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TABLE OF CONTENTS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Table of Contents

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2015

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

LOGO

Janus Capital Group Inc.
(Exact name of registrant as specified in its charter)

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

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

 

80206
(Zip Code)

(303) 333-3863
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
 
Name of Each Exchange on Which Registered
Common Stock, $0.01 Per Share Par Value   New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý    No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

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 ý    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 ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy of information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller
reporting company)
  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 ý

As of June 30, 2015, the aggregate market value of common equity held by non-affiliates was $3,198,997,199. As of February 19, 2016, there were 185,897,108 shares of the Company's common stock, $0.01 par value per share, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated herein by reference into Part of the Form 10-K as indicated:

Document
  Part of Form 10-K into Which Incorporated 
Company's Definitive Proxy Statement for the 2016 Annual Meeting of Stockholders   Part III

   


Table of Contents


JANUS CAPITAL GROUP INC.
2015 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

 
   
  Page

PART I

Item 1.

 

Business

  2

Item 1A.

 

Risk Factors

  8

Item 1B.

 

Unresolved Staff Comments

  13

Item 2.

 

Properties

  13

Item 3.

 

Legal Proceedings

  14

Item 4.

 

Mine Safety Disclosures

  14

PART II

Item 5.

 

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

  15

Item 6.

 

Selected Financial Data

  18

Item 7.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

  19

Item 7A.

 

Quantitative and Qualitative Disclosures about Market Risk

  40

Item 8.

 

Financial Statements and Supplementary Data

  44

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

  94

Item 9A.

 

Controls and Procedures

  94

Item 9B.

 

Other Information

  94

PART III

Item 10.

 

Directors, Executive Officers and Corporate Governance

  94

Item 11.

 

Executive Compensation

  94

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

  94

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

  94

Item 14.

 

Principal Accountant Fees and Services

  94

PART IV

Item 15.

 

Exhibits and Financial Statement Schedules

  94

 

Signatures

  102

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PART I

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange Act of 1934 ("Exchange Act") and Section 27A of the Securities Act of 1933. In addition, Janus Capital Group Inc. and its subsidiaries (collectively, "JCG" or the "Company") may make other written and oral communications from time to time (including, without limitation, in the Company's 2015 Annual Report to Stockholders) that contain such statements. Forward-looking statements include statements as to industry trends, future expectations of the Company and other matters that do not relate strictly to historical facts and are based on certain assumptions by management. These statements are often identified by the use of words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "should," "estimate" or "continue," and similar expressions or variations. These statements are based on the beliefs and assumptions of Company management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, among others, the risks described in Part I, Item 1A, Risk Factors, and elsewhere in this report and other documents filed or furnished by JCG from time to time with the Securities and Exchange Commission ("SEC"). JCG cautions readers to carefully consider such factors. Furthermore, such forward-looking statements speak only as of the date on which such statements are made. Except to the extent required under applicable securities law and stock exchange rules, the Company undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

ITEM 1.    BUSINESS

JCG provides investment management, administration, distribution and related services to financial advisors, individuals and institutional clients through mutual funds, separate accounts, other pooled investment vehicles, exchange-traded products ("ETPs") and subadvised relationships (collectively referred to as "investment products") in both domestic and international markets. Over the last several years, JCG has expanded its business to become a more diversified manager with increased investment product offerings and distribution capabilities. JCG provides investment management competencies across a range of disciplines, including fundamental U.S. and global equities (growth and value), mathematical equities, fixed income and alternatives, through its subsidiaries, Janus Capital Management LLC ("Janus"), INTECH Investment Management LLC ("INTECH") and Perkins Investment Management LLC ("Perkins"). These subsidiaries specialize in specific investment styles, and each has its own unique and independent perspective. JCG's investment products are distributed through three primary channels: intermediary, institutional and self-directed. Each distribution channel focuses on specific investor groups and the unique requirements of each group. As of December 31, 2015, JCG's complex wide assets totaled $192.3 billion for mutual fund shareholders, clients and institutions around the globe.

JCG's complex-wide assets include all assets under management and ETPs. ETPs are not included in assets under management as the Company is not the named advisor or subadvisor to ETPs. Assets under management primarily consist of domestic and international equity and fixed income securities. Accordingly, fluctuations in domestic and international 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 JCG's operating results.

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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. Certain investment products are also subject to performance fees, which vary based on a product's relative performance as compared to a benchmark index and the level of assets subject to such fees.

Although JCG manages and distributes a wide range of investment products and services, the Company's management directs JCG's operations as one business, the investment management business, and thus operates in one business segment.

Subsidiaries

Janus

Janus has managed primarily growth equity portfolios since 1969 with the introduction of the Janus Fund. Janus has leveraged its research-driven investment philosophy and culture to other areas of the markets, including fundamental fixed income, global macro fixed income, diversified alternatives and ETPs. Independent thinking and fundamental research are at the core of Janus' investment culture across its investment product teams. Janus believes its depth of research, willingness to make concentrated investments when Janus believes it has a research edge and commitment to delivering strong long-term results for its investors differentiate Janus from its competitors.

At December 31, 2015, Janus managed $87.4 billion of long-term equity assets, $37.2 billion of fixed income assets and $1.3 billion of money market assets, or approximately 67% of total Company assets under management.

INTECH

INTECH has managed institutional portfolios since 1987, establishing one of the industry's longest continuous performance records of mathematical equity investment strategies. INTECH's unique investment process is based on a mathematical theorem that seeks to add value for clients by capitalizing on the volatility in stock price movements. INTECH's goal is to achieve long-term returns that outperform a specified benchmark index while controlling risks and trading costs. At December 31, 2015, INTECH managed $47.6 billion, or approximately 25% of total Company assets under management.

