**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 10-Q**

** **

x**QUARTERLY REPORT PURSUANT TO SECTION 13OR 15(d)**

**OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thequarterly period ended March 31, 2008**

 

**OR**

 

o**TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d)**

**OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**for thetransition period from                 to               **

 

**CommissionFile Number 001-15253**

 

 

**Janus Capital Group Inc.**

(Exact name of registrant as specified in itscharter)

 

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

 

**(303) 333-3863**

(Registrant’s telephone number, includingarea code)

 

**Not applicable**

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

 

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

Yes x               No o

 

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

Large Accelerated Filer x               AcceleratedFiler o               Non-AcceleratedFiler o               SmallerReporting Company o

 

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

Yes o               No x

 

As of April 21, 2008,there were 162,792,889, shares of the Company’s common stock, $.01 par valueper share, issued and outstanding.

 

 

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**PART I - FINANCIAL INFORMATION**

**Item 1.  FinancialStatements**

 

**JANUS CAPITAL GROUP INC.**

** **

**CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

**(Dollars in Millions)**

 
| ** **                                      | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                      | ** ** | **2008**           | ** ** | **2007**              | ** ** |
| **ASSETS**                                      |       |               |       |                  |       |
| ** **                                      |       |               |       |                  |       |
| **Current assets:**                             |       |               |       |                  |       |
| Cash and cash equivalents                       |       | $ 270.3       |       | $ 480.7          |       |
| Marketable securities                           |       | 202.9              |       | 210.7                 |       |
| Accounts receivable                             |       | 143.2              |       | 164.5                 |       |
| Income taxes receivable                         |       | 16.3               |       | 5.9                   |       |
| Other current assets                            |       | 52.0               |       | 62.3                  |       |
| Assets related to discontinued operations       |       | 28.1               |       | 29.8                  |       |
| Total current assets                            |       | 712.8              |       | 953.9                 |       |
|                                            |       |               |       |                  |       |
| Other assets                                    |       | 124.3              |       | 112.2                 |       |
| Property and equipment, net                     |       | 46.8               |       | 46.5                  |       |
| Intangibles, net                                |       | 1,331.3            |       | 1,310.4               |       |
| Goodwill                                        |       | 1,178.8            |       | 1,141.1               |       |
|                                            |       |               |       |                  |       |
| Total assets                                    |       | $ 3,394.0     |       | $ 3,564.1        |       |
|                                            |       |               |       |                  |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**   |       |               |       |                  |       |
|                                            |       |               |       |                  |       |
| **Current liabilities:**                        |       |               |       |                  |       |
| Accounts payable                                |       | $ 3.3         |       | $ 2.2            |       |
| Accrued compensation and benefits               |       | 51.3               |       | 134.5                 |       |
| Other accrued liabilities                       |       | 69.1               |       | 79.2                  |       |
| Liabilities related to discontinued  operations |       | 11.6               |       | 10.8                  |       |
| Total current liabilities                       |       | 135.3              |       | 226.7                 |       |
|                                            |       |               |       |                  |       |
| **Other liabilities:**                          |       |               |       |                  |       |
| Long-term debt                                  |       | 1,127.8            |       | 1,127.7               |       |
| Deferred income taxes                           |       | 412.5              |       | 404.3                 |       |
| Other liabilities                               |       | 64.8               |       | 65.7                  |       |
| Total liabilities                               |       | 1,740.4            |       | 1,824.4               |       |
|                                            |       |               |       |                  |       |
| Commitments and contingencies                   |       |               |       |                  |       |
|                                            |       |               |       |                  |       |
| Minority interest                               |       | 16.5               |       | 16.2                  |       |
|                                            |       |               |       |                  |       |
| **STOCKHOLDERS’ EQUITY**                   |       |               |       |                  |       |
|                                            |       |               |       |                  |       |
| Preferred stock                                 |       | —             |       | —                |       |
| Common stock                                    |       | 1.7                |       | 1.7                   |       |
| Retained earnings                               |       | 1,630.8            |       | 1,717.0               |       |
| Accumulated other comprehensive income          |       | 4.6                |       | 4.8                   |       |
| Total stockholders’ equity                 |       | 1,637.1            |       | 1,723.5               |       |
|                                            |       |               |       |                  |       |
| Total liabilities and stockholders’ equity |       | $ 3,394.0     |       | $ 3,564.1        |       |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

1

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** JANUS CAPITAL GROUPINC.**

** **

**CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)**

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

 
| ** **                                                  | ** ** | **Three months ended** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                  | ** ** | **March 31,**               | ** ** |
| ** **                                                  | ** ** | **2008**                         | ** ** | **2007** | ** ** |
|                                                        |       |                             |       |   |   |
| **Revenues:**                                               |       |                             |       |   |   |
| Investment management fees                                  |       | $ 225.5                     |       | $ 200.9 |   |
| Performance fees                                            |       | 5.6                              |       | 2.5 |   |
| Shareowner servicing fees and other                         |       | 50.1                             |       | 44.5 |   |
| Total                                                       |       | 281.2                            |       | 247.9 |   |
|                                                        |       |                             |       |   |   |
| **Operating Expenses:**                                     |       |                             |       |   |   |
| Employee compensation and benefits                          |       | 91.8                             |       | 87.4 |   |
| Long-term incentive compensation                            |       | 12.1                             |       | 18.7 |   |
| Marketing and advertising                                   |       | 7.8                              |       | 5.1 |   |
| Distribution                                                |       | 36.3                             |       | 30.6 |   |
| Depreciation and amortization                               |       | 9.9                              |       | 7.1 |   |
| General, administrative and occupancy                       |       | 33.8                             |       | 30.1 |   |
| Total                                                       |       | 191.7                            |       | 179.0 |   |
|                                                        |       |                             |       |   |   |
| **Operating Income**                                        |       | 89.5                             |       | 68.9 |   |
|                                                        |       |                             |       |   |   |
| Interest expense                                            |       | (18.9                            | )          | (9.5 | ) |
| Investment gains (losses), net                              |       | (9.5                             | )          | 0.8 |   |
| Other income, net                                           |       | 4.2                              |       | 5.6 |   |
| Income before taxes, equity earnings and  minority interest |       | 65.3                             |       | 65.8 |   |
| Income tax provision                                        |       | (24.5                            | )          | (23.4 | ) |
| Equity in earnings of unconsolidated  affiliate             |       | 2.0                              |       | 1.7 |   |
| Minority interest in consolidated earnings                  |       | (3.8                             | )          | (6.1 | ) |
|                                                        |       |                             |       |   |   |
| Income from continuing operations                           |       | 39.0                             |       | 38.0 |   |
|                                                        |       |                             |       |   |   |
| Loss from discontinued operations                           |       | (1.6                             | )          | (2.4 | ) |
|                                                        |       |                             |       |   |   |
| **Net Income**                                              |       | $ 37.4                      |       | $ 35.6 |   |
|                                                        |       |                             |       |   |   |
| **Earnings per Share-Basic:**                               |       |                             |       |   |   |
| Income from continuing operations                           |       | $ 0.24                      |       | $ 0.20 |   |
| Loss from discontinued operations                           |       | (0.01                            | )          | (0.01 | ) |
| Net income                                                  |       | $ 0.23                      |       | $ 0.19 |   |
|                                                        |       |                             |       |   |   |
| **Earnings per Share-Diluted:**                             |       |                             |       |   |   |
| Income from continuing operations                           |       | $ 0.24                      |       | $ 0.20 |   |
| Loss from discontinued operations                           |       | (0.01                            | )          | (0.01 | ) |
| Net income                                                  |       | $ 0.23                      |       | $ 0.19 |   |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

