Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2009

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from to

Commission File Number 001-15253

Janus Capital Group Inc.

(Exact name of registrant as specified in its charter)

Delaware		43-1804048
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

151 Detroit Street, Denver, Colorado		80206
(Address of principal executive offices)		(Zip Code)

(303) 333-3863

(Registrant’s telephone number, including area code)

Not applicable

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes x No o

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

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

Large Accelerated Filer x		Accelerated Filer o

Non-Accelerated Filer o		Smaller Reporting Company o

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

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

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

JANUS CAPITAL GROUP INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in Millions)

	September 30,		December 31,
	2009		2008
ASSETS

Current assets:
Cash and cash equivalents	$	236.4	$	282.6
Marketable securities	100.5		125.3
Accounts receivable	113.4		101.1
Income taxes receivable	22.9		16.4
Other current assets	72.3		58.5
Total current assets	545.5		583.9

Other assets:
Other assets	77.4		60.2
Property and equipment, net	50.5		51.1
Intangibles, net	1,202.4		1,321.2
Goodwill	574.6		1,320.3

Total assets	$	2,450.4	$	3,336.7

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	4.4	$	0.5
Accrued compensation and benefits	67.4		90.0
Current portion of long-term debt	—		22.0
Other accrued liabilities	82.6		44.1
Total current liabilities	154.4		156.6

Other liabilities:
Long-term debt	790.2		1,106.0
Deferred income taxes	387.7		388.1
Other liabilities	52.3		62.4
Total liabilities	1,384.6		1,713.1

Commitments and contingencies

Redeemable noncontrolling interests	87.5		106.8

STOCKHOLDERS’ EQUITY

Preferred stock	—		—
Common stock	1.8		1.6
Retained earnings	967.0		1,510.6
Accumulated other comprehensive loss (income)	0.7		(5.3		)
Total JCG stockholders’ equity	969.5		1,506.9
Noncontrolling interests	8.8		9.9
Total stockholders’ equity	978.3		1,516.8

Total liabilities and stockholders’ equity	$	2,450.4	$	3,336.7

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

JANUS CAPITAL GROUP INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in Millions, Except Per Share Data)

	Three months ended						Nine months ended
	September 30,						September 30,
	2009			2008			2009			2008

Revenues:
Investment management fees	$	185.4		$	218.9		$	482.0		$	684.2
Performance fees	7.4			8.8			17.3			26.0
Shareowner servicing fees and other	34.8			47.7			98.8			150.6
Total	227.6			275.4			598.1			860.8

Operating Expenses:
Employee compensation and benefits	85.7			81.2			214.1			264.6
Long-term incentive compensation	19.5			10.7			46.9			35.3
Marketing and advertising	6.5			8.0			20.3			24.5
Distribution	29.2			36.5			74.7			111.0
Depreciation and amortization	8.7			10.1			25.6			30.7
General, administrative and occupancy	48.4			35.6			113.0			106.8
Goodwill and intangible asset impairments	—			—			856.7			—
Total	198.0			182.1			1,351.3			572.9

Operating income (loss)	29.6			93.3			(753.2		)	287.9

Interest expense	(18.6		)	(18.9		)	(58.2		)	(56.6		)
Investment gains (losses), net	0.9			(32.3		)	(6.0		)	(38.8		)
Other income, net	0.1			1.4			0.5			6.6
Gain on early extinguishment of debt	5.8			—			5.8			—
Income (loss) before taxes and equity earnings	17.8			43.5			(811.1		)	199.1

Income tax provision	(6.0		)	(17.2		)	26.5			(65.5		)
Equity in earnings of unconsolidated affiliate	—			2.5			—			6.8

Income (loss) from continuing operations	11.8			28.8			(784.6		)	140.4

Loss from discontinued operations	—			(0.6		)	—			(1.5		)

Net income (loss)	11.8			28.2			(784.6		)	138.9
Noncontrolling interest	(3.6		)	(2.8		)	(9.5		)	(9.8		)

