any of the foregoing series of notes that remain outstanding.

 

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

 

21

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Because the convertiblesenior notes may be wholly or partially settled in cash, the proceeds arerequired to be bifurcated into debt and equity components.  The estimated $125.7 million debt componentwas determined by discounting future contractual cash flows at a 10.0% ratewhich is consistent with the estimated market rate for similar senior noteswith no conversion option.  The debtcomponent will accrete up to the face value over the five-year expected termthrough interest expense.  The $44.3million (or $27.9 million, net of deferred taxes) equity component wasdetermined using the difference between the proceeds and the debt component.

 

The tender offer for theapplicable outstanding senior notes expires on August 11, 2009 with theearly tender period ending on July 27, 2009.  Details of the tender offer are as follows:

 
| ** **                        | ** ** | ** **                      | ** ** | ** **                            | ** **  | ** **                  | ** ** | **Dollar per $1,000 Face Amount** | ** ** |
|-----------------------------------|------------|---------------------------------|------------|---------------------------------------|-------------|-----------------------------|------------|-----------------------------------|------------|
| ** **                        | ** ** | **Acceptance  Priority  Level** | ** ** | **Aggregate  Principle  Outstanding** | ** **  | **Maximum  Tender  Amount** | ** ** | **Total  Consideration**          | ** ** | **Early  Tender  Payment** | ** ** | **Late  Tender  Payment** | ** ** |
|                              |       |                            |       |                                  |        |                        |       |                              |       |   |   |   |   |
| **5.875%  Senior Notes due 2011** |       | 1                               |       | $                                     | 275,000,000 |                        | $          | —                            |       | $ | 1,000.00 |   | $ | 40.00 |   | $ | 960.00 |   |
|                              |       |                            |       |                                  |        |                        |       |                              |       |   |   |   |   |
| **6.250%  Senior Notes due 2012** |       | 2                               |       | $                                     | 300,000,000 |                        | $          | —                            |       | $ | 980.00 |   | $ | 40.00 |   | $ | 940.00 |   |
|                              |       |                            |       |                                  |        |                        |       |                              |       |   |   |   |   |
| **6.700%  Senior Notes due 2017** |       | 3                               |       | $                                     | 450,000,000 |                        | $          | 75,000,000                        |       | $ | 900.00 |   | $ | 40.00 |   | $ | 860.00 |   |

 

*InterestRate Adjustment Covenant*

 

All of JCG’s outstandingdebt is subject to an interest rate adjustment covenant that provides that theinterest rate payable will increase by 25 basis points for each level that theCompany’s debt rating is decreased by Moody’s from its existing rating of Baa3or by S&P from its existing rating of BBB-, up to a maximum increase of 200basis points.  If at any time after theinterest has been adjusted upward, either Moody’s or S&P increases itsrating, then for each level of such increase in the rating, the interestpayable will be decreased by 25 basis points, but in no event to a rate lessthan the interest rate payable on the date of their issuance.  The interest rate adjustment covenant willpermanently terminate if the Company’s debt ratings increase to Baa2 by Moody’sand BBB by S&P (or higher), with a stable or positive outlook regardless ofany subsequent decrease in the ratings by either or both rating agencies.  On February 23, 2009, S&P loweredJCG’s credit rating to BB+, which resulted in a 25 basis point increase in theinterest rates payable on all of JCG’s outstanding debt, or approximately $2.8million of additional annual interest expense.

 

**Other Sources of Liquidity**

 

*Shelf Registration*

 

The Company has effectivea Shelf Registration Statement with the SEC, under which JCG registered theabove common stock and convertible senior notes sales.  JCG’s effective Shelf Registration allows itto register the sale of an indeterminate amount of preferred stock andadditional common stock and debt securities.

 

*Credit Facility*

 

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

 

22

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The covenants and thecalculation of the ratios, as defined in the amended Credit Facility, are asfollows *(in millions)*:

 

| ** **                                                                                 | ** ** | **Last Four**          | ** ** |
|--------------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                                 | ** ** | **Quarters Ended**     | ** ** |
| ** **                                                                                 | ** ** | **June 30, 2009** | ** ** |
|                                                                                       | ** ** | ** **             | ** ** |
| Net  income (loss)                                                                         |       | $                      | (769.1     | ) |
| Add  back:                                                                                 |       |                   |       |
| Goodwill  and intangible asset impairment charges                                          |       | 856.7                  |       |
| Interest  expense                                                                          |       | 77.4                   |       |
| Income  tax provision                                                                      |       | (12.0                  | )          |
| Depreciation  and amortization                                                             |       | 36.5                   |       |
| Non-cash  amortization of long-term incentive compensation                                 |       | 46.3                   |       |
| Unrealized  gains or losses on investments                                                 |       | 49.5                   |       |
| Other  nonrecurring cash charges                                                           |       | 14.2                   |       |
| Cash  paid for deferred commissions and mutual fund share awards                           |       | (36.8                  | )          |
| Adjusted  EBITDA                                                                           |       | $                      | 262.7      |   |
|                                                                                       |       |                   |       |
| Debt  (including capital leases and letters of credit)                                     |       | $                      | 1,113.0    |   |
|                                                                                       |       |                   |       |
| Leverage  Ratio (Debt divided by Adjusted EBITDA)                                          |       | 4.24                   |       |
| **Cannot exceed 8.00**                                                                     |       |                   |       |
|                                                                                       |       |                   |       |
| Interest  Coverage Ratio (Adjusted EBITDA divided by Last Four Quarters Interest  Expense) |       | 3.4                    |       |
| **Must equal or exceed 2.0**                                                               |       |                   |       |
|                                                                                       |       |                   |       |
| Minimum  long-term assets under management (in billions)                                   |       | $                      | 130.6      |   |
| **Must exceed $80.0 billion**                                                              |       |                   |       |

 

JCG expects to remain incompliance will all financial covenants after consideration of the issuance ofthe convertible senior notes in July 2009.