2

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**JANUS CAPITAL GROUP INC.**

** **

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

**(Dollars in Millions)**

 
| ** **                                                   | ** ** | **Three months ended** | ** ** |
|--------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                   | ** ** | **March 31,**               | ** ** |
| ** **                                                   | ** ** | **2008**                         | ** ** | **2007** | ** ** |
| **CASH FLOWS PROVIDED BY (USED FOR):**                       |       |                             |       |   |   |
| **Continuing Operations**                                    |       |                             |       |   |   |
| **Operating Activities:**                                    |       |                             |       |   |   |
| Net income from continuing operations                        |       | $ 39.0                      |       | $ 38.0 |   |
| Adjustments to net income:                                   |       |                             |       |   |   |
| Depreciation and amortization                                |       | 9.9                              |       | 7.1 |   |
| Deferred income taxes                                        |       | 10.9                             |       | 19.0 |   |
| Minority interest in consolidated earnings                   |       | 3.8                              |       | 6.1 |   |
| Amortization of stock-based compensation                     |       | 8.6                              |       | 14.7 |   |
| Investment gains (losses), net                               |       | 9.4                              |       | (0.4 | ) |
| Payment of deferred commissions, net                         |       | (1.8                             | )          | (7.7 | ) |
| Other, net                                                   |       | 0.1                              |       | 0.2 |   |
| Changes in working capital items:                            |       |                             |       |   |   |
| Accounts receivable                                          |       | 21.3                             |       | (27.4 | ) |
| Other current assets                                         |       | —                           |       | 0.7 |   |
| Accounts payable and accrued compensation  payable           |       | (81.4                            | )          | (50.3 | ) |
| Other accrued liabilities                                    |       | (17.9                            | )          | (19.3 | ) |
| Net operating                                                |       | 1.9                              |       | (19.3 | ) |
|                                                         |       |                             |       |   |   |
| **Investing Activities:**                                    |       |                             |       |   |   |
| Purchase of property and equipment                           |       | (4.2                             | )          | (5.9 | ) |
| Acquisitions of INTECH                                       |       | (60.7                            | )          | (81.0 | ) |
| Purchase of marketable securities                            |       | (47.4                            | )          | (48.3 | ) |
| Proceeds from sales and maturities of  marketable securities |       | 35.9                             |       | 114.4 |   |
| Net investing                                                |       | (76.4                            | )          | (20.8 | ) |
|                                                         |       |                             |       |   |   |
| **Financing Activities:**                                    |       |                             |       |   |   |
| Proceeds from stock plans                                    |       | 7.5                              |       | 15.6 |   |
| Excess tax benefit from equity-based  compensation           |       | 3.2                              |       | 2.8 |   |
| Repurchase of common stock                                   |       | (142.5                           | )          | (214.4 | ) |
| Distributions to minority interest                           |       | (4.1                             | )          | (12.9 | ) |
| Net financing                                                |       | (135.9                           | )          | (208.9 | ) |
|                                                         |       |                             |       |   |   |
| **Cash and Cash Equivalents:**                               |       |                             |       |   |   |
| Net decrease                                                 |       | (210.4                           | )          | (249.0 | ) |
| At beginning of period                                       |       | 480.7                            |       | 507.1 |   |
| At end of period                                             |       | $ 270.3                     |       | $ 258.1 |   |
|                                                         |       |                             |       |   |   |
| **Discontinued Operations:**                                 |       |                             |       |   |   |
| Operating activities                                         |       | $ (0.6                      | )          | $ 1.2 |   |
| Investing activities                                         |       | (0.2                             | )          | (0.7 | ) |
| Net increase (decrease)                                      |       | (0.8                             | )          | 0.5 |   |
| Cash at beginning of period                                  |       | 4.3                              |       | 52.6 |   |
| Cash at end of period                                        |       | $ 3.5                       |       | $ 53.1 |   |
|                                                         |       |                             |       |   |   |
| **Supplemental Cash Flow Information:**                      |       |                             |       |   |   |
| Cash paid for interest                                       |       | $ 8.1                       |       | $ 11.1 |   |
| Cash paid for income taxes                                   |       | $ 19.6                      |       | $ 8.9 |   |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

3

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**JANUS CAPITAL GROUP INC.**

** **

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

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

 
| ** **                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | **Accumulated**   | ** ** | ** **             | ** ** |
|------------------------------------------------------|------------|------------|------------|------------|------------|----------------|------------|-------------------|------------|------------------------|------------|
| ** **                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | **Other**         | ** ** | **Total**              | ** ** |
| ** **                                           | ** ** | ** ** | ** ** | **Common** | ** ** | **Retained**   | ** ** | **Comprehensive** | ** ** | **Stockholders’** | ** ** |
| ** **                                           | ** ** | **Shares** | ** ** | **Stock**  | ** ** | **Earnings**   | ** ** | **Income**        | ** ** | **Equity**             | ** ** |
|                                                 |       |       |       |       |       |           |       |              |       |                   |       |
| **Balance at December 31, 2006**                     |       | 193.5      |       | $ 1.9 |       | $ 2,293.4 |       | $ 11.1       |       | $ 2,306.4         |       |
|                                                 |       |       |       |       |       |           |       |              |       |                   |       |
| Cumulative-effect adjustment for the                 |       |       |       |       |       |           |       |              |       |                   |       |
| adoption of a new accounting principle               |       |       |       |       |       | 29.9           |       |              |       | 29.9                   |       |
| Net income                                           |       |       |       |       |       | 116.3          |       |              |       | 116.3                  |       |
| Net unrealized gain on marketable  securities        |       |       |       |       |       |           |       | 5.2               |       | 5.2                    |       |
| Amortization of net loss on cash flow hedge          |       |       |       |       |       |           |       | 0.4               |       | 0.4                    |       |
| Reclassification for gains included in net  income   |       |       |       |       |       |           |       | (12.8             | )          | (12.8                  | )          |
| Foreign currency translation adjustment              |       |       |       |       |       |           |       | 0.9               |       | 0.9                    |       |
| *Comprehensive income*                               |       |       |       |       |       |           |       |              |       | 110.0                  |       |
| Amortization of stock-based compensation             |       |       |       |       |       | 50.1           |       |              |       | 50.1                   |       |
| Issuance and forfeitures of restricted  stock awards |       | 0.9        |       |       |       |           |       |              |       | —                 |       |
| Tax impact of stock-based compensation               |       |       |       |       |       | 6.7            |       |              |       | 6.7                    |       |
| Stock option exercises                               |       | 4.2        |       |       |       | 73.2           |       |              |       | 73.2                   |       |
| Common stock repurchased                             |       | (32.3      | )          | (0.2       | )          | (845.4         | )          |              |       | (845.6                 | )          |
| Common stock dividends ($0.04 per share)             |       |       |       |       |       | (7.2           | )          |              |       | (7.2                   | )          |
| **Balance at December 31, 2007**                     |       | 166.3      |       | 1.7        |       | 1,717.0        |       | 4.8               |       | 1,723.5                |       |
| ** **                                           |       |       |       |       |       |           |       |              |       |                   |       |
| Net income                                           |       |       |       |       |       | 37.4           |       |              |       | 37.4                   |       |
| Net unrealized loss on marketable  securities        |       |       |       |       |       |           |       | (0.8              | )          | (0.8                   | )          |
| Amortization of net loss on cash flow hedge          |       |       |       |       |       |           |       | 0.1               |       | 0.1                    |       |
| Foreign currency translation adjustment              |       |       |       |       |       |           |       | 0.5               |       | 0.5                    |       |
| *Comprehensive income*                               |       |       |       |       |       |           |       |              |       | 37.2                   |       |
| Amortization of stock-based compensation             |       |       |       |       |       | 8.4            |       |              |       | 8.4                    |       |
| Issuance and forfeitures of restricted  stock awards |       | 1.5        |       |       |       |           |       |              |       | —                 |       |
| Tax impact of stock-based compensation               |       |       |       |       |       | 3.0            |       |              |       | 3.0                    |       |
| Stock option exercises                               |       | 0.4        |       |       |       | 7.5            |       |              |       | 7.5                    |       |
| Common stock repurchased                             |       | (5.5       | )          |       |       | (142.5         | )          |              |       | (142.5                 | )          |
| **Balance at March 31, 2008**                        |       | 162.7      |       | $ 1.7 |       | $ 1,630.8 |       | $ 4.6        |       | $ 1,637.1         |       |

