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Article by DailyStocks_admin    (03-11-08 03:04 AM)

Janus Capital Group Inc. CEO GARY D BLACK bought 40,000 shares on 3-4-2008 at 23.93

BUSINESS OVERVIEW

Janus Capital Group Inc. (collectively, "Janus" or the "Company") provides investment management and administrative services to mutual funds, separate accounts and institutional clients in both domestic and international markets. Janus provides investment advisory services through its primary subsidiaries, Janus Capital Management LLC ("JCM" or "Janus ex-INTECH") and Enhanced Investment Technologies, LLC ("INTECH").

Revenues are generally based upon a percentage of the market value of assets under management and are calculated as a percentage of the daily average asset balance in accordance with contractual agreements with the Company's mutual funds, separate accounts and subadvised relationships (collectively referred to herein as "products" or "investment products"). Certain investment products are also subject to performance fees which vary based on their relative performance as compared to a benchmark index and the level of assets subject to such fees. Assets under management primarily consist of domestic and international equity and debt securities. Accordingly, fluctuations in the financial markets, relative investment performance, sales and redemptions of investment products, and changes in the composition of assets under management are all factors that have a direct effect on Janus' operating results.

Janus Capital Management

Janus considers itself a leader in equity investing, beginning with the launch of the Janus Fund more than 35 years ago. Janus' investment teams are led by its co-Chief Investment Officers, who are charged with driving investment performance across all disciplines and subsidiaries while maintaining a structured investment approach. Janus' investment teams seek to identify strong businesses with sustainable competitive advantages or improving returns on capital that sell at a discount to what the teams believe they are worth. Janus believes its depth of research, its experienced portfolio managers and analysts, its willingness to make concentrated investments when Janus believes it has a research edge, and its commitment to delivering strong, long-term results for its investors are what differentiate Janus from its competitors.

For the one- and three-year periods ended December 31, 2007, approximately 89% and 86%, respectively, of the Company's largest fund family, Janus Investment Fund ("JIF"), were ranked in the top two Lipper Analytics quartiles based upon total returns. On a five-year total return basis, 76% of JIF funds were in the top two Lipper quartiles at December 31, 2007. (See Exhibit 99.1 for complete Lipper rankings.)

INTECH

INTECH's unique investment process is based on a mathematical theorem that attempts to capitalize on the volatility in stock price movements. The goal is to achieve long-term returns that outperform the benchmark index while controlling risks and trading costs. Acquired by Janus in 2002, INTECH has managed institutional portfolios since 1987, establishing one of the industry's longest continuous performance records of mathematically driven equity investing strategies. INTECH assets under management have grown from approximately $6.0 billion when Janus acquired it in 2002 to $69.7 billion at the end of 2007. Risk-managed products have primarily been sold through the institutional channel, which generally has lower management fees than products sold through the intermediary, international or retail channels.

Since inception, twelve out of thirteen INTECH investment strategies as of December 31, 2007, have outperformed their respective benchmarks, net of fees and on a gross fee basis. Additionally, all of INTECH's investment strategies rank in the top 2 quartiles of their corresponding universes for alpha and information ratio, from inception through December 31, 2007, based on Callan Risk-Return Rankings that provide industry measurements of risk and reward.

Distribution Channels

Janus' sales organization capabilities are segmented into four distribution channels: retail, U.S. intermediary, U.S. institutional and international.

Retail Channel

The retail channel serves individual investors who access Janus directly or through supermarket platforms. These investors are served through Janus' largest fund family, JIF. Assets in the retail channel totaled $59.5 billion, or 29% of total assets under management at December 31, 2007.

U.S. Intermediary Channel

The U.S. intermediary channel serves financial intermediaries and retirement plans for the advice-driven market, which includes asset managers, bank/trust officers, broker-dealers, independent planners, third-party administrators and insurance companies. Janus has aligned the channel to focus resources on distributor needs and is targeting product platforms that tend to have high asset retention rates in order to enhance long-term returns and margins. Janus has made significant investments in the U.S. intermediary channel by increasing the number of wholesalers from 23 at the beginning of 2005 to 50 at the end of 2007. Assets in the domestic intermediary channel totaled $60.1 billion, or 29% of total assets under management at December 31, 2007.

U.S. Institutional Channel

The U.S. institutional channel serves endowments, foundations, municipalities, corporations and Taft-Hartley clients and focuses on distribution through consulting relationships and on a direct basis. The current asset base in this channel is weighted heavily toward INTECH's risk-managed products. Assets in the U.S. institutional channel totaled $73.7 billion, or 35% of total assets under management at December 31, 2007.

International Channel

The international channel serves all products sold outside of the United States and includes international retail, intermediary and institutional accounts. International products are offered through Janus Capital Funds Plc, Janus Selection Funds, separate accounts and subadvisory relationships. Assets in the international channel totaled $13.4 billion, or 7% of total assets under management at December 31, 2007.

COMPETITION

The investment management industry is relatively mature and saturated with competitors that provide services similar to Janus. As such, Janus encounters significant competition in all areas of its business. Janus competes with other investment managers, mutual fund advisers, brokerage and investment banking firms, insurance companies, hedge funds, venture capitalists, banks and other financial institutions, many of which are larger, have proprietary access to distribution, have a broader range of product choices and investment capabilities, and have greater capital resources. Janus believes its ability to successfully compete in this market is based on its ability to: achieve consistently strong investment performance; maintain and build upon its distribution relationships and continue to create new ones; develop appropriately priced investment products well suited for its distribution channels and attractive to underlying clients and investors; offer multiple investment choices; provide effective shareowner servicing; retain and strengthen the confidence of its clients; attract and retain talented portfolio management and sales personnel; and develop and leverage its brand in existing and new distribution channels. Additionally, Janus' ability to successfully compete with other investment management companies is highly dependent on its reputation and its relationship with clients.