Net income (loss) attributable to JCG	$	8.2		$	25.4		$	(794.1	)	$	129.1

Basic earnings (loss) per share attributable to JCG common shareholders:
Income (loss) from continuing operations	$	0.05		$	0.17		$	(4.89	)	$	0.82
Loss from discontinued operations	—			—			—			(0.01		)
Net income (loss)	$	0.05		$	0.17		$	(4.89	)	$	0.81

Diluted earnings (loss) per share attributable to JCG common shareholders:
Income (loss) from continuing operations	$	0.05		$	0.16		$	(4.89	)	$	0.80
Loss from discontinued operations	—			—			—			(0.01		)
Net income (loss)	$	0.05		$	0.16		$	(4.89	)	$	0.79

Amounts attributable to JCG common shareholders:
Income (loss) from continuing operations	$	8.2		$	26.0		$	(794.1	)	$	130.6
Loss from discontinued operations	—			(0.6		)	—			(1.5		)
Net income (loss)	$	8.2		$	25.4		$	(794.1	)	$	129.1

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

JANUS CAPITAL GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in Millions)

	Nine months ended
	September 30,
	2009			2008
CASH FLOWS PROVIDED BY (USED FOR):
Continuing Operations
Operating Activities:
Net income (loss)	$	(784.6	)	$	140.4
Adjustments to net income:
Depreciation and amortization	25.6			30.7
Deferred income taxes	(13.7		)	(8.9		)
Amortization of stock-based compensation	30.3			25.3
Investment losses, net	6.0			38.8
Goodwill and intangible asset impairments	856.7			—
Gain on early extinguishment of debt	(5.8		)	—
Payment of deferred commissions, net	(5.7		)	(2.2		)
Other, net	5.4			4.4
Changes in working capital items:
Accounts receivable	(12.1		)	28.4
Other current assets	(14.8		)	(26.6		)
Accounts payable and accrued compensation payable	(18.7		)	(46.3		)
Other liabilities	12.3			(15.9		)
Net operating	80.9			168.1

Investing Activities:
Purchase of property and equipment	(8.1		)	(14.1		)
Acquisitions	(1.3		)	(67.7		)
Purchase of marketable securities	(49.2		)	(63.7		)
Proceeds from sales and maturities of marketable securities	55.3			65.8
Distribution of cash from discontinued operations	—			13.5
Net investing	(3.3		)	(66.2		)

Financing Activities:
Proceeds from issuance of long-term debt	170.0			—
Debt issuance costs	(8.5		)	—
Repayment of long-term debt	(456.0		)	—
Issuance of common stock	218.1			—
Purchase of noncontrolling interests	(27.5		)	—
Proceeds from stock plans	0.9			21.5
Excess tax benefit from equity-based compensation	0.4			4.4
Repurchase of common stock	—			(289.8		)
Distributions to noncontrolling interest	(14.2		)	(14.6		)
Principal payments under capital lease obligations	(0.5		)	—
Dividends paid to shareholders	(6.5		)	(6.5		)
Net financing	(123.8		)	(285.0		)

Cash and Cash Equivalents:
Net decrease	(46.2		)	(183.1		)
At beginning of period	282.6			480.7
At end of period	$	236.4		$	297.6

Discontinued Operations:
Operating activities	$	(0.1	)	$	(5.0	)
Investing activities	—			2.8

Cash and Cash Equivalents:
Net decrease	(0.1		)	(2.2		)
At beginning of period	0.4			4.3
At end of period	$	0.3		$	2.1

Supplemental Cash Flow Information:
Cash paid for interest	$	47.5		$	44.0
Cash paid (received) for income taxes	$	(0.6	)	$	94.1

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

JANUS CAPITAL GROUP INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(Amounts in Millions, Except Per Share Data)

									Accumulated
									Other			Nonredeemable			Total
			Common			Retained			Comprehensive			Noncontrolling			Stockholders’
	Shares		Stock			Earnings			Income			Interest			Equity