Perkins

Perkins has managed value-disciplined investment products since 1980, focusing on building diversified portfolios of what it believes to be high-quality, undervalued stocks with favorable reward characteristics. With its fundamental research and careful consideration for downside risk, Perkins has established a reputation as a leading value manager. Perkins offers value equity investment products across a range of U.S. asset classes and global equity. At December 31, 2015, Perkins managed $8.4 billion, or approximately 4% of total Company assets under management.

Acquisitions

Kapstream

On July 1, 2015, JCG announced and closed the acquisition of a controlling 51% voting interest in Kapstream Capital Pty Limited ("Kapstream"), a global macro fixed income asset manager located in Australia. The acquisition serves to further expand JCG's fixed income capabilities and build out its global macro fixed income team. Kapstream is part of the Company's global macro fixed income team and remains a separate, autonomous and distinct capability from the fundamental fixed income

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team. At December 31, 2015, Kapstream managed $7.2 billion, or approximately 4% of total Company assets under management.

VelocityShares

On December 1, 2014, JCG announced the closing of its acquisition of VS Holdings, Inc. ("VelocityShares"). VelocityShares is a sponsor of unique ETPs that are institutionally focused and offers sophisticated volatility management solutions. VelocityShares has recently launched a second business around innovative and intelligent exchange-traded funds ("ETFs") for diversified investment portfolios, currently focused on volatility-hedged equities and equal-risk weighted solutions. These ETF strategies, along with future product innovation, offer significant potential synergies between VelocityShares and JCG. VelocityShares-branded products had $3.2 billion in assets as of December 31, 2015. The majority of these assets represent tactical trading products serving short-term investors and traders in the form of exchange-traded notes ("ETNs"). ETNs are not included in assets under management.

Distribution Channels

JCG distributes its products through three channels: intermediary, institutional and self-directed. Each channel is discussed below.

Intermediary Channel

The intermediary channel serves U.S. financial advisors, variable insurance trusts, retirement platforms and ETFs. International mutual funds are also part of the intermediary channel and are offered through Janus Capital Funds Plc, a Dublin-domiciled mutual fund trust. Significant investments have been made to grow the Company's presence in the financial advisor subchannel, including increasing the number of external and internal wholesalers, enhancing the Company's technology platform and recruiting highly seasoned client relationship managers. At December 31, 2015, assets in the intermediary channel totaled $70.8 billion, or 37% of total complex-wide assets.

Institutional Channel

The institutional channel serves U.S. corporations, endowments, foundations, Taft-Hartley funds, public fund clients and non-U.S. separate accounts, and focuses on distribution direct to the plan sponsor and through consultants. Although the current asset base in this channel is weighted heavily toward INTECH's mathematical products, the Company has steadily increased its fixed income penetration, growing fixed income assets to $13.8 billion (including international institutional fixed income assets), an increase of approximately 85% compared to December 31, 2014. At December 31, 2015, assets in the institutional channel totaled $66.5 billion, or 34% of total complex-wide assets.

Self-Directed Channel

This channel serves existing individual investors who invest in JCG products through a mutual fund supermarket or directly with JCG. ETNs associated with VelocityShares are also part of the self-directed channel. At December 31, 2015, assets in the self-directed channel totaled $55.0 billion, or 29% of total complex-wide assets.

COMPETITION

The investment management industry is relatively mature and saturated with competitors that provide services similar to JCG. As such, JCG encounters significant competition in all areas of its business. JCG competes with other investment managers, mutual fund advisers, brokerage and

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investment banking firms, insurance companies, hedge funds, venture capitalists, banks and other financial institutions, many of which are larger, have proprietary access to certain distribution channels, have a broader range of product choices and investment capabilities, and have greater capital resources. Additionally, the marketplace for investment products is rapidly changing, investors are becoming more sophisticated, the demand for and access to investment advice and information is becoming more widespread, passive investment strategies are becoming more prevalent, and more investors are demanding investment vehicles that are customized to their individual requirements.

JCG believes its ability to successfully compete in the investment management industry significantly depends upon its ability to achieve consistently strong investment performance, provide exceptional client service and strategic partnerships, and develop and innovate products that will best serve its clients.

REGULATION

The investment management industry is subject to extensive federal, state and international laws and regulations intended to benefit and protect the shareholders of investment products such as those managed by JCG's subsidiaries and advisory clients of JCG's subsidiaries. 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 a global investment adviser. These laws and regulations generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the conduct of businesses and to impose sanctions for failure to comply with laws and regulations. Possible consequences for 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 imposition of censures and fines. Further, failure to comply with such laws and regulations may provide the basis for civil litigation that may also result in significant costs and reputational harm to JCG.

U.S. Regulation

JCG and certain of its U.S. subsidiaries are subject to laws and regulations from a number of government agencies and regulatory bodies, including, but not limited to, the SEC, the U.S. Department of Labor ("DOL"), the Financial Industry Regulatory Authority ("FINRA") and the Commodity Futures Trading Commission ("CFTC").

Investment Advisers Act of 1940

Certain subsidiaries of JCG are registered investment advisers under the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act") and, as such, are regulated by the SEC. The Investment Advisers Act requires registered investment advisers to comply with numerous and pervasive obligations, including, among others, recordkeeping requirements, operational procedures, registration and reporting requirements, and disclosure obligations. Certain subsidiaries of JCG are also registered with regulatory authorities in various countries and states, and thus are subject to the oversight and regulation by such countries' and states' regulatory agencies.