Competition in the investment management industry continues to increase as a result of greater flexibility afforded to banks and other financial institutions to sponsor and distribute mutual funds. Furthermore, the marketplace for investment products is rapidly changing; investors are becoming more sophisticated; the demand for and access to investment advice and information are becoming more widespread; and more investors are demanding investment vehicles that are customized to their personal requirements.

REGULATION

The investment management industry is subject to extensive federal, state and international laws and regulations intended to benefit or protect the shareholders of funds managed by Janus and advisory clients of Janus. The costs of complying with such laws and regulations have significantly increased and may continue to contribute significantly to the costs of doing business as an investment adviser. These laws and regulations generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the conduct of Janus' business and to impose sanctions for failure to comply with the laws and regulations. Possible consequences or sanctions for such failure to comply include, but are not limited to, voiding of investment advisory and subadvisory agreements; the suspension of individual employees (particularly investment management and sales personnel); limitations on engaging in certain lines of business for specified periods of time; revocation of registrations; disgorgement of profits; and censures and fines. Further, such laws and regulations may provide the basis for litigation that may also result in significant costs and reputational harm to Janus.

The Investment Advisers Act

The Securities and Exchange Commission ("SEC") is the federal agency generally responsible for administering the federal securities laws. Certain subsidiaries of Janus are registered investment advisers under the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act") and, as such, are supervised by the SEC. The Investment Advisers Act requires registered investment advisers to comply with numerous and pervasive obligations, including among other things, record-keeping requirements, operational procedures, registration and reporting and disclosure obligations. Certain subsidiaries of Janus are also registered with regulatory authorities in various states, and thus are subject to the oversight and regulation of such states' regulatory agencies.

The 1940 Act

Through its subsidiaries, Janus acts as adviser or subadviser to both proprietary and non-proprietary mutual funds, which are registered with the SEC pursuant to the Investment Company Act of 1940, as amended (the "1940 Act"). Janus subsidiaries also serve as adviser or subadviser to separately managed accounts and commingled accounts that are not required to register under the 1940 Act. As an adviser or subadviser to a registered investment company, Janus must comply with the requirements of the 1940 Act and related regulations including among other things, requirements relating to operations, fees charged, sales, accounting, recordkeeping, disclosure and governance. In addition, the adviser or subadviser to a registered investment company generally has obligations with respect to the qualification of the registered investment company under the Internal Revenue Code of 1986, as amended (the "Code").

Broker-Dealer Regulations

Janus' limited purpose broker-dealer subsidiary, Janus Distributors LLC ("JD"), is registered with the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is a member of the Financial Industry Regulatory Authority ("FINRA"), the securities industry's self-regulatory organization. JD is the general distributor and agent of the sale and distribution of shares of certain mutual funds that are directly advised or serviced by JCM. The SEC imposes various requirements on Janus' limited broker-dealer operations including disclosure, recordkeeping and accounting. FINRA has established conduct rules for all securities transactions among broker-dealers and private investors, trading rules for the over-the-counter markets and operational rules for its member firms. The SEC and FINRA also impose net capital requirements on registered broker-dealers.

Janus' limited broker-dealer is also subject to regulation under state law. The federal securities laws prohibit states from imposing substantive requirements on broker-dealers that exceed those under federal law. This does not preclude the states from imposing registration requirements on broker-dealers that operate within their jurisdiction or from sanctioning these broker-dealers and their employees for engaging in misconduct.

ERISA

Certain Janus subsidiaries are also subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and related regulations to the extent they are considered "fiduciaries" under ERISA with respect to some of their clients. ERISA, related provisions of the Code and regulations issued by the Department of Labor impose duties on persons who are fiduciaries under ERISA and prohibit some transactions involving the assets of each ERISA plan that is a client of a Janus subsidiary as well as some transactions by the fiduciaries (and several other related parties) to such plans.

International Regulations

Certain Janus subsidiaries are authorized to conduct investment business in international markets and are subject to foreign regulation. Janus' international subsidiaries are subject to the regulatory supervision and requirements of various agencies, including the Financial Services Authority in the United Kingdom, the Irish Financial Services Regulatory Authority, the Securities and Futures Commission of Hong Kong, the Monetary Authority of Singapore, the Financial Services Agency of Japan and Canadian Securities Commissions. These regulatory agencies have broad supervisory and disciplinary powers, including, among others, the power to temporarily or permanently revoke the authorization to carry on regulated business, the suspension of registered employees, censures and fines for both regulated businesses and their registered employees.

Many of the non-U.S. securities exchanges and regulatory authorities have imposed rules (and others may impose rules) relating to capital requirements applicable to Janus' foreign subsidiaries. These rules, which specify minimum capital requirements, are designed to measure general financial integrity and liquidity, and require that a minimum amount of assets be kept in relatively liquid form.

EMPLOYEES

As of December 31, 2007, Janus had 1,213 full-time employees related to continuing operations and 429 full-time employees related to discontinued operations. No Janus employees are represented by a labor union.

CEO BACKGROUND

G. Andrew Cox , age 63, has been a director of the Company since October 2002. He has served as an adjunct professor at the Daniels College of Business, University of Denver since 1995. He served as vice president of investments and portfolio manager at Founders Family of Mutual Funds from 1976 to 1988, and as portfolio and security analyst for Berger Associates from 1972 to 1976. Mr. Cox also served as a director of Montgomery Partners and as a trustee of The Montgomery Funds, The Montgomery Funds II and The Montgomery Funds III from 1989 until 2004.