Balance at December 31, 2007	166.3		$	1.7		$	1,717.0		$	4.8		$	—		$	1,723.5
Cumulative-effect adjustment for the adoption of a new accounting principle	—		—			(236.7		)	—			7.1			(229.6		)
Balance at January 1, 2008	166.3		1.7			1,480.3			4.8			7.1			1,493.9
Net income attributable to JCG						136.9						2.4			139.3
Net unrealized loss on marketable securities									(3.8		)				(3.8		)
Amortization of net loss on cash flow hedge									0.5						0.5
Reclassification for net gains included in net income									(0.9		)				(0.9		)
Foreign currency translation adjustment									(5.9		)				(5.9		)
Comprehensive income															129.2
Amortization of stock-based compensation						29.3						2.1			31.4
Issuance and forfeitures of restricted stock awards	1.6														—
Tax impact of stock-based compensation						3.4									3.4
Stock option exercises	1.1					21.6									21.6
Repurchase of common stock	(11.1	)	(0.1		)	(291.6		)							(291.7		)
Noncontrolling interest in consolidated investment products												1.1			1.1
Purchase of noncontrolling interests												(0.3		)	(0.3		)
Distributions to noncontrolling interests												(2.5		)	(2.5		)
Change in value of redeemable noncontrolling interest						137.2									137.2
Common stock dividends ($0.04 per share)						(6.5		)							(6.5		)
Balance at December 31, 2008	157.9		1.6			1,510.6			(5.3		)	9.9			1,516.8

Net loss attributable to JCG						(794.1		)				2.1			(792.0		)
Net unrealized gain on marketable securities									4.1						4.1
Amortization of net loss on cash flow hedge									1.1						1.1
Foreign currency translation adjustment									0.8						0.8
Comprehensive income															(786.0		)
Common stock issuance	20.9		0.2			217.9									218.1
Convertible debt issuance						26.4									26.4
Amortization of stock-based compensation						27.2						3.3			30.5
Issuance and forfeitures of restricted stock awards	3.2														—
Tax impact of stock-based compensation						(4.5		)							(4.5		)
Stock option exercises						0.9									0.9
Noncontrolling interest in consolidated investment products												(1.2		)	(1.2		)
Purchase of noncontrolling interests												(2.3		)	(2.3		)
Distributions to noncontrolling interests												(3.0		)	(3.0		)
Change in value of redeemable noncontrolling interest						(10.9		)							(10.9		)
Common stock dividends ($0.04 per share)						(6.5		)							(6.5		)
Balance at September 30, 2009	182.0		$	1.8		$	967.0		$	0.7		$	8.8		$	978.3

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

JANUS CAPITAL GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Basis of Presentation

In the opinion of Janus Capital Group Inc. (collectively, “JCG” or the “Company”) management, the accompanying unaudited interim consolidated financial statements contain all adjustments necessary to fairly present the financial position, results of operations and cash flows of the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All such adjustments are of a normal recurring nature. Such unaudited interim financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying financial statements through the issuance date, October 22, 2009. These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, as updated for the retrospective application of new accounting guidance related to noncontrolling interests and redeemable noncontrolling interests. The updated 2008 Form 10-K items were filed in a Current Report on Form 8-K on July 14, 2009.

The accompanying consolidated financial statements have been prepared on a consistent basis with the accounting policies described in Note 2 to the consolidated financial statements that are presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, as updated for the retrospective application of new guidance related to noncontrolling and redeemable noncontrolling interests.

Note 2 – Recent Accounting Guidance

In June 2009, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance related to the consolidation of variable interest entities which amends guidance for identifying the primary beneficiary in variable interest entities, requires ongoing assessments for purposes of identifying the primary beneficiary and eliminates the scope exception for qualifying special-purpose entities. This new guidance will be effective for JCG’s first quarter 2010. JCG is assessing the impact on its consolidated financial statements.