Investment Company Act of 1940

Certain of JCG's subsidiaries act as the adviser or subadviser to mutual funds, which are registered with the SEC pursuant to the Investment Company Act of 1940, as amended (the "1940 Act"). Certain of JCG's subsidiaries also serve as adviser or subadviser to investment products that are not

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required to be registered under the 1940 Act. As an adviser or subadviser to a registered investment company, these subsidiaries must comply with the requirements of the 1940 Act and related regulations, including, among others, 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

JCG's limited purpose broker-dealer subsidiary, Janus Distributors LLC ("JD"), is registered with the SEC under the Exchange Act and is a member of FINRA, the securities industry's domestic self-regulatory organization. JD is the general distributor and agent for the sale and distribution of shares of domestic mutual funds that are directly advised or serviced by certain of JCG's subsidiaries. The SEC imposes various requirements on JD's 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.

JD 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 broker-dealers and their employees for engaging in misconduct.

ERISA

Certain JCG 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 DOL 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 JCG subsidiary as well as some transactions by the fiduciaries (and several other related parties) to such plans.

CFTC

The CFTC has regulations that require Janus to register as a Commodity Pool Operator ("CPO") and become a member of the National Futures Association ("NFA") in connection with the operation of certain of the Company's products. The regulations generally impose certain registration, reporting and disclosure requirements on CPOs and products that utilize futures, swaps and other derivatives that are subject to CFTC regulation. The CFTC or NFA may institute proceedings to enforce applicable rules and regulations, and violations may result in fines, censure or the termination of CPO registration and NFA membership.

Dodd-Frank Wall Street Reform and Consumer Protection Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") was signed into law in July 2010. The Dodd-Frank Act established enhanced regulatory requirements for non-bank financial institutions designated as "systemically important" by the Financial Stability Oversight Council ("FSOC"). Subsequently, in April 2012, the FSOC issued a final rule and interpretive guidance related to the process by which it will designate non-bank financial companies as systemically important financial institutions ("SIFI"). Certain non-bank financial companies have since been designated as SIFIs and additional non-bank financial companies, including large asset

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management companies, may be designated as SIFIs in the future. If JCG were designated a SIFI, it would be subject to enhanced prudential measures, which could include capital and liquidity requirements, leverage limits, enhanced public disclosures and risk management requirements, annual stress testing by the Federal Reserve, credit exposure and concentration limits, and supervisory and other requirements. These heightened regulatory requirements could adversely affect the Company's business and operations. JCG is not a designated SIFI.

International Regulation

JCG increased its product offerings and international business activities over the past several years, resulting in increased exposure to international regulation. JCG's international subsidiaries are subject to the laws and regulations of non-U.S. jurisdictions and non-U.S. regulatory agencies and bodies, including the following:

Australian Securities and Investments Commission

Authorité des Marchés Financiers of France

Canadian Provincial Securities Commissions

Central Bank of Ireland

Commissione Nazionale per le Societa e la Borsa of Italy

Dubai Financial Services Authority

Federal Financial Supervisory Authority of Germany

Financial Conduct Authority in the United Kingdom

Financial Market Supervisory Authority of Switzerland

Financial Services Agency of Japan

Financial Supervisory Commission of Taiwan

Financial Supervisory Service and the Financial Services Commission of Korea

Monetary Authority of Singapore

Netherlands Authority for the Financial Markets

Securities and Futures Commission of Hong Kong

These regulatory agencies have broad supervisory and disciplinary powers, including, among others, the power to temporarily or permanently revoke the authorization to conduct regulated business, suspend registered employees, and censure and fine both regulated businesses and their registered employees. As JCG expands its international presence, the costs and risks associated with doing business in other countries will increase.

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 JCG's 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, 2015, JCG had 1,272 full-time employees. None of these employees are represented by a labor union.

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AVAILABLE INFORMATION

Copies of JCG's filings with the SEC can be obtained from the SEC's Public Reference Room at 100 F Street, N.E., Washington, DC 20549. Information can be obtained about the operation of the Public Reference Room by calling the SEC at (800) SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

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

JCG's Officer Code of Ethics for Chief Executive Officer and Senior Financial Officers (including its Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer) (the "Officer Code"); Corporate Code of Business Conduct for all employees; corporate governance guidelines; and the charters of key committees of the Board of Directors (including the Audit, Compensation, and Nominating and Corporate Governance committees) are available on the Investor Relations section of JCG's website (http://ir.janus.com), and printed copies are available to any shareholder upon request by calling JCG at (888) 834-2536. Any future amendments to or waivers of the Officer Code will be posted to the Investor Relations section of JCG's website.

ADDITIONAL FINANCIAL INFORMATION

See additional financial information about geographical areas in Part II, Item 8, Financial Statements and Supplementary Data, Note 19 — Geographic Information, of this Annual Report on Form 10-K.

ITEM 1A.    RISK FACTORS

JCG faces numerous risks, uncertainties and other factors that are substantial and inherent to its business, including market, operational, legal and regulatory risks. The following are significant factors that could affect JCG's business.

JCG's revenues and profits are primarily dependent on the value, composition and relative investment performance of its investment products.

Any decrease in the value, relative investment performance or amount of assets under management will cause a decline in revenues and operating results. Assets under management may decline for various reasons, many of which are not under JCG's control.

Factors that could cause assets under management and revenues to decline include the following:

Declines in equity markets.  JCG's assets under management are concentrated in the U.S. equity markets and, to a lesser extent, in the international equity markets. As such, declines in the financial markets as a whole or the market segments in which JCG's investment products are concentrated will cause assets under management to decrease.