Deborah R. Gatzek , age 58, has been a director of the Company since March 2004. She is an attorney and mutual fund compliance consultant, and serves on the boards of three non-profit organizations. She served as Chief Counsel, ING Americas' Mutual Fund Practice Group and Broker Dealer Practice Group from 2001 to 2003. She was a partner in Stradley, Ronan, Stevens & Young, a law firm, from 2000 to 2001, and she served as Senior Vice President and General Counsel of Franklin Resources, Inc. from 1983 through 1999.

Robert T. Parry , age 67, has been a director of the Company since March 2005. Mr. Parry is also a director of Countrywide Financial Corporation ("CFC"), Countrywide Bank (a subsidiary of CFC) and PACCAR Inc. He served as President and Chief Executive Officer of the Federal Reserve Bank of San Francisco from 1986 to 2004. He was Chief Economist of Security Pacific Corporation from 1970 to 1986.

Jock Patton , age 61, has been a director of the Company since March 2007 and was appointed by the Board to fill the vacancy left by James P. Craig, III's retirement. Mr. Patton is non-executive chairman and director of Swift Transportation Co., Inc., a director of JDA Software Group, Inc. and the independent chairman of ING Funds Unified Board of Trustees (anticipated resignation on or before June 30, 2007). He served as Chief Executive Officer and director of Rainbow Multimedia Group, Inc. from 1999 to 2001 and was President and co-owner of StockVal, Inc. from 1992 to 1997. From 1972 to 1992, Mr. Patton was a Partner in the law firm of Streich Lang where he founded and headed the Corporate/Securities Practice Group. The appointment of Mr. Patton to the Board was recommended by Ms. Gatzek, and such recommendation was presented to the Nominating and Corporate Governance Committee of the Board for evaluation.

Paul F. Balser , age 65, has been a director of the Company since June 2000, and has served as lead director until January 2006 at which time he began serving as the presiding director for all executive sessions of the Board of Directors. He has been a partner of Ironwood Partners, LLC of New York, New York, since December 2000 and a partner of Ironwood Manufacturing Fund LP of New York, New York, since July 2003. Mr. Balser has been a director of Tweedy, Browne Funds Inc., New York, New York since 2000, as well as several private companies. He was a partner of Generation Partners, L.P. of Greenwich, Connecticut, from August 1995 to September 30, 2004. All are investment firms specializing in privately negotiated equity transactions. He was a partner of Centre Partners, L.P., New York, New York, from September 1986 through July 1995, which also specialized in privately negotiated equity and venture capital investments.

Gary D. Black , age 47, has been Chief Executive Officer of the Company since January 2006 and has served as a director since May 2004. From April 2004 until January 2006, he served as Chief Investment Officer and President of the Company. From 2001 until March 2004, he worked for Goldman Sachs Asset Management most recently as Chief Investment Officer of the global equities business. From 1992 to 2001, he worked for Alliance Bernstein serving as a Senior Research Analyst and later as Executive Vice President and Head, Global Institutional Asset Management.

Robert Skidelsky , age 68, has been a director of the Company since January 2001. Lord Skidelsky has been the Chairman of The Social Market Foundation, London, England, since 1992 and has served on the Board of the Greater European Fund since February 2005. He has also served as Chair of Political Economy at Warwick University, Coventry, England, since 1990. He is a fellow of the British Academy and an honorary fellow of Jesus College, Oxford University, Oxford, England. He was named to the United Kingdom Parliaments House of Lords in 1991, and from 1998 to 1999 served as Principal Opposition Spokesman on Treasury Affairs, House of Lords.

MANAGEMENT DISCUSSION FROM LATEST 10K

EXECUTIVE SUMMARY

Janus finished 2007 with assets under management of $206.7 billion, an increase of 23% from the end of 2006.

Long-term net flows for 2007 totaled $9.8 billion compared to $2.3 billion for 2006.

Janus ex-INTECH long-term net flows improved significantly to $7.5 billion of inflows compared with outflows of $9.7 billion in 2006, representing the first annual period of positive long-term net flows in six years.

Janus' investment product performance remained strong in 2007. As of December 31, 2007, 89%, 86% and 76% of the JIF funds were in the top half of their Lipper categories on a one-, three- and five-year total return basis, respectively.

Operating margins were 31.3% in 2007 compared with 25.5% in 2006 and diluted earnings per share from continuing operations increased 57%.

During 2007, Janus initiated a new advertising campaign that focuses on the promotion and awareness of the Janus brand.

In 2007, Janus bought 32.3 million shares of its common stock at an aggregate cost of $845.6 million, reducing outstanding common shares by 14.1%.

INVESTMENT MANAGEMENT OPERATIONS (CONTINUING OPERATIONS)

Janus' average assets under management totaled $190.4 billion during 2007, an increase of $33.7 billion from 2006 and $55.2 billion from 2005. The increases were driven by positive market/fund performance and positive long-term net flows.

Janus ex-INTECH's 2007 long-term net flows improved by $17.2 billion over 2006 and $21.6 billion over 2005 from significant increases in sales. Sales efforts have been facilitated by strong relative investment performance, increased penetration in the intermediary channel from expansion initiatives over the last three years, and a shift in investor preference from value to growth investing (as growth indices generally outperformed value indices in 2007).

Janus ex-INTECH's investment performance remained strong despite the loss of several portfolio managers during 2007. Janus manages change through the development of investment analysts and the cultivation of the next generation of portfolio managers. The recent departures have not resulted in significant client losses.

INTECH's net long-term inflows declined to $2.3 billion in 2007 compared to $12.0 billion in 2006 and $16.1 billion in 2005 primarily as a result of increased redemptions. Redemptions increased as a result of the relative underperformance of certain key investment strategies through most of 2007 and 2006 and several clients rebalancing their portfolios. Despite the recent relative underperformance, INTECH's long-term performance remains strong, with 89%, 100% and 100% of all product strategies with at least a 3-, 5- and 10-year performance track record, respectively, outperforming their respective benchmarks during each of those periods ended December 31, 2007.