 

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

 

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

 

**Item 4.     Controls and Procedures**

 

JCG’s managementevaluated the effectiveness of the design and operation of its disclosurecontrols and procedures (as such term is defined in Rules 13a-15(e) and15d-15(e) under the Exchange Act) as of June 30, 2009.  Disclosure controls and procedures are thecontrols and other procedures that the Company designed to ensure that itrecords, processes, summarizes and reports in a timely manner the informationit must disclose in reports that it files with or submits to the SEC.  Timothy K. Armour, Chief Executive Officer,and Gregory A. Frost, Executive Vice President and Chief Financial Officer,reviewed and participated in this evaluation. Based on this evaluation, Messrs. Armour and Frost concluded thatas of the date of their evaluation, JCG’s disclosure controls and procedureswere 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 June 30, 2009, that has materially affected, or isreasonably likely to materially affect, JCG’s internal controls over financialreporting.

 

23

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**PART II — OTHER INFORMATION**

 

**Item1.     Legal Proceedings**

 

See Part I, Item 1.Financial Statements, Note 12 — Legal Proceedings.

 

**Item1A.     Risk Factors**

 

TheCompany has had no material changes in its risk factors from those previouslyreported in the Company’s Annual Report on Form 10-K for the year ended December 31,2008 and Prospectus Supplements dated July 14, 2009, to the RegistrationStatement on Form S-3 (Registration No. 333-143510).

 

**Item 2.     Unregistered Sales of Equity Securitiesand Use of Proceeds**

 

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

 

**Item 4.    Submission of Matters to a Vote of Security Holders**

 

The Annual Meeting ofStockholders of Janus Capital Group Inc. was held in Denver, Colorado, on April 30,2009.  At that meeting, the stockholdersconsidered and acted upon the following proposals:

 

*Proposal1.  The Election of Directors.* By the vote reflected below, the stockholders elected the followingindividuals as directors for three-year terms:

 
| **Director**           | ** ** | **For**     | ** ** | **Against** | ** ** | **Abstain** | ** ** |
|------------------------|------------|-------------|------------|-------------|------------|-------------|------------|
| Steven  L. Scheid      |       | 139,074,144 |       | 4,739,158   |       | 259,470     |       |
| Timothy  K. Armour     |       | 137,250,058 |       | 6,482,422   |       | 340,292     |       |
| J.  Richard Fredericks |       | 139,320,151 |       | 4,523,479   |       | 229,142     |       |
| Lawrence  E. Kochard   |       | 139,276,354 |       | 4,437,478   |       | 358,940     |       |
| Landon  H. Rowland     |       | 139,287,694 |       | 4,562,567   |       | 222,511     |       |

 

*Proposal 2.*  *Ratification of Independent Auditor. *The stockholders voted to ratify the appointment of Deloitte &Touche LLP as independent auditor. Voting was as follows:

 
| ** **  | ** ** | **For**     | ** ** | **Against** | ** ** | **Abstain** | ** ** |
|-------------|------------|-------------|------------|-------------|------------|-------------|------------|
| Proposal  2 |       | 140,325,352 |       | 3,560,154   |       | 187,266     |       |

 

24

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**Item 6.     Exhibits**

 
| 31.1   |   | Certification of  Timothy K. Armour, Chief Executive Officer of Registrant                                                                                                                                                   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                         |
| 31.2   |   | Certification of  Gregory A. Frost, Executive Vice President and Chief Financial Officer of  Registrant                                                                                                                      |
|   |   |                                                                                                                                                                                                                         |
| 32.1   |   | Certification of  Timothy K. Armour, Chief Executive Officer of Registrant, pursuant to 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002                             |
|   |   |                                                                                                                                                                                                                         |
| 32.2   |   | Certification of  Gregory A. Frost, Executive Vice President and Chief Financial Officer of  Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 |
|   |   |                                                                                                                                                                                                                         |
| 99.1   |   | Lipper Rankings                                                                                                                                                                                                              |

 

25

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

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

 

26

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**JANUSCAPITAL GROUP INC.**

**INDEX TOEXHIBITS**

 
| **Exhibit  No.** | ** ** | **Document**                                                                                                                                                                                                                 | ** ** | **Regulation S-K  Item 601(b)  Exhibit No.** |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------|
| 31.1             |       | Certification of  Timothy K. Armour, Chief Executive Officer of Registrant                                                                                                                                                   |       | 31                                                |
|             |       |                                                                                                                                                                                                                         |       |                                              |
| 31.2             |       | Certification of  Gregory A. Frost, Executive Vice President and Chief Financial Officer of  Registrant                                                                                                                      |       | 31                                                |
|             |       |                                                                                                                                                                                                                         |       |                                              |
| 32.1             |       | Certification of  Timothy K. Armour, Chief Executive Officer of Registrant, pursuant to 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002                             |       | 32                                                |
|             |       |                                                                                                                                                                                                                         |       |                                              |
| 32.2             |       | Certification of  Gregory A. Frost, Executive Vice President and Chief Financial Officer of  Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 |       | 32                                                |
|             |       |                                                                                                                                                                                                                         |       |                                              |
| 99.1             |       | Lipper Rankings                                                                                                                                                                                                              |       | 99                                                |

 

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