 
|  The accompanying notes are an integral part  of these consolidated financial statements. |   |   |   |   |
|------------------------------------------------------------------------------------------------|--------|--------|--------|--------|

 

4

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**JANUSCAPITAL GROUP INC.**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

***(Unaudited)***

 

**Note 1 –Basis of Presentation**

 

Inthe opinion of Janus Capital Group Inc. (collectively, “Janus” or the “Company”)management, the accompanying unaudited interim consolidated financialstatements contain all adjustments necessary to fairly present the financialposition, results of operations and cash flows of the Company in accordancewith accounting principles generally accepted in the United States of America (“GAAP”).  Such interim financial statements have beenprepared in accordance with the instructions to Form 10-Q pursuant to the rules andregulations of the Securities and Exchange Commission (“SEC”).  Certain information and footnote disclosuresnormally included in financial statements prepared in accordance with GAAP havebeen condensed or omitted pursuant to such rules and regulations.  These consolidated financial statementsshould be read in conjunction with the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2007.

 

Theaccompanying consolidated financial statements have been prepared on aconsistent basis with the accounting policies described in Note 2 to theconsolidated financial statements that are presented in the Company’s AnnualReport on Form 10-K for the year ended December 31, 2007.

 

**Note 2 –Recent Accounting Pronouncements**

 

In December 2007,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standard No. 141 (revised 2007), “Business Combinations” (“SFAS141R”), which establishes principles and requirements for how an acquirer recognizesand measures the identifiable assets acquired, the liabilities assumed and anynoncontrolling interest in an acquiree, including the recognition andmeasurement of goodwill acquired in a business combination.  The effective date of SFAS 141R is the Company’sfiscal year beginning January 1, 2009. Janus has not yet completed an assessment of the impact of SFAS 141R.

 

In December 2007,the FASB issued Statement of Financial Accounting Standard No. 160, “NoncontrollingInterests in Consolidated Financial Statements, an amendment of AccountingResearch Bulletin No. 51” (“SFAS 160”), which establishes accounting andreporting standards for the noncontrolling interest in a subsidiary, andrequires noncontrolling interests to be classified as a component of equity inthe consolidated financial statements. The effective date of SFAS 160 is the Company’s fiscal year beginning January 1,2009.  Janus has not yet completed anassessment of the impact of SFAS 160.

 

In March 2008, theFASB issued Statement of Financial Accounting Standard No. 161, “Disclosuresabout Derivative Instruments and Hedging Activities, an amendment of FASBStatement No. 133” (“SFAS 161”), which requires enhanced disclosures aboutan entity’s derivative and hedging activities. The effective date of SFAS 161 is the Company’s fiscal year beginning January 1,2009.  Janus has not yet completed anassessment of the impact of SFAS 161.

 

5

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**Note 3 – Earnings PerShare**

 

Basic earnings per commonshare is calculated by dividing net income by the weighted average number ofcommon shares outstanding during the period. Diluted earnings per common share adjusts the weighted average sharesoutstanding by the dilutive impact of shares underlying stock options andunvested restricted stock awards.  Thefollowing is a summary of the earnings per share calculation *(in millions, except per share data)*:

 
| ** **                                                                                      | ** ** | **Three months ended** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                      | ** ** | **March 31,**               | ** ** |
| ** **                                                                                      | ** ** | **2008**                         | ** ** | **2007** | ** ** |
| Income from continuing operations                                                               |       | $ 39.0                      |       | $ 38.0 |   |
| Loss from discontinued operations                                                               |       | (1.6                             | )          | (2.4 | ) |
|                                                                                            |       |                             |       |   |   |
| **Net income**                                                                                  |       | $ 37.4                      |       | $ 35.6 |   |
|                                                                                            |       |                             |       |   |   |
| **Basic earnings per share**                                                                    |       |                             |       |   |   |
| Weighted average common shares outstanding                                                      |       | 162.5                            |       | 187.3 |   |
| Income from continuing operations                                                               |       | $ 0.24                      |       | $ 0.20 |   |
| Loss from discontinued operations                                                               |       | (0.01                            | )          | (0.01 | ) |
|                                                                                            |       |                             |       |   |   |
| Basic earnings per share                                                                        |       | $ 0.23                      |       | $ 0.19 |   |
|                                                                                            |       |                             |       |   |   |
| **Diluted earnings per share**                                                                  |       |                             |       |   |   |
| Weighted average common shares outstanding                                                      |       | 162.5                            |       | 187.3 |   |
| Dilutive effect of stock options and  unvested restricted stock using the treasury stock method |       | 1.5                              |       | 1.3 |   |
| Weighted average diluted common shares  outstanding                                             |       | 164.0                            |       | 188.6 |   |
| Income from continuing operations                                                               |       | $ 0.24                      |       | $ 0.20 |   |
| Loss from discontinued operations                                                               |       | (0.01                            | )          | (0.01 | ) |
|                                                                                            |       |                             |       |   |   |
| Diluted earnings per share                                                                      |       | $ 0.23                      |       | $ 0.19 |   |

 

The following stock options and unvested restrictedstock are anti-dilutive and have not been included in the weighted averagediluted shares outstanding calculation *(in millions)*:

 
| ** **                | ** ** | **Three months ended** | ** ** |
|---------------------------|------------|----------------------------------|------------|
| ** **                | ** ** | **March 31,**               | ** ** |
| ** **                | ** ** | **2008**                         | ** ** | **2007** | ** ** |
| Stock options             |       | 5.6                              |       | 6.3 |   |
| Unvested restricted stock |       | 1.2                              |       | — |   |

 

**Note 4 – Acquisition**

 

Each fiscal year through2012, each of the two founding members of Enhanced Investment Technologies, LLC(“INTECH”) has the option to require Janus to purchase up to approximately 1.5%of INTECH shares at the fair market value of such shares.  On March 31, 2008, the two INTECHfounding members exercised their right and Janus increased its ownership ofINTECH to approximately 89.5% with the purchase of an additional 3% ownershipinterest for $60.7 million in cash.  Thepro forma results of operations have not been presented as they would not havebeen materially different from reported amounts.** **The preliminary purchase priceallocation resulted in the recognition of $23.7 million of intangible assetsand $37.0 million of goodwill. Intangible assets represent customer relationships and are preliminarilybeing amortized over 12 years.