Revenues

Revenues are generally based upon a percentage of the market value of assets under management and are calculated as a percentage of the daily average asset balance in accordance with contractual agreements with the Company's investment advisory clients. Certain INTECH private accounts (and beginning in 2007, certain mutual funds) are subject to performance fees which vary based on the amount of assets subject to such fees and the relative performance of each account. Assets under management primarily consist of domestic and international equity and debt securities. Accordingly, fluctuations in the financial markets, relative investment performance, sales and redemptions of investment products, and changes in the composition of assets under management are all factors that have a direct effect on Janus' operating results. The following graph depicts the direct relationship between average assets under management and investment management revenues:

2007 Compared to 2006

Investment management fees increased $147.7 million, or 19.7%, from a similar increase in average assets under management driven primarily by market appreciation and investment performance combined with positive long-term net inflows.

Performance fees have historically been earned on certain INTECH private accounts. Beginning in the first quarter 2007, certain mutual funds also became subject to performance fees. The increase in performance fee revenue was primarily due to fees of $11.2 million earned on mutual funds, partially offset by a decrease of $6.5 million of fees on INTECH private accounts as a result of recent relative underperformance.

Shareowner servicing fees and other revenue improved $28.9 million, or 16.9%, over the comparable prior period primarily as a result of an increase in transfer agent fees which are based on average JIF assets under management, excluding money market assets. Average JIF assets, excluding money market assets, increased 15.6% over the prior year.

Employee compensation and benefits increased $45.5 million, or 14.4%, principally due to higher base salaries, investment team compensation and sales commissions. Base salaries increased $11.5 million from annual merit increases and an 8.3% growth in the average number of employees. The investment team compensation plan implemented in the first quarter 2007 is linked to individual performance, but also ties the aggregate level of compensation to investment management fee revenue. Investment team compensation increased $21.0 million due to higher management fee revenue and relative investment performance. Sales commissions increased $6.6 million due to improved sales, primarily in the intermediary channel.

Long-term incentive compensation decreased $2.8 million due to the final vesting of a previous grant in the first quarter 2007, partially offset by an increase related to the 2007 annual grant awarded in February, a $17.0 million charge for the contractual acceleration of awards related to certain portfolio managers who resigned in 2007 and accelerated vesting of previous awards based on 2007 financial performance.

Future long-term incentive amortization will be impacted by the 2008 annual grant totaling $71.5 million, which will be recognized ratably over a three-year period and is not subject to performance-based acceleration. In addition, retention grants were awarded to certain Janus investment team members and certain INTECH employees in order to facilitate succession planning and incent key personnel to remain with the Company. The Janus investment team retention grant totaled $21.0 million and will be recognized ratably over a four-year period. The INTECH retention grant totaled $25.0 million and will be recognized ratably over a ten-year period. The retention grants are not subject to performance-based acceleration.

Distribution expenses increased $31.5 million, or 28.6%, from a similar increase in assets under management subject to third-party concessions. Distribution fees are calculated based on a contractual percentage of the market value of assets under management distributed through third-party intermediaries.

Interest expense increased $26.5 million as a result of the issuance of additional debt during 2007. Annual interest expense is expected to increase approximately $36.6 million from the issuance of debt on June 14, 2007, and the debt repayment on June 26, 2007.

Investment gains decreased $7.0 million primarily from the recognition of an $18.2 million impairment charge on SIV securities acquired from money market funds advised by Janus (see discussion in Cash Flows section) and a decrease in realized gains related to the sale of seed capital investments. The impairment charge and decrease in realized gains were partially offset by $17.6 million of income previously recorded as unrealized gains in the equity statement. In the fourth quarter 2007, Janus evaluated its seed capital investments and determined that mutual funds and separate accounts in which it owns a majority interest should be consolidated, with changes in market value reported in current period earnings. As a result, Janus expects that future earnings will be impacted by fluctuations in the market value and amount of consolidated investments.

2006 Compared to 2005

Investment management fees increased $77.1 million, or 11.5%, from a 15.9% increase in average assets under management, partially offset by the impact of the continuing product mix shift toward lower yielding INTECH risk-managed products.

Performance fee revenue decreased $11.9 million, or 44.4%, primarily as a result of INTECH underperformance in 2006 combined with fewer assets subject to a performance-based fee structure.

Shareowner servicing fees and other revenue remained consistent year-over-year as an increase in transfer agent servicing fees was partially offset by a decline in distribution revenue. Transfer agent servicing fees increased 4.9% over the prior year. Distribution revenue is primarily based on average assets in certain share classes of Janus' offshore fund series, which declined 26.9% over the prior year.

Employee compensation and benefits increased $15.7 million as a result of increases in base and incentive compensation for investment and non-investment personnel, partially offset by $10.6 million of lower executive severance charges. Base compensation increased $4.5 million from annual merit increases combined with a 7% increase in the number of employees. Incentive compensation for investment personnel increased $5.4 million primarily from strong investment performance. Incentive compensation for non-investment personnel (sales commissions and firmwide bonuses) increased $12.5 million from higher long-term product sales, more distribution personnel and stronger corporate results.

Long-term incentive compensation increased $7.6 million as a result of the annual grant made in February 2006 combined with the accelerated vesting of the 2005 and 2006 awards based on 2006 financial performance, partially offset by the impact of revising the forfeiture estimate. During 2006, Janus revised its estimate for forfeitures as a result of higher than expected employee departures, which resulted in a $5.0 million decrease to long-term incentive compensation in 2006.

Marketing and advertising expenses declined slightly in 2006 as a result of a decrease in advertising expenditures partially offset by mutual fund proxy costs of $4.8 million from proposed fund changes.