Declines in fixed income markets.  In the case of fixed income investment products, which invest in high-quality short-term instruments as well as other fixed income securities of varying quality and duration, the value of the assets may decline as a result of changes in interest rates, available liquidity in the markets in which a security trades, an issuer's actual or perceived creditworthiness, or an issuer's ability to meet its obligations.

Redemptions and other withdrawals.  Investors may reduce their investments in specific JCG investment products or in the markets in which JCG's investment products are concentrated in

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Operations in international markets.  The investment products managed by JCG may have significant investments in international markets that are subject to risk of loss from political or diplomatic developments, government policies, civil unrest, currency fluctuations and changes in legislation related to foreign ownership. International markets, particularly emerging markets and frontier markets, which are often smaller and may not have the liquidity of established markets, may lack established regulations and may experience significantly more volatility than established markets.

Relative investment performance.  JCG's investment products are often judged on their performance as compared to benchmark indices or peer groups, or on an absolute return basis. Any period of underperformance of investment products may result in the loss of existing assets and affect JCG's ability to attract new assets. In addition, approximately 34% of the Company's assets under management at December 31, 2015, are subject to performance fees. Performance fees are based on each product's investment performance as compared to an established benchmark index over a specified period of time. If investment products subject to performance fees underperform their respective benchmark index for a defined period, JCG's revenues and thus results of operations may be adversely affected. In addition, performance fees subject JCG's revenues to increased volatility.

JCG's results are dependent on its ability to attract and retain key personnel.

The investment management business is highly dependent on the ability to attract, retain and motivate highly skilled and often highly specialized technical, executive, sales and investment management personnel. The market for qualified investment and sales professionals is extremely competitive and is increasingly characterized by the frequent movement of portfolio managers, analysts and salespersons among different firms. Any changes to management structure, shifts in corporate culture, changes to corporate governance authority, or adjustments or reductions to compensation could affect JCG's ability to retain key personnel and could result in legal claims. If JCG is unable to retain key personnel, it could adversely affect JCG's assets under management, results of operations and financial condition.

JCG is dependent upon third-party distribution channels to access clients and potential clients.

JCG's ability to market and distribute its investment products is significantly dependent on access to the client base of insurance companies, defined contribution plan administrators, securities firms, broker-dealers, financial advisors, banks and other distribution channels. These companies generally offer their clients various investment products in addition to, and in competition with, JCG. Further, the separate account business uses referrals from financial planners, investment advisers and other professionals. JCG cannot be certain that it will continue to have access to these third-party distribution channels or have an opportunity to offer some or all of its investment products through these channels. In addition, JCG's existing relationships with third-party distributors and access to new distributors could be adversely affected by recent consolidation within the financial services industry. Consolidation may result in increased distribution costs, a reduction in the number of third parties distributing JCG's investment products or increased competition to access third-party distribution channels. The inability to access clients through third-party distribution channels could adversely affect JCG's business prospects, assets under management, results of operations and financial condition.

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INTECH's investment process is highly dependent on key employees and proprietary software.

INTECH's investment process is based on complex and proprietary mathematical models that seek to outperform various indices by capitalizing on the volatility in stock price movements while controlling trading costs and overall risk relative to the index. The maintenance of such models for current products and the development of new products are highly dependent on certain key INTECH employees. If INTECH is unable to retain key personnel or properly transition key personnel responsibilities to others, or if the mathematical investment strategies fail to produce the intended results, INTECH may not be able to maintain its historical level of investment performance, which could adversely affect JCG's assets under management, results of operations and financial condition.

Changes in the value of seeded investment products could affect JCG's nonoperating income or earnings and could increase the volatility of its earnings.

JCG periodically adds new investment strategies to its investment product offerings by providing the initial cash investment or "seeding" to facilitate the launch of the product. JCG may also provide substantial supplemental capital to an existing investment product in order to accelerate the growth of a strategy and attract outside investment in the product. A decline in the valuation of these seeded investments could increase the volatility of JCG's earnings and result in a decline in earnings and financial condition.

JCG's international operations are subject to foreign risks, including political, regulatory, economic and currency risks.

JCG operates offices and advises clients outside of the U.S., and is thereby subject to risks inherent in doing business internationally. These risks may include changes in applicable laws and regulatory requirements; difficulties in staffing and managing foreign operations; difficulties in collecting investment management fees receivable; different, and in some cases less stringent, legal, regulatory and accounting regimes; political instability; fluctuations in currency exchange rates; expatriation controls; expropriation risks; and potential adverse tax consequences. These or other risks related to JCG's international operations could adversely affect the Company's assets under management, results of operations and financial condition.

The regulatory environment in which JCG operates has changed and may continue to change.

JCG may be adversely affected as a result of new or revised legislation or regulations, or by changes in the interpretation or enforcement of existing laws and regulations. The Company has increased its product offerings and international business activities over the past several years, resulting in increased exposure to international regulation. The costs and burdens of compliance with these and other new reporting and operational requirements and regulations have increased significantly and may continue to increase the cost of operating mutual funds and other investment products, which could adversely affect JCG's assets under management, results of operations and financial condition. (See Part I, Item 1, Business — Regulation, of this Annual Report on Form 10-K.)

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Any damage to JCG's reputation could harm its business and lead to a loss of assets under management, revenues and net income.

JCG's reputation is critical to the success of its business. Any damage to the Company's reputation could impede its ability to attract and retain clients and key personnel, and could adversely affect JCG's assets under management, results of operations and financial condition.

JCG's business may be vulnerable to failures or breaches in support systems and client service functions, and may be subject to cyberattacks.