 

6

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**Note 5 – DiscontinuedOperations**

 

Duringthe third quarter 2007, Janus initiated a plan to dispose of its Printing andFulfillment operations, represented by Rapid Solutions Group (“RSG”), as aresult of difficulty in growing the business and Janus’ desire to focus on itscore investment management business.

 

RSGprovides clients with digital and offset printing services.  The digital print operations focus onproviding clients with communication solutions using leading-edgeprint-on-demand technology and software applications that support the processof improving the effectiveness of customer communication throughpersonalization and customization.  Theoffset printing operations provide customers with full-service graphics anddesign solutions through prepress services and high-speed, high-quality offsetprinting, including direct marketing packages, brochures, preprinted base stockand collateral pieces.

 

OnApril 9, 2008, the digital print operations of RSG, representing themajority of RSG’s assets, were sold to Bowne & Co., Inc. for $14.5million.  The disposition of RSG’sdigital and offset operations is not expected to have a material impact onJanus’ 2008 results of operations or financial condition.

 

**Note 6 –Adoption of New Accounting Principle**

 

Janusadopted the provisions of Statement of Financial Accounting Standard No. 157,“Fair Value Measurements” (“SFAS 157”), on January 1, 2008.  SFAS 157 defines fair value as the price thatwould be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date.  SFAS 157 also establishes a framework formeasuring fair value and a valuation hierarchy based upon the transparency ofinputs used in the valuation of an asset or liability.  Classification within the hierarchy is basedupon the lowest level of input that is significant to the fair valuemeasurement. The valuation hierarchy contains three levels:

 

·                  Level1 – Valuation inputs are unadjusted quoted market prices for identical assetsor liabilities in active markets.

·                  Level2 – Valuation inputs are quoted prices for identical assets or liabilities inmarkets that are not active,   quotedmarket prices for similar assets and liabilities in active markets and otherobservable inputs directly or indirectly related to the asset or liabilitybeing measured.

·                  Level3 – Valuation inputs are unobservable and significant to the fair valuemeasurement.

 

Janus’fair value measurements relate to marketable securities, purchase priceallocations associated with business acquisitions and impairment testing oftangible and intangible assets. Marketable securities consist primarily of exchange-traded equity anddebt securities underlying separate accounts and consolidated mutual funds, andmutual fund securities with quoted prices in active markets.  Accordingly, the fair value measurements ofthese securities have been classified as level 1.

 

Alsoincluded in marketable securities are securities issued by Stanfield VictoriaFunding LLC (“Stanfield securities”), a structured investment vehicle thatpurchased high grade medium- and long-term fixed-income instruments financed byissuing low-cost, short-term senior debt instruments such as asset-backedcommercial paper and asset-backed medium-term notes.  Due to illiquidity in the commercial paperand capital markets, there are currently no active markets for the Stanfieldsecurities.  To measure fair value, Janusundertook a detailed analysis of the assets underlying the Stanfield securitiesand benchmarked those assets against instruments of a similar type withcomparable yields, maturities and credit ratings for which quoted market pricesare readily available.  Discounts havebeen applied to the quoted market prices of the benchmark instruments to adjustfor varying yields, credit ratings or other distinguishingcharacteristics.  The valuationmethodology for the Stanfield securities has been consistently applied.  Because of the significance of the discounts,the fair value measurement of the Stanfield securities has been classified aslevel 3.

 

7

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The following table presentsthe marketable securities carried at fair value as of March 31, 2008 *(in millions)*:

 
| ** **                               | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
|------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| Trading securities                       |       | $ 96.7      |       | $ —    |       | $ —    |       |
|                                     |       |             |       |             |       |             |       |
| Available-for-sale securities            |       |             |       |             |       |             |       |
| Investments in advised funds             |       | 15.9             |       | —           |       | —           |       |
| Structured investment vehicle securities |       | —           |       | —           |       | 90.3             |       |
|                                     |       |             |       |             |       |             |       |
| Other assets                             |       |             |       |             |       |             |       |
| Mutual fund unit award hedge asset       |       | 49.5             |       | —           |       | —           |       |
| Deferred compensation hedge asset        |       | 8.1              |       | —           |       | —           |       |
|                                     |       |             |       |             |       |             |       |
| Total assets at fair value               |       | $ 170.2     |       | $ —    |       | $ 90.3      |       |

 

Janusmeasured the fair value of the Stanfield securities as of March 31, 2008,and determined that the valuation was consistent with the previously reportedamount of $90.3 million as of December 31, 2007.  There were no other securities classified aslevel 3 during the three months ended March 31, 2008.

 

OnFebruary 8, 2008, the FASB issued Staff Position 157-2, “Effective Date ofFASB 157” (“FSP 157-2”) which deferred the provisions of SFAS 157 to annualperiods beginning after November 15, 2008 for non-financial assets andliabilities.  Non-financial assetsinclude fair value measurements associated with business acquisitions andimpairment testing of tangible and intangible assets.

 

**Note 7 –Seed Capital Investments**

 

Janusperiodically adds new investment strategies to its mutual fund, separateaccount and subadvised relationship (collectively referred to herein as “investmentproducts”) offerings by seeding investment products.  Seeded investment products are initiallyconsolidated and the individual securities within the portfolio are accountedfor as trading securities.  Janus willconsolidate such investment products as long as it holds a controlling interest,defined as greater than 50% ownership. Upon deconsolidation, Janus accounts for its investments asavailable-for-sale securities.

 

Investmentsin seed capital are classified as follows:

 

***Trading Securities***

 

AtMarch 31, 2008, seed capital investments classified as trading totaled$96.7 million.  Trading securitiesare carried in Janus’ consolidated financial statements at fair market value,with changes in value recognized as gains and losses currently in earnings.

 

***Available-for-Sale Securities***

 

AtMarch 31, 2008, seed capital investments classified as available-for-saletotaled $15.9 million. Available-for-sale securities are carried in Janus’ consolidatedfinancial statements at fair market value, with changes in value recognized asgains and losses in other comprehensive income. Accumulated gains and losses are reclassified to earnings when thesecurities are sold.