Depreciation and amortization decreased primarily as a result an $8.4 million decline in amortization of deferred commissions from lower sales of B shares of the Janus Capital Funds Plc in Europe and Asia, partially offset by an increase in amortization of intangibles related to the February 2006 acquisition of an additional 5% interest in INTECH. The acquisition resulted in the recognition of $32.5 million of intangible assets related to customer contracts and will be amortized over a period of 12 years.

Impairment charges incurred in 2006 represent the loss of certain Janus subadvised relationships. Janus recognizes an impairment charge equal to the unamortized value of the associated intangible asset when formal notification of termination is received.

General, administrative and occupancy expense includes Mutual Fund Investigation recoveries of $14.1 million in 2006, representing insurance recoveries for legal fees incurred as a result of the Mutual Fund Investigation.

DISCONTINUED OPERATIONS

During the third quarter 2007, Janus initiated a plan to dispose of the Printing and Fulfillment operations, represented by RSG, as a result of difficulty in growing the business and Janus' desire to focus on its core investment management business.

RSG provides clients with digital and offset printing and fulfillment services. The digital operation focuses on providing clients with communication solutions using leading-edge print-on-demand technology and software applications that support the process of improving the effectiveness of customer communication through personalization and customization. The offset printing operations provide customers with full-service graphics and design solutions through prepress services and high-speed, high-quality offset printing, including direct marketing packages, brochures, preprinted base stock and collateral pieces.

Results of Discontinued Operations

Production volume and revenue from fulfillment, digital printing and offset printing declined from the prior year as a result of lower nonrecurring or one-time production work in 2007. Operating results for 2007 include impairment charges totaling $67.1 million (net of a $6.2 million tax benefit) to write-down RSG's carrying value to management's estimate of fair value less costs to sell the business. The fair value of RSG at December 31, 2007, was estimated using preliminary bids received from potential buyers.

Although Janus is pursuing the disposal of RSG, a final sale price has not yet been negotiated. A gain or additional loss may be recognized to the extent that the actual sale price varies from management's estimate of fair value less costs to sell. Janus expects to dispose of RSG within the next six months.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

2007 Cash Flows

Janus' cash flow from operations historically has been positive and sufficient to fund ordinary operations and capital requirements. Fluctuations in operating cash flows are attributable to changes in net income and working capital items, which can vary from period to period based on the timing of cash receipts and payments.

Net cash used for investing activities in 2007 includes $81.0 million for the purchase of an additional 4% interest in INTECH and $108.5 million (including $3.5 million of purchased accrued interest) for the purchase of SIV securities from the Funds, partially offset by $55.2 million of proceeds from the net sale of investments in advised funds.

Cash used for financing activities in 2007 includes $748.4 million of proceeds from the issuance of long-term debt, offset by the repayment of $158.1 million of long-term debt and common stock buybacks of $845.6 million.

2006 Cash Flows

Operating cash flows in 2006 increased $31.1 million to $298.6 million due to changes in net income and working capital items.

Net cash generated from investing activities in 2006 includes proceeds from the maturity and sale of marketable securities, partially offset by a $90.0 million acquisition of an additional 5% interest in INTECH and capital expenditures.

Cash used for financing activities in 2006 consists primarily of common stock repurchases of $516.4 million and the repayment of $113.1 million of long-term debt, partially offset by the issuance of $275.0 million of debt.

2005 Cash Flows

Operating cash flows in 2005 increased from cash used for operations in 2004, which included payments related to the regulatory settlement associated with the Mutual Fund Investigation and income taxes for the sale of DST shares.

Net cash generated from investing activities in 2005 represents proceeds from the maturity and sale of marketable securities, partially offset by capital expenditures.

Cash used for financing activities in 2005 consists primarily of common stock repurchases of $310.4 million and distributions to the minority owners of INTECH.

Structured Investment Vehicle Securities Acquired by Janus

A SIV is a fund that seeks to generate investment returns through yield curve arbitrage by purchasing high grade medium- and long-term fixed income instruments and funding those purchases by issuing low cost, short-term senior debt instruments such as asset-backed commercial paper and asset-backed medium term notes. In late 2007, widespread illiquidity in the commercial paper and capital markets prevented SIVs from accessing necessary funding for ongoing operations. The securities issued by those SIVs that were unable to access necessary liquidity through banks or other large financial institutions were generally downgraded by rating agencies as a result of expected defaults on maturing securities.

While Janus does not sponsor or serve as asset manager to any SIVs, it does serve as investment adviser to certain money market funds (the "Funds") that have invested in securities issued by SIVs from time to time, including securities issued by Stanfield Victoria Funding LLC ("Stanfield securities"). On December 21, 2007, Moody's Investors Service, Inc. ("Moody's") downgraded the Stanfield securities to a rating below what is generally permitted to be held by a security in the Funds. In connection with this downgrade, Janus purchased all of the Stanfield securities held by the Funds, totaling $108.5 million, to protect investors in the Funds from possible losses associated with such downgrade.

Subsequent to the purchase, Janus undertook a detailed analysis of the assets underlying the Stanfield securities, many of which do not have readily determinable fair values, and estimated a range of fair value by benchmarking those assets against instruments of a similar type with comparable yields, maturities and credit ratings for which fair market values were readily available. As a result of this analysis, Janus recognized an $18.2 million impairment charge (including $3.5 million of purchased accrued interest), reflecting the difference between the estimated fair value and the purchase price of the Stanfield securities.