The ability to consistently and reliably obtain securities pricing information, process client transactions and provide reports and other client services to the shareholders of funds and other investment products managed by JCG is essential to JCG's operations. Any delays, errors or inaccuracies in obtaining pricing information, processing client transactions or providing reports, and any other inadequacies in other client service functions could discourage clients, result in financial loss and potentially give rise to regulatory action and claims against JCG. Any failures of the Company's systems could adversely affect JCG's results of operations and financial condition, assets under management, and ability to maintain confidential information relating to its clients and business operations.

JCG's client service capabilities as well as JCG's ability to obtain prompt and accurate securities pricing information and to process client transactions and reports are significantly dependent on communication and information systems and services provided by third-party vendors. Also, JCG's established disaster recovery plans could suffer failures or interruptions due to various natural or man-made causes, and backup procedures and capabilities may not be adequate to avoid extended interruptions. Furthermore, JCG places significant reliance on its automated systems, thereby increasing the related risks if such systems were to fail. A failure of third-party systems or services, disaster recovery plans or automated systems could adversely affect JCG's assets under management, results of operations and financial condition.

JCG maintains confidential information relating to its clients and business operations. Authorized persons could inadvertently or intentionally release confidential or proprietary information. JCG's systems could be infiltrated by unauthorized users or damaged by computer viruses or other malicious software code as a result of cyberattacks by computer programmers or hackers. While JCG has established business continuity plans and risk management systems designed to prevent or reduce the severity of any such improprieties or cyberattacks, there are inherent limitations in such plans and systems including the possibility that certain risks have not been identified. JCG also cannot directly control any cybersecurity plans and systems put in place by third-party service providers. Unauthorized or inadvertent disclosure of confidential or proprietary information or cyberattacks could be detrimental to JCG's reputation and lead to legal claims, negative publicity, regulatory action, increased costs or loss of revenue, among other things, all of which could adversely affect JCG's assets under management, results of operations and financial condition.

JCG's business is dependent on investment management agreements that are subject to termination, non-renewal or reductions in fees.

JCG derives revenue from investment management agreements with mutual funds and other investment products. With respect to investment management agreements with mutual funds, these agreements may be terminated by either party with notice, or terminated in the event of an "assignment" (as defined in the 1940 Act), and must be approved and renewed annually by the independent members of each fund's board of directors or trustees or its shareowners, as required by law. In addition, the board of directors or trustees of certain funds generally may terminate these investment management agreements upon written notice for any reason and without penalty. The

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termination of or failure to renew one or more of these agreements or the reduction of the fee rates applicable to such agreements could have a material adverse effect on JCG's assets under management, results of operations and financial condition.

JCG's financial results could be adversely affected by the financial stability of other financial institutions.

JCG routinely executes transactions with various counterparties in the financial services industry. Historical market volatility highlights the interconnection of the global markets and demonstrates how the deteriorating financial condition of one institution may materially and adversely affect the performance of other institutions. JCG may be exposed to operational, credit or other risks in the event that a counterparty with whom the Company transacts defaults on its obligations or if there are other unrelated systemic failures in the markets.

JCG's indebtedness could adversely affect its financial condition and results of operations.

JCG's indebtedness could limit its ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt servicing requirements or other purposes. Debt servicing requirements increase JCG's vulnerability to adverse economic, market and industry conditions; limit JCG's flexibility in planning for or reacting to changes in business operations or to the asset management industry overall; and place JCG at a disadvantage in relation to competitors that have lower debt levels. Any or all of the above events and factors could adversely affect JCG's assets under management, results of operations and financial condition.

JCG is periodically involved in various legal proceedings and regulatory matters and may be involved in such proceedings in the future.

JCG and its employees are periodically involved in various legal proceedings and regulatory matters. These matters could adversely affect JCG's assets under management, results of operations and financial condition. Additionally, JCG and its employees have received and may receive in the future requests for information in connection with certain investigations or proceedings from various governmental and regulatory authorities. These investigations or proceedings may result in increased costs or reputational harm to the Company, which may lower sales and increase redemptions.

JCG operates in a highly competitive environment and its current fee structure may be reduced.

The investment management business is highly competitive and has relatively low barriers to entry. JCG's current fee structure may be subject to downward pressure due to these factors. Moreover, in recent years there has been a trend toward lower fees in the investment management industry. Fee reductions on existing or future new business as well as changes in regulations pertaining to its fee structure could adversely affect JCG's results of operations and financial condition. Additionally, JCG competes with investment management companies on the basis of investment performance, fees, diversity of products, distribution capability, reputation and the ability to develop new investment products to meet the changing needs of investors. Failure to adequately compete could adversely affect JCG's assets under management, results of operations and financial condition.

Acquisitions expose JCG to risks inherent in acquiring a company.

JCG has and may acquire or invest in businesses that the Company believes will add value to its business and generate positive net returns. These acquisitions and investments may not be effective, and could result in decreased earnings and harm to the Company's competitive position in the investment management industry.

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Any strategic transaction can involve a number of risks, such as additional demands on JCG's existing employees and unanticipated problems regarding integration of products, technologies and new employees. As a result, the Company may not be able to realize all of the benefits that it hoped to achieve from such transactions. In addition, entering new jurisdictions or managing new products involves numerous risks such as adhering to new regulations, foreign currency exposure and the integration of new products into JCG's existing operations. JCG may be required to spend additional time or money on integration which could decrease its earnings and prevent the Company from focusing on the development and expansion of its existing business and services.

JCG has significant goodwill and intangible assets that are subject to impairment.