 

**Note 8 – Long-TermIncentive Compensation**

 

Janus generally grantsannual long-term incentive awards in February of each year.  Janus granted $79.4 million in long-termincentive awards during the first quarter 2008, which will generally berecognized ratably over a three-year period. The 2008 awards consisted of $25.1 million of restricted stock (0.9million shares at a weighted average price of $27.60 per share), $20.5 millionof stock options and $33.8 million of mutual fund units.

 

Atotal of 2.1 million options with a grant date fair value of $10.02 per optionwere awarded as part of the first quarter 2008 grants.  The grant date fair value of stock optionswas determined using the Black-Scholes model with the following assumptions:expected volatility of 32%, dividend yield of 0.13%, risk-free interest rate of2.81% and an expected life of five years.

 

Inaddition, retention grants were awarded to certain Janus investment teammembers to facilitate succession planning and incentivize key personnel toremain with the Company.  The Janusinvestment team retention grant totaled $21.0 million (0.7 million shares ofrestricted stock at $28.83 per share).

 

8

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**Note 9 – Other Income, Net**

 

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

 
| ** **      | ** ** | **Three months ended**

**March 31,** | ** ** |
|-----------------|------------|------------------------------------------------------|------------|
| ** **      | ** ** | ** **                                           |
| ** **      | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| Dividend income |       | $ 0.7                                           |       | $ 2.6 |   |
| Interest income |       | 2.5                                                  |       | 3.0 |   |
| Other, net      |       | 1.0                                                  |       | — |   |
| Total           |       | $ 4.2                                           |       | $ 5.6 |   |

 

 

**Note 10 – Legal Proceedings**

 

Janus 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 Janus’consolidated financial condition. However, an adverse outcome in any of theactions could have a material adverse effect on the Company’s financial resultsin the period in which it is recorded. As of March 31, 2008, Janus had nolitigation reserves as management believes that the remaining claims made inthe civil actions described below have little or no merit and intends to defendagainst them.

 

***Market Timing Litigation***

 

Following themarket timing investigations by the New York Attorney General (“NYAG”) and theSEC, Janus and certain affiliates were named as defendants in a consolidated lawsuitin the U.S. District Court in Baltimore, Maryland (*Case No. MDLNo. 1586, 04-MD-15863*). Five amended complaints were filed in these coordinated proceedings,including: (i) claims by a putative class of Janus fund investorsasserting claims on behalf of the investor class (*Marini, etal. v. Janus Investment Fund, et al., U.S. District Court, District ofMaryland, 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 Janus 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*); (iv) claimsbrought on behalf of shareholders of Janus on a derivative basis against Janus’Board of Directors (*Chasen v. Whiston, et al.,U.S. District Court, District of Maryland, Case No. 04-MD-00855*);and (v) claims by a putative class of Janus shareholders asserting claimson behalf of the shareholders (*Wiggins, et al. v. JanusCapital Group Inc., et al.*, *U.S. District Court,District of Maryland, Case No. 04-CV-00818).*

 

InAugust 2005, the U.S. District Court entered orders dismissing most of theclaims asserted against the Company and its affiliates by fund investors in the*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.  The U.S.District Court also entered an order dismissing all claims in the *Wiggins* lawsuit. Plaintiffs have appealed that dismissal to the U.S. Court of Appeals forthe Fourth Circuit.  That appeal iscurrently pending.  In August 2006,the U.S. District Court in the *Wangberger* 401(k) planclass action dismissed the action with prejudice, and the plaintiff appealedthe dismissal to the U.S. Court of Appeals for the Fourth Circuit.  That appeal is still pending.  Finally, the U.S. District Court alsodismissed the *Chasen* lawsuit against Janus’Board of Directors without leave to amend, ruling that the plaintiff had failedto make a pre-suit demand on the Board of Directors as required by applicablestate law. The time to appeal this dismissal has expired.  As a result of the above events, the Companyand Janus Capital Management LLC are the remaining defendants, in somecapacity, in one or more of the actions 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 Janus) 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, Janus filed itsanswer to the Auditor’s summary order instituting proceedings, and requested ahearing.  A hearing was held in June 2007during which the parties were ordered to submit a scheduling order.  In addition to the currently pending Motionto Discharge Order to Show Cause, Janus continues to challenge the statutoryauthority of the Auditor to bring such an action.

 

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***MiscellaneousProceedings***

 

During 2007, two former portfoliomanagers filed suit against a Janus subsidiary, alleging that it implementedcertain changes to their compensation arrangements in violation of prioragreements *(Edward Keely v. Janus Management HoldingsCorporation, Denver District Court, Case No. 2007 CV 7366* and *Tom Malley v. Janus Management Holdings Corporation, Denver DistrictCourt, Case No. 2007 CV 10719)*. Janus answered the complaints, denying any liability and challenging themerits of Mr. Keely’s and Mr. Malley’s allegations.  Trial for the suit brought by Mr. Keelyis scheduled for October 2008.  Atrial date for the suit brought by Mr. Malley has not yet been scheduled.

 

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**Item 2.    Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

 

**FORWARD-LOOKINGSTATEMENTS**

 

*ThisQuarterly Report on Form 10-Q contains “forward-looking statements” withinthe meaning of the Private Securities Litigation Reform Act of 1995.  In addition, Janus Capital Group Inc.(collectively, “Janus” or the “Company”) may make other written and oralcommunications from time to time that contain such statements.  Forward-looking statements include statementsas to industry trends and future expectations of the Company and other mattersthat do not relate strictly to historical facts and are based on certainassumptions by management.  Thesestatements are often identified by the use of words such as “may,” “will,” “expect,”“believe,” “anticipate,” “intend,” “could,” “should,” “estimate” or “continue,”and similar expressions or variations. These statements are based on the beliefs and assumptions of the Companymanagement based on information currently available to management.  Such forward-looking statements are subjectto risks, uncertainties and other factors that could cause actual results todiffer materially from future results expressed or implied by suchforward-looking statements. Important factors that could cause actual resultsto differ materially from the forward-looking statements include, among others,the risks described in the Company’s filings with the Securities and ExchangeCommission, including those in Part I, Item 1A, Risk Factors, andelsewhere in Janus’ Annual Report on Form 10-K for the year ended December 31,2007.   Janus cautions readers tocarefully consider such factors. Furthermore, such forward-looking statements speak only as of the dateon which such statements are made. Except as required by applicable law, Janus undertakes no obligation toupdate any forward-looking statements to reflect events or circumstances afterthe date of such statements.*

 

**AVAILABLEINFORMATION**

 

Copiesof Janus Capital Group Inc.’s (collectively, “Janus” or the “Company”) filingswith the Securities and Exchange Commission (“SEC”) can be obtained from theSEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C.20549.  Information can be obtained aboutthe operation 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.

 

Janusmakes available free of charge its annual reports on Form 10-K, quarterlyreports on Form 10-Q and current reports on Form 8-K and amendmentsthereto as soon as reasonably practical after such filing has been made withthe SEC.  Reports may be obtained throughthe Investor Relations section of Janus’ website (http://ir.janus.com) or bycontacting Janus at (888) 834-2536. The contents of Janus’ website are not incorporated herein for anypurpose.