In January 2008, the Stanfield securities were placed with an enforcement manager to be restructured or sold at the election of each senior note holder. Janus elected to participate in the restructuring of the Stanfield securities. In addition, the collateral agent, Deutsche Bank, filed an interpleader complaint due to conflicting positions of note holders that has effectively prevented the enforcement manager from making any cash payments and other distributions, or from restructuring the Stanfield securities, until the matter is resolved by the New York courts or is settled among the parties. Janus management believes that the anticipated restructuring will likely result in extended maturities and/or a pro-rata distribution of proceeds from the income and principal payments on the assets underlying the Stanfield securities. Given the uncertainty of the restructuring at this time, Janus can not determine the potential impact that a restructuring will have on the value of the Stanfield securities.

Janus may recognize additional impairment charges on the Stanfield securities if the restructuring is unsuccessful or there is an other-than-temporary deterioration in the value of the underlying assets. Janus' total additional risk of loss with respect to the Stanfield securities is limited to the $90.3 million carrying value of its investment.

Structured Investment Vehicle Securities Held by the Funds

In addition to the Stanfield securities purchased by Janus, the Funds held $470 million of securities issued by bank-sponsored SIVs, representing approximately 3.3% of total money market assets under management at the end of February 2008. These SIV securities are scheduled to mature between March and August of 2008. Bank-sponsored SIVs have access to various forms of necessary liquidity through their sponsors or other large financial institutions, and are considered to pose less risk to holders as a result of such liquidity access. However, if the markets relating to investments in SIVs and related underlying assets remain illiquid, securities issued by bank-sponsored SIVs could experience declines in market value. Additionally, sponsors could be unable or unwilling to continue their sponsorship of these SIVs, which may cause a decline in the credit quality of the bank-sponsored SIVs. In such circumstances, Janus will analyze the appropriate action on behalf of the Funds, including a potential election by Janus to provide further support to the Funds, which could result in additional impairments and financial losses.

Short-Term Liquidity and Capital Requirements

Janus believes cash from operations should be sufficient to satisfy its short-term capital requirements. Expected short-term uses of cash include ordinary operations, ongoing common stock repurchases, capital expenditures, income tax payments, and interest and principal payments on outstanding debt.

Common Stock Repurchase Program

Janus' Board of Directors has authorized four separate $500 million share repurchase programs beginning in July 2004 with the most recent authorization in July 2007. During 2007 and 2006, the Company repurchased 31.5 million shares for $828.6 million and 24.8 million shares for $492.9 million, respectively, under these authorizations. As of December 31, 2007, $302.2 million is available under the current authorization.

Long-Term Liquidity and Capital Requirements

The information presented above does not include operating related liabilities or capital expenditures that will be committed to in the normal course of business. Janus expects to fund these obligations from cash generated from normal operations.

Interest payments are determined assuming that all debt is held to maturity.

Operating lease obligations are presented net of estimated sublease income of $7.4 million.

Janus has the right to purchase an additional 14% ownership in Perkins, Wolf, McDonnell and Company, LLC ("PWM") each year at a price equal to the fair market value on each respective call date. Janus also may negotiate with the majority owners of PWM to acquire additional interests with terms other than those associated with the annual call rights. The above schedule does not include any estimated payments for the acquisition of additional interests in PWM as Janus is not obligated to acquire any interests and the price is unknown at this time.

Each fiscal year beginning in 2008 and terminating in 2012, each of the two INTECH founding members has the option to require Janus to purchase up to approximately 25% of their current holdings of INTECH shares ("Annual Option Shares") at the fair market value on the date of exercise based on a valuation by an independent investment bank. As of December 31, 2007, each of the two founders owns approximately 6% of INTECH. In the event that either INTECH founder does not fully exercise his annual voluntary sale option in a given year, Janus has the option to require the INTECH founder to sell the remaining balance of the Annual Option Shares at fair market value on the date of exercise.

In addition, each of the founders can require Janus to purchase their INTECH interests if the founder's employment is terminated. The purchase price of the departing founder's INTECH interests will be based on the fair market value on the date of exercise based on a valuation by an independent investment bank. Each founder is entitled to retain approximately one percent of INTECH's shares currently outstanding after employment until his death unless he is terminated for cause or leaves voluntarily while not in good standing. An INTECH founder will be deemed to be in good standing if he voluntarily leaves on or after January 1, 2009, after providing 12 months' prior notice and provided he cooperates with the transition.

The long-term commitments schedule above does not include any estimate for the purchase of the outstanding INTECH interests due to the uncertainty of this obligation and the price at which it may occur. INTECH interests in the aggregate would currently be valued at approximately $223.0 million, based on the most recent fair market value determined by an independent investment bank and agreed upon by INTECH and Janus.

Other Sources of Liquidity

Credit Facility

On June 1, 2007, the Company and the syndicate of banks amended the then existing $200 million Three-Year Competitive Advance and Revolving Credit Facility Agreement (the "Credit Facility"). Under the amended Credit Facility, the bank syndicate's commitment was increased to $350 million, and the maturity date was extended from October 19, 2008, to June 1, 2012. The Credit Facility contains a number of financial covenants including a specified financing leverage ratio and interest coverage ratio. At December 31, 2007, Janus was in compliance with all covenants and there were no borrowings under the Credit Facility.

Shelf Registration

In June 2007, the Company filed a new Shelf Registration Statement ("Shelf Registration") on Form S-3 that registered an indeterminate amount of Janus' common stock, preferred stock and debt securities. This Shelf Registration was effective immediately upon filing under new SEC regulations permitting "well-known seasoned issuers" to register an unlimited amount of securities to be issued. The Shelf Registration replaces the $325.0 million remaining under Janus' previous shelf registration. The issuances of debt in 2007 described below were issued under the Shelf Registration.