Goodwill and intangible assets totaled $2.0 billion at December 31, 2015. The value of these assets may not be realized for a variety of reasons, including, but not limited to, significant redemptions, loss of clients, damage to brand name and unfavorable economic conditions. JCG has recorded goodwill and intangible asset impairments in the past and could incur similar charges in the future. JCG reviews the carrying value of goodwill and intangible assets not subject to amortization on an annual basis, or more frequently if indications exist suggesting that the fair value of its intangible assets may be below their carrying value. JCG evaluates the value of intangible assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Should such reviews indicate impairment, a reduction of the carrying value of the intangible asset could occur, resulting in a charge that may, in turn, adversely affect JCG's assets under management, results of operations and financial condition.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

JCG's headquarters are located in Denver, Colorado. JCG leases office space from non-affiliated companies for administrative, investment and client servicing operations in the following locations:

Domestic properties

Boston, Massachusetts

Chicago, Illinois

Darien, Connecticut

Denver, Glendale and Aurora, Colorado

Newport Beach, California

Princeton, New Jersey

San Francisco, California

West Palm Beach, Florida

International properties

Dubai

Frankfurt

Hong Kong

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London

Melbourne

Milan

Paris

Singapore

Sydney

Taipei

The Hague

Tokyo

Zurich

In the opinion of management, the space and equipment owned or leased by the Company are adequate for existing operating needs.

ITEM 3.    LEGAL PROCEEDINGS

The information set forth in response to Item 103 of Regulation S-K under "Legal Proceedings" is incorporated by reference from Part II, Item 8, Financial Statements and Supplementary Data, Note 16 — Commitments and Contingencies, of this Annual Report on Form 10-K.

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

JCG Common Stock

JCG's common stock is traded on the New York Stock Exchange ("NYSE") (symbol: JNS). The following table presents the high and low sale prices as reported on the NYSE composite tape for each completed quarter in 2015 and 2014.

 
  2015   2014  
Quarter
  High   Low   High   Low  

First

  $ 18.59   $ 15.56   $ 12.99   $ 10.32  

Second

  $ 18.75   $ 16.66   $ 12.91   $ 10.40  

Third

  $ 17.29   $ 13.29   $ 15.89   $ 11.08  

Fourth

  $ 16.01   $ 13.37   $ 16.47   $ 13.40  

The following graph illustrates the cumulative total shareholder return (rounded to the nearest whole dollar) of JCG's common stock over the five-year period ending December 31, 2015, the last trading day of 2015, and compares it to the cumulative total return on the Standard and Poor's ("S&P") 500 Index and the S&P Diversified Financials Index. The comparison assumes a $100 investment on December 31, 2010, in JCG's common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any. This table is not intended to forecast future performance of JCG's common stock.

GRAPHIC

On December 31, 2015, there were approximately 2,187 holders of record of JCG's common stock.

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Dividends

The payment of cash dividends is within the discretion of JCG's Board of Directors and depends on many factors, including, but not limited to, JCG's results of operations, financial condition, capital requirements, restrictions imposed by financing arrangements, general business conditions and legal requirements. Dividends are subject to quarterly declaration by JCG's Board of Directors.

On April 16, 2015, JCG's Board of Directors approved an increase of $0.01 per share, or 13%, in the Company's regular quarterly dividend. The approved quarterly rate of $0.09 per share represents an expected annualized dividend rate of $0.36 per share of common stock.

On January 19, 2016, JCG's Board of Directors declared a regular quarterly cash dividend of $0.09 per share, which will be paid on February 25, 2016, to stockholders of record at the close of business on February 12, 2016.

The following cash dividends were declared and paid during 2015:

Dividend per share
  Date declared   Date paid
$  0.08   January 15   February 27
$  0.09   April 16   May 22
$  0.09   July 16   August 21
$  0.09   October 15   November 20

JCG declared and paid three $0.08 per share dividends and one $0.07 per share dividend in 2014. JCG declared and paid three $0.07 per share dividends in 2013.

Common Stock Repurchases

JCG's Board of Directors authorized a $500 million share repurchase program in July 2008. During the year ended December 31, 2015, JCG repurchased 4,500,938 shares of its common stock at an average price of $15.58 per share and a total cost of $70.2 million as part of the share repurchase program. The share repurchase program is conducted within the parameters of Rule 10b5-1 under the Exchange Act. Any future repurchases of common stock will depend on prevailing market conditions, the Company's liquidity requirements, contractual and legal restrictions, and other factors.

JCG also repurchased 295,850 shares of common stock from The Dai-ichi Life Insurance Company ("Dai-ichi Life") on January 27, 2015, for a total cost of $4.6 million in order for Dai-ichi Life to comply with the ownership limit obligations under the investment agreement between JCG and Dai-ichi Life. At December 31, 2015, Dai-ichi Life owned approximately 20% of the outstanding common shares of the Company.

In addition to the share repurchase program, during the year ended December 31, 2015, JCG withheld 1,002,805 shares from employees as part of a share withholding program to satisfy the employees' minimum statutory income tax liabilities attributable to the vesting of restricted stock. The shares withheld had a value of $17.0 million and were deposited into treasury shares.