 

Janus’Officer Code of Ethics for Principal Executive Officer and Senior FinancialOfficers (including its chief executive officer, chief financial officer andcontroller) (the “Officer Code”); Corporate Code of Business Conduct and Ethicsfor all employees; corporate governance guidelines; and the charters of keycommittees of the Board of Directors (including the Audit, Compensation, andNominating and Corporate Governance committees) are available on its website(http://ir.janus.com/governance.cfm), and printed copies are available to anyshareholder upon request by calling Janus at (888) 834-2536.  Any futureamendments to or waivers of the Officer Code will be posted to the InvestorRelations section of Janus’ website.

 

**RESULTSOF OPERATIONS**

** **

**Overview**

Janusprovides investment management and administrative services to mutual funds, separateaccounts and institutional clients in both domestic and international marketsthrough its primary subsidiaries, Janus Capital Management LLC (“Janusex-INTECH”) and Enhanced Investment Technologies, LLC (“INTECH”).

 

Revenuesare generally based upon a percentage of the market value of assets undermanagement and are calculated as a percentage of the daily average assetbalance in accordance with contractual agreements with the Company’s mutualfunds, separate accounts and subadvised relationships (collectively referred toherein as “investment products”). Certain investment products are also subject to performance fees thatvary based on their relative performance as compared to a benchmark index andthe level of assets subject to such fees. Assets under management primarily consist of domestic and internationalequity and debt securities.  Accordingly,fluctuations in the financial markets, relative investment performance, salesand redemptions of investment products, and changes in the composition ofassets under management are all factors that have a direct effect on Janus’operating results.

 

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**INVESTMENTMANAGEMENT OPERATIONS (CONTINUING OPERATIONS)**

 

Highlightsfor the current quarter include:

 

·                  Relativeinvestment performance remained strong with approximately 86%, 85% and 87% ofJanus’ mutual funds in the top half of their Lipper categories on a one-,three- and five-year total return basis, respectively, as of March 31,2008

·                  Netincome from continuing operations was $39.0 million, or $0.24 per dilutedshare.

·                  Operatingmargin totaled 31.8%.

·                  Acquiredan additional 3% interest in INTECH for $60.7 million on March 31, 2008.

·                  Repurchased5.5 million shares of Janus common stock at a total price of $142.5 million.

 

**AssetsUnder Management and Flows**

 
| ** **                      | ** ** | **Three months ended March 31,** | ** ** |
|---------------------------------|------------|------------------------------------------------------|------------|
| ** **                      | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| ** **                      | ** ** | **(in billions)**                               | ** ** |
|                            |       |                                                 |       |   |   |
| Beginning of period assets      |       | $ 206.7                                         |       | $ 167.7 |   |
| Long-term sales                 |       |                                                 |       |   |   |
| Janus ex-INTECH                 |       | 9.5                                                  |       | 7.1 |   |
| INTECH                          |       | 1.8                                                  |       | 5.0 |   |
| Long-term redemptions           |       |                                                 |       |   |   |
| Janus ex-INTECH                 |       | (9.9                                                 | )          | (7.1 | ) |
| INTECH                          |       | (2.9                                                 | )          | (1.9 | ) |
| Long-term net flows *           |       |                                                 |       |   |   |
| Janus ex-INTECH                 |       | (0.4                                                 | )          | — |   |
| INTECH                          |       | (1.1                                                 | )          | 3.1 |   |
| Total long-term net flows       |       | (1.5                                                 | )          | 3.1 |   |
| Net money market flows          |       | (0.6                                                 | )          | 1.5 |   |
| Market / fund performance       |       | (17.0                                                | )          | 3.9 |   |
| End of period assets            |       | $ 187.6                                         |       | $ 176.2 |   |
|                            |       |                                                 |       |   |   |
| Average assets under management |       |                                                 |       |   |   |
| Janus ex-INTECH                 |       | $ 114.2                                         |       | $ 99.4 |   |
| INTECH                          |       | 63.1                                                 |       | 64.2 |   |
| Money Market                    |       | 12.4                                                 |       | 8.5 |   |
| Total                           |       | $ 189.7                                         |       | $ 172.1 |   |

 

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*    Excludes money marketflows.  Sales and redemptions of moneymarket funds are presented net on a separate line due to the short-term natureof the investments.

 

Totalaverage assets under management increased $17.6 billion, or 10.2%, for thethree-month period ended March 31, 2008, as compared to the same period in2007.  The increase in average assetsunder management is a result of positive long-term net flows and marketappreciation/ fund performance in the last three quarters of 2007, partiallyoffset by market depreciation in the first quarter 2008 due to challengingmarket conditions.

 

Janusex-INTECH sales improved 33.8% over the comparable prior year period fromhigher sales through the retail intermediary channel as a result of expansionefforts over the last several years and strong relative investmentperformance.  Redemptions increased inthe first quarter 2008 largely as a result of a $1.1 billion fixed incomemandate redemption combined with recent volatility in the equity markets,resulting in a slight decline in net long-term flows.

 

INTECH’ssales and redemptions have been impacted by the relative underperformance ofcertain key investment strategies during the first quarter 2008 and most of2007 as well as clients rebalancing their portfolios.  Despite the recent 

 

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relativeunderperformance, INTECH’s long-term performance remains strong, with 46%, 44%,100% and 100% of all product strategies with at least a 1-, 3-, 5- and 10-yearperformance track record, respectively, outperforming their respectivebenchmarks during each of those periods ended March 31, 2008.

 

**Results of InvestmentManagement Operations**

 

##### ***ThreeMonths Ended March 31, 2008, Compared with Three Months Ended March 31,2007***

##### *** ***

***Revenues***

 

Investment management feesincreased $24.6 million, or 12.2%, primarily as a result of the 10.2% increasein average assets under management. Revenue increased at a slightly higher rate than average assets undermanagement as a result of increased average assets in higher yielding Janusex-INTECH products.

 

Performancefee revenue is derived from certain mutual funds and INTECH privateaccounts.  The increase in performancefee revenue was primarily due to performance fees of $5.0 million earned onmutual funds, partially offset by a decrease of $1.7 million of fees on INTECHprivate accounts as a result of recent relative underperformance.

 

Shareownerservicing fees and other revenue improved $5.6 million over the comparableprior year period primarily as a result of an increase in transfer agentfees.  Transfer agent fees are based onaverage assets under management in Janus’ retail fund series (Janus InvestmentFund), excluding money market assets, which increased 9.1% over the comparableperiod in the prior year.

 

***Expenses***

 

Employeecompensation and benefits increased from the same period last year, principallydue to growth in the number of employees and higher investment teamcompensation as a result of strong investment performance and higher managementfee revenue.  The investment teamcompensation plan is linked to individual performance, but also ties theaggregate level of compensation to investment management fee revenue.  These increases were partially offset byseverance charges incurred in the first quarter 2007.

 

Long-termincentive compensation declined $6.6 million primarily due to the final vestingof the 2002 restricted stock grant in the first quarter 2007.

 

Marketingand advertising expenses increased $2.7 million due to higher print advertisingexpenses in the current period associated with the continued promotion andawareness of the Janus brand.