Debt

On June 14, 2007, Janus issued $300.0 million of 6.250% Senior Notes due June 15, 2012, and $450.0 million of 6.700% Senior Notes due June 15, 2017 (collectively, the "2007 senior notes"). Interest is paid semiannually on June 15 and December 15 of each year. The proceeds from the 2007 senior note issuances were $748.4 million. On June 26, 2007, approximately $160.0 million of the total proceeds were used to repay the 7.875% Senior Notes due 2032 plus accrued and unpaid interest as of the redemption date. The remaining proceeds may be used for possible future acquisitions, the repurchase of Janus' common stock; and/or general corporate purposes.

If the Company experiences a change of control and the 2007 senior notes are rated below investment grade by Standard & Poor's Rating Service ("S&P") and Moody's, the Company must offer to repurchase all of the 2007 senior notes at a price equal to 101% of the principal amount plus accrued and unpaid interest to the repurchase date.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Janus' consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.

Janus continually evaluates the accounting policies and estimates used to prepare the consolidated financial statements. In general, management's estimates are based on historical experience, information from third-party professionals and various other assumptions that are believed to be reasonable under current facts and circumstances. Actual results could differ from those estimates made by management. Janus' critical accounting policies and estimates include income taxes, intangible assets and goodwill, marketable securities and equity compensation.

Accounting for Income Taxes

Significant management judgment is required in developing Janus' provision for income taxes, including the valuation allowances that might be required against deferred tax assets and the evaluation of various income tax contingencies.

Valuation Allowance

Janus has not recorded a valuation allowance on its deferred tax assets as of December 31, 2007, based on management's belief that operating income will more likely than not be sufficient to realize the benefit of the Company's deferred tax assets over time. In the event that actual results differ from these estimates, or if Janus' historical trend of positive operating income changes, Janus may be required to record a valuation allowance on deferred tax assets, which could have a material adverse effect on Janus' consolidated financial condition and results of operations.

Income Tax Contingencies

At December 31, 2007, Janus has an accrued liability of $34.7 million related to tax contingencies for issues raised by various taxing authorities. At any one time, tax returns filed in previous years are subject to audit by various taxing authorities. As a result of these audits and negotiations, additional tax assessments may be proposed or tax contingencies recorded in prior years may be reversed. On January 1, 2007, Janus adopted the provisions of Financial Accounting Standards Board ("FASB") issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"), which sets forth a specific recognition threshold and measurement method for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. As a result of the implementation of FIN 48, Janus reduced its tax contingencies liability by $29.3 million. The reduction in the liability and the related change in deferred taxes were accounted for as an increase to retained earnings on January 1, 2007.

Accounting for Intangible Assets and Goodwill

Intangible assets and goodwill comprise $2.5 billion, or 69%, of total assets at December 31, 2007. Goodwill and intangible assets require significant management estimates and judgment, including the valuation and expected life determination in connection with the initial purchase price allocation and the ongoing evaluation for impairment. Janus separately tests goodwill and indefinite-lived intangible assets for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired.

In connection with the purchase price allocation of acquisitions, Janus will rely on in-house financial expertise or utilize a third-party expert, if considered necessary. Valuations generally rely on management's estimates and judgments as to growth rates and operating margins over a range of possible assumptions for various products, distribution channels and business strategies.

Goodwill represents the excess of cost over the fair value of the identifiable net assets of acquired companies and is not amortized. Goodwill is tested annually for impairment by comparing the fair value of the "reporting unit" associated with the goodwill to the reporting unit's recorded value. If the fair value of the reporting unit is less than its recorded value, it would generally indicate an impairment of goodwill. For purposes of testing goodwill for impairment, Janus has identified one reporting unit.

Indefinite-lived intangible assets primarily represent mutual fund advisory contracts, brand name and trademark. The assignment of indefinite lives to mutual fund advisory contracts, brand name and trademark is based on the assumption that they are expected to generate cash flows indefinitely. This assumption, with respect to mutual fund advisory contracts, is supported by the fact that historically there have not been significant switches between fund managers in the mutual fund industry. Indefinite-lived intangible assets are tested annually for impairment by comparing the fair value of the asset to its carrying value.

Definite-lived intangible assets represent client relationships, which are amortized over their estimated lives of seven to 25 years using the straight-line method. Definite-lived intangible assets are tested only when there are indications of impairment. One component of Janus' definite-lived intangible assets is subadvised contracts. Each subadvised contract has a specific allocation of value and therefore, the loss of an individual contract will cause an impairment charge. Janus recorded impairments of $0.4 million and $11.0 million in 2007 and 2006, respectively, associated with the termination of subadvised contracts. There were no impairments of subadvised contracts in 2005. At December 31, 2007, the net book value of intangible assets related to subadvised contracts was $13.4 million.

To complete the annual tests for potential impairment of intangible assets and goodwill, Janus utilizes a discounted cash flow analysis that requires assumptions regarding projected future earnings and discount rates. In projecting future earnings, Janus considers the following: performance compared to peers; significant changes in the underlying business and products; material and ongoing negative industry or economic trends; and/or other factors that may influence future earnings. Changes in the assumptions underlying the discounted cash flow analysis could materially affect Janus' impairment conclusion. Due to the significance of the identified intangible assets and goodwill to Janus' consolidated balance sheet, any impairment charge could have a material adverse effect on the Company's financial condition and results of operations.

Valuation of Investment Securities

Janus records all investment securities classified as trading or available-for-sale at fair value. Fair value is generally determined using observable market data based on recent trading activity. Where observable market data is unavailable due to a lack of trading activity, Janus utilizes independent third parties or internally developed models to estimate fair value. Estimating fair value requires significant management judgment, including benchmarking to similar instruments with observable market data and applying appropriate discounts that reflect differences between the securities that Janus is valuing and the selected benchmark. Depending on the type of securities owned by Janus, other valuation methodologies may be required. Any variation in the assumptions used to approximate fair value could have a material adverse effect on the Company's financial condition and results of operations.