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

Note 3 – Acquisition

Each fiscal year through 2012, each of the two founding members of INTECH Investment Management LLC (“INTECH”) has the option to require JCG to purchase from him an ownership interest of up to approximately 1.5% of INTECH at fair value. On April 30, 2009, the two INTECH founding members exercised their put rights and JCG increased its ownership of INTECH to approximately 92% by purchasing an additional 3% interest for $25.3 million in cash. As a result of the new guidance related to redeemable noncontrolling interests effective January 1, 2009, the additional interest in INTECH resulted in a reduction of redeemable noncontrolling interests on the Consolidated Balance Sheets in an amount equal to the purchase price. No assets will be recognized as a result of the April 2009 acquisition of an additional interest in INTECH or future acquisitions of noncontrolling interests. The pro forma results of operations have not been presented as they would not have been materially different from reported amounts.

Note 4 – Marketable Securities

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

	September 30, 2009									December 31, 2008
			Gross		Gross			Estimated				Gross		Gross			Estimated
	Cost		Unrealized		Unrealized			Fair		Cost		Unrealized		Unrealized			Fair
	Basis		Gains		Losses			Value		Basis		Gains		Losses			Value

Trading securities (carried at fair value)	$	51.4	$	3.2	$	(6.0	)	$	48.6	$	81.9	$	1.0	$	(20.5	)	$	62.4
Available-for-sale securities (carried at fair value)
Investments in advised funds	9.5		2.3		(0.1		)	11.7		14.7		—		(4.8		)	9.9
Structured investment vehicle	40.2		—		—			40.2		52.2		—		—			52.2
Derivative instruments	—		—		—			—		0.8		—		—			0.8
	$	101.1	$	5.5	$	(6.1	)	$	100.5	$	149.6	$	1.0	$	(25.3	)	$	125.3

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

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

Investments in seed capital are classified as follows:

Trading Securities

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

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

Available-for-Sale Securities

Investments in Advised Funds

At September 30, 2009, investments in advised funds totaled $11.7 million. Investments in advised funds are carried in JCG’s consolidated financial statements at fair value, with changes in value recognized as gains and losses in other comprehensive income. Accumulated gains and losses are reclassified to earnings when the securities are sold. JCG periodically reviews the carrying value of investments in advised funds for impairment by evaluating the nature, duration and extent 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 through earnings. No impairment charges were recognized during the three months ended September 30, 2009. Other-than-temporary impairment charges of $5.2 million were recognized during the

nine months ended September 30, 2009. No impairment charges were recognized during the three and nine months ended September 30, 2008 for investments in advised funds.

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

Structured Investment Vehicle (“SIV”)

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

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

Derivative Instruments

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

Note 5 – Intangible Assets and Goodwill

JCG’s intangible assets and goodwill are summarized below (in millions) :

	December 31,			Impairment						September 30,
	2008			Charges			Additions			2009

Indefinite-lived intangible assets:
Mutual fund advisory contracts	$	943.1		$	(109.7	)	$	—		$	833.4
Brand name and trademark	270.5			—			—			270.5
Amortized intangible assets:
Client relationships	162.5			—			—			162.5
Accumulated amortization	(54.9		)	—			(9.1		)	(64.0		)
Net intangible assets	$	1,321.2		$	(109.7	)	$	(9.1	)	$	1,202.4

Goodwill	$	1,320.3		$	(747.0	)	$	1.3		$	574.6

JCG conducts impairment analyses of indefinite-lived intangible assets and goodwill annually as of October 1 st or more frequently if events or circumstances indicate that the carrying value may not be recoverable. Indefinite-lived intangible assets represent mutual fund advisory contracts, brand name and trademark. In addition, amortized intangible assets are evaluated for impairment when events or circumstances indicate that the carrying value may not be recoverable. JCG’s amortized intangible assets represent client relationships. The October 2008 tests of indefinite-lived intangible assets and goodwill indicated that estimated fair values exceeded their respective book values and no impairment charges were recognized.