 

Distributionexpense increased $5.7 million, or 18.6%, from a similar increase 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 and are primarily related toJanus ex-INTECH investment products.

 

Depreciationand amortization expenses increased $2.8 million primarily as a result of theamortization of deferred commissions from higher sales of B shares of Janus’international fund series, Janus Capital Funds Plc, and the amortization ofintangibles related to the February 2007 acquisition of an additional 4%interest in INTECH.

 

Interestexpense increased $9.4 million as a result of the issuance of additional debtin June 2007.

 

Netinvestment losses of $9.5 million for the three months ended March 31,2008, were driven primarily by mark-to-market adjustments on consolidatedinvestment products.  Mutual funds andseparate accounts in which Janus owns a majority interest are consolidated,with changes in market value reported in current period earnings.  Future earnings will be impacted byfluctuations in the fair value measurements and amount of consolidatedinvestments.

 

Minorityinterest in consolidated earnings consists of INTECH earnings and netinvestment losses attributable to the minority interests in INTECH andconsolidated investment products.  Thedecline in minority interest is largely the result of a 15.9% decline in INTECHearnings associated with lower performance fees earned on private accounts.

 

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**DISCONTINUED OPERATIONS**

 

Duringthe third quarter 2007, Janus initiated a plan to dispose of its Printing andFulfillment operations, represented by Rapid Solutions Group (“RSG”), as aresult of difficulty in growing the business and Janus’ desire to focus on itscore investment management business.

 

RSGprovides clients with digital and offset printing services.  The digital print operations focus onproviding clients with communication solutions using leading-edgeprint-on-demand technology and software applications that support the processof improving the effectiveness of customer communication throughpersonalization and customization.  Theoffset printing operations provide customers with full-service graphics anddesign solutions through prepress services and high-speed, high-quality offsetprinting, including direct marketing packages, brochures, preprinted base stockand collateral pieces.

 

OnApril 9, 2008, the digital print operations of RSG, representing themajority of RSG’s assets, were sold to Bowne & Co., Inc. for$14.5 million.  The disposition of RSG’sdigital and offset operations is not expected to have a material impact onJanus’ 2008 results of operations or financial condition.

 

**LIQUIDITYAND CAPITAL RESOURCES**

 

**Cash Flows**

 

A summary of cash flow data from continuing operations for thethree-month periods ended March 31, 2008 and 2007 is as follows *(in millions)*:

 
| ** **                              | ** ** | **2008**     | ** ** | **2007**     | ** ** |
|-----------------------------------------|------------|--------------|------------|--------------|------------|
| Cash flows provided by (used for):      | ** ** | ** **   | ** ** | ** **   | ** ** |
| Operating activities                    |       | $ 1.9   |       | $ (19.3 | )          |
| Investing activities                    |       | (76.4        | )          | (20.8        | )          |
| Financing activities                    |       | (135.9       | )          | (208.9       | )          |
| Net change in cash and cash equivalents |       | (210.4       | )          | (249.0       | )          |
| Balance beginning of period             |       | 480.7        |       | 507.1        |       |
| Balance end of period                   |       | $ 270.3 |       | $ 258.1 |       |

 

Onan annual basis, Janus’ cash flow from operations historically has beenpositive and sufficient to fund ordinary operations and capitalrequirements.  Cash provided by operatingactivities for the three months ended March 31, 2008, increased over thecomparable prior year period as a result of changes in working capital items,which can vary from period to period based on the timing of cash receipts andpayments.

 

Cashused for investing activities for the three months ended March 31, 2008,includes $60.7 million for the purchase of an additional 3% interest in INTECHand $11.5 million of net proceeds from the sale and purchase ofinvestments.  Cash used for investingactivities for the comparable prior year period primarily represents theacquisition of an additional 4% interest in INTECH and $66.1 million of netproceeds from the sale and maturities of investments.

 

Cashused for financing activities for the three months ended March 31, 2008and 2007, primarily represents stock buybacks of $142.5 million and $214.4million, respectively.

 

**OtherSources of Liquidity**

 

*CreditFacility*

 

Janushas a $350 million Three-Year Competitive Advance and Revolving Credit FacilityAgreement (the “Credit Facility”) with a syndicate of banks.  The Credit Facility contains a number offinancial covenants including a specified financing leverage ratio and interestcoverage ratio.  At March 31, 2008,Janus was in compliance with all covenants and there were no borrowings underthe Credit Facility.

 

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*ShelfRegistration*

 

TheCompany has effective a Shelf Registration Statement with the SEC, under whichJanus could register an indeterminate amount of Janus’ common stock, preferredstock and debt securities.

 

**CapitalRequirements**

 

***Money Market Funds Advised by the Company***

 

Janusadvises money market funds (the “Funds”) that attempt to provide current incomeand limit exposure to losses by investing in high-quality securities withshort-term durations that present minimal credit risk.  Adverse events or circumstances related to individualsecurities or the market in which the securities trade may causeother-than-temporary declines in value. In these situations, Janus may elect to support one or more of the Fundsthrough a variety of means, including but not limited to, purchasing securitiesheld by the Funds, reimbursing for any losses incurred or providing a letter ofcredit.  However, Janus is notcontractually or legally obligated to provide support to the Funds.

 

Janus’decision to provide support to the Funds is based on the facts and circumstancesat the time a holding in the Funds becomes or is expected to becomedistressed.  A holding is considereddistressed when there is significant doubt regarding the issuer’s ability topay required amounts when due, often resulting in a decline in the securities’credit ratings.  If a security fallsbelow the minimum rating required by investment restrictions, the Funds mustdispose of the investment unless the Funds’ board of trustees determines thatsuch disposition is not in the best interests of the Funds.  In determining whether to take any action inresponse to a distressed condition or a downgrade affecting securities held bythe Funds, Janus considers many factors, which may include the potentialfinancial and reputational impact to the Funds and Janus, the regulatory andoperational restrictions, the size of a holding, a security’s expected time tomaturity and likelihood of payment at maturity, general market conditions,discussions with the Funds’ board of trustees and Janus’ board of directors,and Janus’ liquidity and financial condition.

 

*FinancialSupport Provided to the Funds*

 

On December 21,2007, Moody’s Investors Service, Inc. downgraded securities issued bycertain structured investment vehicles (“SIV”) including those issued byStanfield Victoria Funding LLC (“Stanfield securities”) to a rating below whatis generally permitted to be held by the Funds. The Funds held $105.0 million of Stanfield securities plus $3.5 millionof accrued interest at the time of the downgrade.  In connection with this downgrade, Janusdetermined that it was in the best interests of the applicable Funds and theirshareholders for Janus to purchase the Stanfield securities from the Funds atamortized cost plus accrued interest. Subsequent to purchase, Janus recognized an $18.2 million impairmentcharge in the fourth quarter 2007 (including $3.5 million of purchased accruedinterest), reflecting the difference between the low end of the range ofestimated fair value and the purchase price of the Stanfield securities.  Included in Janus’ estimate of fair value isthe assumption that no interest income payable on the securities will bereceived.  Janus again assessed the fairvalue of the Stanfield securities as of March 31, 2008, and determinedthat no further impairment was necessary. Janus’ total additional risk of loss with respect to the Stanfieldsecurities is limited to the $90.3 million carrying value of its investment.