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The following table presents total 2015 JCG common stock repurchases by month as part of the share repurchase programs:

Period
  Total
number of
shares
purchased
  Average
price paid per
share
  Total number of shares
purchased as part of
publicly announced
programs
  Approximate dollar value of
shares that may yet
be purchased under the
programs (end of month)
 

January

  595,575   $ 16.29   594,050   $ 378 million  

February

    791,172     17.41       $ 378 million  

March

        $ 378 million  

April

    40,653     17.85     27,565   $ 377 million  

May

  280,905   17.81   280,905   $ 372 million  

June

    307,434     17.89     307,434   $ 367 million  

July

  382,791   16.80   328,422   $ 361 million  

August

    585,492     15.49     585,492   $ 352 million  

September

  731,234   14.37   731,234   $ 342 million  

October

    745,775     14.80     744,045   $ 331 million  

November

  636,728   15.71   636,728   $ 321 million  

December

    701,834     14.28     560,913   $ 313 million  

Total

  5,799,593   $ 15.82   4,796,788      

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ITEM 6.    SELECTED FINANCIAL DATA

The selected financial data below was derived from the Company's audited consolidated financial statements and should be read in conjunction with Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of this Annual Report on Form 10-K and Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

 
  Year ended December 31,  
 
  2015   2014   2013   2012   2011  
 
  (dollars in millions, except per share data and operating data)
 

Income statement:

                     

Revenues

  $ 1,076.2   $ 953.2   $ 873.9   $ 850.0   $ 981.9  

Operating expenses

  753.9   663.5   634.8   635.5   670.1  

Operating income

    322.3     289.7     239.1     214.5     311.8  

Interest expense

  (27.7 ) (33.1 ) (41.1 ) (45.0 ) (51.0 )

Investment gains (losses), net

    (8.2 )   (1.9 )   6.5     11.1     (21.9 )

Other income, net

  3.2   3.0   4.5   3.2   3.8  

Loss on early extinguishment of debt

    (36.3 )       (13.5 )   (7.2 )   (9.9 )

Income tax provision

  (94.0 ) (102.3 ) (73.3 ) (64.7 ) (79.4 )

Net income

    159.3     155.4     122.2     111.9     153.4  

Noncontrolling interests

  (3.5 ) (1.0 ) (7.5 ) (9.6 ) (10.5 )

Net income attributable to JCG

  $ 155.8   $ 154.4   $ 114.7   $ 102.3   $ 142.9  

Earnings per share attributable to JCG common shareholders: (1)

                     

Diluted

  $ 0.80   $ 0.81   $ 0.62   $ 0.55   $ 0.78  

Weighted-average diluted common shares outstanding

 

186.8

 


184.9

 


185.9

 


185.1

 


184.2
 

Dividends declared and paid per share

 
$

0.35
 
$

0.31
 
$

0.21
 
$

0.29
 
$

0.15
 

Balance sheet (as of December 31):

 

 

 


 

 


 

 


 

 


 
 

Total assets

  $ 2,871.5   $ 2,793.2   $ 2,747.3   $ 2,660.4   $ 2,644.0  

Long-term debt (including current portion)

  $ 406.1   $ 450.5   $ 544.6   $ 545.1   $ 595.2  

Other non-current liabilities

  $ 545.1   $ 519.6   $ 480.1   $ 477.8   $ 465.5  

Redeemable noncontrolling interests

  $ 21.8   $ 5.4   $ 7.3   $ 42.9   $ 85.4  

Cash flow:

   
 
   
 
   
 
   
 
   
 
 

Cash flows provided by operating activities

  $ 274.4   $ 218.4   $ 224.1   $ 208.9   $ 224.6  

Operating data (in billions):

   
 
   
 
   
 
   
 
   
 
 

Ending assets under management (2)

  $ 189.1   $ 183.1   $ 173.9   $ 156.8   $ 148.2  

Average assets under management (2)

  $ 190.6   $ 175.8   $ 165.4   $ 156.3   $ 162.3  

Long-term net flows (2) (3)

  $ (2.6 ) $ (4.9 ) $ (19.7 ) $ (12.0 ) $ (12.2 )
(1)
Each component of earnings per share presented has been individually rounded.

(2)
Does not include VelocityShares assets at December 31, 2015 and 2014, as VelocityShares is not the named advisor or subadvisor to its branded products.

(3)
Long-term net flows represent total Company net sales and redemptions, excluding money market and VelocityShares assets. Money market flows have been excluded due to the short-term nature of such investments while VelocityShares assets are excluded as VelocityShares is not the named advisor or subadvisor to its branded products.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

2015 SUMMARY

JCG finished 2015 with assets under management of $189.1 billion, an increase of 3.3% from the end of 2014, as a result of the acquisition of Kapstream and market appreciation partially offset by long-term net outflows. The acquisition of Kapstream contributed $7.1 billion to assets under management. Long-term net outflows improved from $4.9 billion in 2014 to $2.6 billion in 2015 driven by higher sales in JCG's fundamental equity strategies partially offset by higher net redemptions in mathematical equity strategies and lower net sales in JCG's fixed income strategies.

Total revenue for JCG in 2015 of $1,076.2 million increased $123.0 million from 2014, primarily as a result of higher average assets under management and lower negative mutual fund performance fees.

The Company remains focused on operating efficiently by managing operating expenses in relation to total revenue. JCG realized operating margins of 29.9% and 30.4% for 2015 and 2014, respectively.

Net income attributable to JCG common shareholders for 2015 totaled $155.8 million, or $0.80 per diluted share, compared with $154.4 million, or $0.81 per diluted share, for 2014. Net income attributable to JCG common shareholders in 2015 was impacted by a $36.3 million loss on the redemption of its 6.700% Senior Notes due 2017 ("2017 Senior Notes").

JCG continued to execute on its strategy of Intelligent Diversification in 2015. A summary of accomplishments include the following:

Focus on performance in the fundamental equity franchise — As of December 31, 2015, 84%, 70% and 62% of fundamental equity mutual fund assets were in the top two Morningstar quartiles on a 1-, 3- and 5-year basis, respectively, compared to 66%, 81% and 48% a year ago.

Focus on performance and grow the fixed income franchise — In 2015, JCG acquired a controlling 51% voting interest in Kapstream, a global macro fixed income asset manager located in Australia. The acquisition serves to further expand JCG's fixed income capabilities and build out its global macro fixed income team.
  