Janus periodically evaluates the carrying value of investment securities classified as available-for-sale or held-to-maturity for potential impairment. In determining if an impairment exists, Janus considers the duration, extent and circumstances of any decline in fair value. If the decline in value is determined to be other than temporary, the carrying value of the security is written down to fair value with the loss recognized currently in earnings.

Equity Compensation

Janus uses the Black-Scholes option pricing model to estimate the fair value of stock options for recording compensation expense. The Black-Scholes model requires management to estimate certain variables, some of which may not be supported by historical activity because of Janus' short history as a publicly traded company. Such estimates include the lives of options from grant date to exercise date, the volatility of the underlying shares and future dividend rates. The two most significant estimates in the Black-Scholes model are volatility and expected life. An increase in the volatility rate increases the value of stock options and a decrease causes a decline in value. Janus estimated expected volatility using an average of Janus' historical volatility and industry and market averages, as appropriate. For expected lives, an increase in the expected life of an option increases its value. Janus factored in employee termination rates combined with vesting periods to determine the average expected life used in the model.

Janus records equity compensation net of estimated forfeitures over the vesting term. Determining the forfeiture estimate requires significant judgment as to the number of actual awards that will ultimately vest over the term of the award. The estimate is reviewed quarterly and any change in actual forfeitures in comparison to estimates may cause an increase or decrease in the ultimate expense recognized in that period and future periods. During the third quarter 2006, the forfeiture estimate was adjusted to reflect higher than expected employee departures resulting in a $5.0 million decrease to long-term incentive compensation expense.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

RESULTS OF OPERATIONS



Overview



Janus derives substantially all of its revenue and net income from its Investment Management operations, which provides investment management and administrative services to mutual funds, separate accounts and institutional clients in both domestic and international markets. Janus provides investment advisory services through its primary subsidiaries, Janus Capital Management LLC (“JCM” or “Janus ex-INTECH”) and Enhanced Investment Technologies, LLC (“INTECH”). The Company also owns a printing and fulfillment business (the “Printing and Fulfillment operations”). In September 2007, Janus committed to a plan to pursue the sale of the Printing and Fulfillment operations and accordingly, it has been reported as discontinued operations.

Revenues are generally based upon a percentage of the market value of assets under management and are calculated as a percentage of the daily average asset balance in accordance with contractual agreements with the Company’s mutual funds, separate accounts and subadvised relationships (collectively referred to herein as “products” or “investment products”). Certain investment products are also subject to performance fees which vary based on their relative performance as compared to a benchmark index and the level of assets subject to such fees. Assets under management primarily consist of domestic and international equity and debt securities. Accordingly, fluctuations in the financial markets, relative investment performance, sales and redemptions of investment products, and changes in the composition of assets under management are all factors that have a direct effect on Janus’ operating results.



INVESTMENT MANAGEMENT OPERATIONS



Highlights for the current quarter include:



• Janus ex-INTECH net flows were positive for the second consecutive quarter.

• As of September 30, 2007, approximately 89%, 73% and 67% of the funds in the Company’s primary fund family, Janus Investment Fund (“JIF”), were in the top half of their Lipper categories on a one-, three- and five-year total return basis, respectively.

• Net income from continuing operations was $50.8 million, or $0.29 per diluted share.

• Janus repurchased 6.5 million shares of its common stock at a total price of $183.5 million.

Average assets under management increased 26.3% and 19.9% for the three- and nine-month periods ended September 30, 2007, respectively, as compared to the same periods in 2006. The increase in average assets under management is a result of market appreciation/fund performance and positive net flows.

INTECH experienced net outflows for the first quarter since its acquisition by Janus in 2002. INTECH outflows are partially attributable to the recent relative underperformance of certain key investment strategies. Continued underperformance may lead to additional INTECH outflows.



Results of Investment Management Operations


Three Months Ended September 30, 2007, Compared with Three Months Ended September 30, 2006


Revenues



Investment management fees increased $45.0 million, or 24.5%, as a result of the 26.3% increase in average assets under management.



Performance fees have historically been earned on certain INTECH institutional accounts. Beginning in the first quarter 2007, certain mutual funds also became subject to performance fees. The increase in performance fee revenue was primarily due to performance fees earned on mutual funds, partially offset by lower fees on INTECH institutional accounts as a result of recent relative underperformance.



Shareowner servicing fees and other revenue improved over the comparable prior year period primarily as a result of an increase in transfer agent fees which are based on average JIF assets under management, excluding money market assets. Average JIF assets increased 24.0% over third quarter 2006.



Expenses



Employee compensation and benefits increased from the same period last year, principally due to higher base salaries, investment team compensation and commissions. Base salaries increased $2.8 million from annual merit raises and growth in the number of employees. Investment team compensation increased $11.1 million due to higher management fee revenue and relative investment performance. The investment team compensation plan implemented in the first quarter 2007 is linked to individual long-term performance, but also ties the aggregate level of compensation to investment management fee revenue. As management fee revenue increases, investment management compensation is expected to increase as well. Sales commissions increased $2.6 million due to higher fund sales.



Long-term incentive compensation declined quarter-to-quarter due to the final vesting of the 2002 restricted stock grant in the first quarter 2007, partially offset by an increase related to the 2007 annual grant awarded in February.



Distribution expense increased $9.3 million, or 35.6%, primarily as a result of the growth in assets under management subject to third-party concessions. Distribution fees are calculated based on a contractual percentage of the market value of assets under management distributed through third-party intermediaries.



Interest expense for the three months ended September 30, 2007, increased $10.8 million as a result of an increase in outstanding debt from $650.4 million as of September 30, 2006, to $1,127.6 million as of September 30, 2007.

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