 

*Securities Held by the Funds*

 

Januscontinuously evaluates the securities held by the Funds to determine if anyholdings are distressed or may become distressed in the near future.  As of March 31, 2008, Janus does notbelieve that the Funds hold other securities that present a material risk ofdowngrade.  However, Janus continues tomonitor the remaining $350 million of securities issued by bank-sponsored SIVsheld by the Funds, representing approximately 2.4% of total money market assetsunder management at March 31, 2008. These SIV securities are scheduled tomature between May and August of 2008.  Bank-sponsored SIVs have access to variousforms of liquidity through their sponsors or other large financialinstitutions, and are therefore considered to pose less risk to holders.  Nonetheless, if the markets relating toinvestments in SIVs and related underlying assets remain illiquid, securitiesissued by bank-sponsored SIVs could experience declines in market value.  Additionally, sponsors could be unable orunwilling to continue their sponsorship of these SIVs, which may cause adecline in the credit quality of bank-sponsored SIVs.  In such circumstances, Janus would considerwhether taking any action, including, but not limited to, a potential electionby Janus to provide further support to the Funds that could result inadditional impairments and financial losses, would be appropriate.

 

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***INTECH***

 

Eachfiscal year through 2012, each of the two INTECH founding members has theoption to require Janus to purchase up to approximately 1.5% of INTECH shares (“AnnualOption Shares”) at the fair market value. Subsequent to the March 31, 2008 sale of 3% of INTECH to Janus, thetwo founders own an aggregate of approximately 8% of INTECH.  In the event that either INTECH founder doesnot fully exercise his annual voluntary sale option in a given year, Janus hasthe option to require the INTECH founder to sell the remaining balance of theAnnual Option Shares for that year at fair market value.

 

Inaddition, the founders can require Janus to purchase their INTECH interestswhen the founder’s employment is terminated. The purchase price of the departing founder’s INTECH interests will bebased on the fair market value.  Eachfounder is entitled to retain approximately one percent of INTECH’s shares thenoutstanding after employment until his death unless he is terminated for causeor leaves voluntarily while not in good standing.  An INTECH founder will be deemed to be ingood standing if he voluntarily leaves on or after January 1, 2009, afterproviding 12 months’ prior notice and provided he cooperates with thetransition.  Janus has not recorded aliability for the purchase of the outstanding INTECH interests due to theuncertainty of this obligation and the price at which it may occur.  INTECH interests held by the founders in theaggregate would currently be valued at approximately $147.0 million, based onthe most recent determination of fair market value.

 

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

 

TheCompany has had no material changes in its exposure to market risks from thatpreviously reported in the Company’s Annual Report on Form 10-K for theyear ended December 31, 2007.

 

**Item 4.    Controls and Procedures**

 

Janus’management evaluated the effectiveness of the design and operation of itsdisclosure controls and procedures (as such term is defined in Rules 13a-15(e) and15d-15(e) under the Exchange Act) as of March 31, 2008.  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.  Gary D. Black, Chief Executive Officer, andGregory A. Frost, Executive Vice President and Chief Financial Officer,reviewed and participated in this evaluation. Based on this evaluation, Messrs. Black and Frost concluded that asof the date of their evaluation, Janus’ disclosure controls and procedures wereeffective.

 

Therehas been no change in Janus’ internal controls over financial reporting (assuch term is defined in Rules 13a-15(e) and 15d-15(e) under theExchange Act) during the three months ended March 31, 2008, that hasmaterially affected, or is reasonably likely to materially affect, Janus’internal controls over financial reporting.

 

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**PART II – OTHER INFORMATION**

 

**Item 1.    Legal Proceedings**

 

SeePart I, Item 1. Financial Statements, Note 10 – Legal Proceedings.

 

**Item 1A.    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 31,2007.

 

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

 

Janus’ Board of Directors hasauthorized four separate $500 million share repurchase programs beginning inJuly 2004 with the most recent authorization in July 2007.  During the first three months of 2008, Janusrepurchased 5.2 million shares at an aggregate cost of $134.2 million under thecurrent authorization.  The Companycautions that there are no assurances that any future repurchases will actuallyoccur.

 

Inaddition to this program, for the three months ended March 31, 2008, Janusrepurchased 304,357 shares from employees as a part of a share withholdingprogram (established under Rule 10b5-1 of the Securities Exchange Act of1934) to satisfy employees’ income tax liabilities attributable to the vestingof restricted stock awards.

 
| **Period** | ** ** | **(a) Total  Number of  Shares (or  Units)  Purchased** | ** ** | **(b) Average  Price Paid Per  Share (or Unit)** | ** ** | **(c) Total Number of  Shares (or Units)  Purchased as Part of  Publicly Announced Plans  or Programs** | ** ** | **(d) Maximum Number (or  Approximate Dollar Value) of  Shares (or Units) that May  Yet Be Purchased Under the  Plans or Programs (End of  Month)** | ** ** |
|------------|------------|------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| January    |       | 2,098,252                                                              |       | $ 27.46                                                              |       | 2,096,800                                                                                                                                                      |       | $ 245 million                                                                                                                                                                                                                            |       |
| February   |       | 2,459,497                                                              |       | $ 25.57                                                              |       | 2,156,592                                                                                                                                                      |       | $ 190 million                                                                                                                                                                                                                            |       |
| March      |       | 955,693                                                                |       | $ 23.07                                                              |       | 955,693                                                                                                                                                        |       | $ 168 million                                                                                                                                                                                                                            |       |
| **Total**  | ** ** | **5,513,442**                                                          | ** ** | **$ 25.86**                                                          | ** ** | **5,209,085**                                                                                                                                                  | ** ** | ** **                                                                                                                                                                                                                                    | ** ** |

 

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**Item 6.    Exhibits**

 
| 31.1   | Certification  of Gary D. Black, 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 Gary D. Black, 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                                                                                                                                                                                                             |

 

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**SIGNATURES**

 

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

 

Date:April 24, 2008

 

Janus Capital Group Inc.

 

 
|   | /s/ Gary D. Black                                                                                   |   |
|--------|-----------------------------------------------------------------------------------------------------|--------|
|   | Gary D. Black,  Chief Executive Officer                                                             |   |
|   |                                                                                                |   |
|   |                                                                                                |   |
|   | /s/ Gregory A. Frost                                                                                |   |
|   | Gregory A. Frost,Executive Vice President and Chief Financial Officer (Principal Financial Officer) |   |
|   |                                                                                                |   |
|   |                                                                                                |   |
|   | /s/ Robert W. Blakley                                                                               |   |
|   | Robert W. BlakleyVice President and Controller (Principal Accounting Officer)                       |   |

 

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**JANUSCAPITAL GROUP INC.**

**INDEXTO EXHIBITS**

 
| **Exhibit  No.** | ** ** | **Document**                                                                                                                                                                                                                | ** ** | **Regulation S-K  Item 601(b)  Exhibit No.** |
|------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------|
| 31.1             |       | Certification of Gary D. Black, 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 Gary D. Black, 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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