In response to significant declines in global markets, JCG’s stock price, assets under management and revenues during the fourth quarter 2008, JCG re-evaluated indefinite-lived intangible assets, amortized intangible assets and goodwill for impairment as of December 31, 2008. The results of the assessments as of December 31, 2008, indicated that the estimated fair values of indefinite-lived intangible assets, amortized intangible assets and goodwill continued to exceed book value, requiring no impairment charges.

Based on further declines in global markets, JCG’s stock price, assets under management and revenues subsequent to December 31, 2008, JCG revised its operating forecast downward and again evaluated indefinite-lived intangible assets, amortized intangible assets and goodwill for impairment as of March 31, 2009. As a result of these assessments, impairment charges of $109.7 million and $747.0 million were recognized on mutual fund advisory contracts and

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

Note 6 – Fair Value Measurements

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

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

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

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

The following table presents assets and liabilities carried at fair value as of September 30, 2009 (in millions) :

	Level 1		Level 2		Level 3		Total
Trading securities	$	37.7	$	10.9	$	—	$	48.6

Available-for-sale securities
Investments in advised funds	7.5		4.2		—		11.7
Structured investment vehicle securities	—		—		40.2		40.2
Total marketable securities	45.2		15.1		40.2		100.5

Other assets
Mutual fund unit award hedge asset	60.5		—		—		60.5
Deferred compensation hedge asset	19.7		—		—		19.7

Total assets carried at fair value	$	125.4	$	15.1	$	40.2	$	180.7

Redeemable noncontrolling interests	—		—		87.5		87.5

Total liabilities carried at fair value	$	—	$	—	$	87.5	$	87.5

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

JCG’s Level 3 recurring fair value measurements include SIV securities and redeemable noncontrolling interests. Nonrecurring Level 3 fair value measurements include goodwill and mutual fund advisory contracts valued at $574.6 million and $833.4 million, respectively, as of March 31, 2009, the most recent valuation date. Because of the significance of the unobservable inputs in the fair value measurements of these assets and liabilities, such measurements have been classified as Level 3.

The SIV securities were issued by a structured investment vehicle that purchased high grade medium- and long-term fixed-income instruments financed by issuing low-cost, short-term senior debt instruments such as asset-backed commercial paper and asset-backed medium-term notes. To measure fair value, JCG undertook a detailed analysis of the assets underlying the SIV securities and benchmarked those assets against instruments of a similar type with comparable yields, maturities and credit ratings for which quoted market prices are readily available. Discounts have been applied to the quoted market prices of the benchmark instruments to adjust for varying yields, credit ratings or other distinguishing characteristics. The valuation methodology for the SIV securities has been consistently applied since their acquisition in 2007 and subsequent restructuring in 2009.

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

Redeemable noncontrolling interests in INTECH are measured at fair value using a discounted cash flow methodology. Significant inputs to the discounted cash flow analysis include forecasted operating results, discount rate and terminal multiple of cash flows. Redeemable noncontrolling interests in Perkins are measured by a contractual formula intended to yield an amount representative of fair value. See Note 9 for further discussion of redeemable noncontrolling interests.

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

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

Carrying value at September 30, 2009	$	40.2		$	87.5

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

Note 7 – Debt

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

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

Fair Value of Debt

The fair value of debt was determined using broker quotes and recent trading activity for each of the notes listed above.

Convertible Senior Notes Offerings

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

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

Tender Offer for Certain Outstanding Senior Notes

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

	Aggregate Principal Outstanding		Principal Amount Tendered		Tender Offer Consideration		Gross Gain on Debt Tender		Deferred Costs		Tender Costs		Net Gain / (Loss) on Debt Tender

5.875% Senior Notes due 2011	$	275.0	$	182.8	$	182.8	$	—	$	1.8	$	1.0	$	(2.8	)

6.250% Senior Notes due 2012	300.0		179.1		175.5		3.6		0.9		1.0		1.7

6.700% Senior Notes due 2017	450.0		81.4		73.3		8.1		0.8		0.4		6.9

Total	$	1,025.0	$	443.3	$	431.6	$	11.7	$	3.5	$	2.4	$	5.8

Deferred costs include the write-off of previously capitalized bond discounts, issue costs and a deferred loss on interest rate swap.

Interest Rate Adjustment Covenant

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

Credit Facility

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

Capital Lease Obligations

JCG’s capital lease obligations represent leased computer equipment. The carrying value of the obligations at September 30, 2009 total $2.1 million and are included in other accrued liabilities and other liabilities. The related lease terms extend through 2012.

Note 8 – Income Tax Contingencies

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

Note 9 – Noncontrolling Interests

JCG adopted the new accounting guidance related to noncontrolling interests and redeemable noncontrolling interests effective January 1, 2009 and retrospectively applied such provisions to reported prior periods. As a result of the new guidance, noncontrolling interests that are not subject to put rights have been reclassified to permanent equity with no change in the measurement principles previously applied to these interests. Redeemable noncontrolling interests remain classified in mezzanine equity and are measured at estimated fair value as of the balance sheet date. Earnings attributable to noncontrolling interests that are and are not subject to put rights have been combined in the Consolidated Statements of Income. Presentation of the noncontrolling interests in the Consolidated Statements of Income has been changed to reflect net income with and without consideration of the noncontrolling interests. Earnings per share continues to be calculated after consideration of the noncontrolling interests.

Noncontrolling Interests that Are Not Subject to Put Rights

Noncontrolling interests that are not subject to put rights consist of third party investors in consolidated investment products, certain INTECH and Perkins interests granted to employees, and undistributed earnings of $5.2 million attributable to such interests. Certain of the INTECH and Perkins interests granted to employees will become subject to put rights upon vesting.

Redeemable Noncontrolling Interests

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

INTECH

Each fiscal year through 2012, each of the two INTECH founding members has the option to require JCG to purchase from him an ownership interest of up to approximately 1.5% of INTECH at fair value. At September 30, 2009, the two founders have an aggregate ownership interest of approximately 5% in INTECH. In the event that either INTECH founder does not fully exercise his annual voluntary sale option in a given year, JCG has the option to require the INTECH founder to sell the remaining balance of the option for that year at fair value.

In addition, each founder can require JCG to purchase his INTECH interests when his employment is terminated. The purchase price of the departing founder’s INTECH interests will be based on fair value. Each founder is entitled to retain approximately 1% of INTECH’s shares then 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 cooperation with the transition. Total INTECH interests held by the two founders have an estimated value of approximately $42.2 million as of September 30, 2009.

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

Perkins

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

Note 10 – Common Stock Issuance

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

Note 11 – Long-Term Incentive Compensation

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

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

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

Note 12 – Other Income, Net

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

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

Note 13 – Earnings Per Share

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

	Three months ended					Nine months ended
	September 30,					September 30,
	2009		2008			2009			2008
Amounts attributable to JCG common shareholders:
Income (loss) from continuing operations	$	8.2	$	26.0		$	(794.1	)	$	130.6
Loss from discontinued operations	—		(0.6		)	—			(1.5		)

Net income (loss)	$	8.2	$	25.4		$	(794.1	)	$	129.1

Basic earnings (loss) per share attributable to JCG common shareholders:
Weighted average common shares outstanding	173.6		157.1			162.5			160.0

Income (loss) from continuing operations	$	0.05	$	0.17		$	(4.89	)	$	0.82
Loss from discontinued operations	—		—			—			(0.01		)

Basic earnings (loss) per share	$	0.05	$	0.17		$	(4.89	)	$	0.81

Diluted earnings per share attributable to JCG common shareholders:
Weighted average common shares outstanding	173.6		157.1			162.5			160.0

Dilutive effect of stock options and unvested restricted stock using the treasury stock method	3.0		2.5			—			2.4
Weighted average diluted common shares outstanding	176.6		159.6			162.5			162.4
Income (loss) from continuing operations	$	0.05	$	0.16		$	(4.89	)	$	0.80
Loss from discontinued operations	—		—			—			(0.01		)

Diluted earnings (loss) per share	$	0.05	$	0.16		$	(4.89	)	$	0.79