Performance in the fundamental fixed income franchise has improved in 2015. As of December 31, 2015, 82%, 100% and 82% of fixed income mutual fund assets were in the top two Morningstar quartiles on a 1-, 3-, and 5-year basis, respectively, compared to 2%, 85% and 80% a year ago.

Expand non-U.S. distribution capabilities and product offerings — The non-U.S. business had full-year 2015 net flows of $6.6 billion, a 20% organic growth rate, representing the strongest year of non-U.S. net flows in the firm's history. JCG's strategic alliance with Dai-ichi Life continues to assist with the Company's ongoing growth in Japan.

Develop solutions-based products — During 2015, JCG launched the Adaptive Global Allocation strategy which aims to provide investors total returns by dynamically allocating assets across a portfolio of global equity and fixed income investments.
  

JCG's acquisition of VelocityShares in 2014 positions the firm to deliver rules-based and actively managed products within the rapidly growing ETF universe, enhancing the customized solutions JCG can provide to its clients and enabling the Company to work with the growing segment of financial advisors and institutions focused on these instruments. The Company filed an initial registration statement with the SEC for the Janus Small Cap Growth Alpha and Janus Small-Mid Cap Growth Alpha ETFs with an anticipated launch date in the first quarter of 2016.

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Strengthen the Consolidated Balance Sheets — In July 2015, JCG issued $300.0 million of 4.875% Senior Notes due 2025 ("2025 Senior Notes"). Using the proceeds of the 2025 Senior Notes and cash on hand, JCG fully redeemed the outstanding 2017 Senior Notes. The redemption of the 2017 Senior Notes and issuance of the 2025 Senior Notes strengthened the Company's balance sheet by reducing the carrying amount of debt on the Consolidated Balance Sheets by $44.4 million in 2015 and extending the maturity of the notes to 2025.

Investment Performance of Assets Under Management

Investment products are generally evaluated based on their investment performance relative to other investment products with similar disciplines and strategies or benchmark indices.

The following table is a summary of investment performance as of December 31, 2015:

 
  Percentage of mutual fund assets
outperforming majority of Morningstar peers (1)
 
 
  1-Year   3-Year   5-Year  

Complex-wide mutual fund assets

  84 % 74 % 65 %

Fundamental equity mutual fund assets

    84 %   70 %   62 %

Fixed income mutual fund assets

  82 % 100 % 82 %

 

 
  Percentage of relative return strategies
outperforming
respective benchmarks (2)
 
 
  1-Year   3-Year   5-Year  

Mathematical equity strategies

  74 % 53 % 67 %

 

 
  Percentage of complex-wide mutual funds
with 4- or 5-star Overall Morningstar RatingTM

Complex-wide mutual funds

  55%
(1)
References Morningstar relative performance on an asset-weighted, total return basis.

(2)
References performance of relative return strategies, net of fees.

Assets Under Management and ETPs

Total Company assets under management increased $6.0 billion, or 3.3%, from 2014 as a result of market appreciation of $1.5 billion and the July 1, 2015, acquisition of Kapstream, which contributed $7.1 billion in fixed income assets. These items were partially offset by long-term net outflows of $2.6 billion. Long-term net flows represent total Company net sales and redemptions, excluding money market assets. Money market net sales and redemptions were nil in 2015.

Fundamental equity net outflows were $1.5 billion in 2015 compared with $7.6 billion in 2014. The decrease in net outflows was primarily driven by improved investment performance and an increase in sales while redemptions remained relatively flat in 2015.

Positive net flows for fixed income continued in 2015 with net inflows of $3.3 billion compared to $4.4 billion in 2014. The year-over-year change in net inflows was driven by increased redemptions partially offset by increased sales.

Mathematical equity net outflows were $4.4 billion in 2015 compared with $1.7 billion in 2014. The increase in net outflows was primarily driven by an increase in redemptions and flat sales in 2015.

ETP assets contributed $3.2 billion to complex-wide assets, an increase of $0.8 billion from 2014 due to net sales of $3.3 billion partially offset by market depreciation of $2.5 billion.

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In December 2015, JCG announced that Gibson Smith, the Company's Fundamental Fixed Income Chief Investment Officer will leave JCG on March 31, 2016. While JCG's other fixed income investment, research, trading and risk management teams remain intact, the Company believes that Mr. Smith's departure could have an impact on assets under management, results of operations and financial condition.

Market volatility in January 2016 has led to a decline in JCG's assets under management from December 31, 2015, which will negatively impact the Company's results of operations and financial condition.

The following table presents the components of JCG's assets under management for the years ended December 31, 2015, 2014 and 2013 (in billions):

 
  Year ended December 31,  
 
  2015   2014   2013  

Beginning of year assets

  $ 183.1   $ 173.9   $ 156.8  

Long-term sales (1)

                   

Fundamental equity

  24.9   18.6   17.2  

Fixed income

    16.2     13.7     12.6  

Mathematical equity

  6.6   6.6   5.2  

Long-term redemptions (1)

                   

Fundamental equity

  (26.4 ) (26.2 ) (33.1 )

Fixed income

    (12.9 )   (9.3 )   (11.7 )

Mathematical equity

  (11.0 ) (8.3 ) (9.9 )

Long-term net flows (1)

                   

Fundamental equity

  (1.5 ) (7.6 ) (15.9 )

Fixed income

    3.3     4.4     0.9  

Mathematical equity

  (4.4 ) (1.7 ) (4.7 )

Total long-term net flows

    (2.6 )   (4.9 )   (19.7 )

Net money market flows

    (0.1 ) (0.1 )

Acquisition

    7.1          

Market/fund performance

  1.5   14.2   36.9  

End of year assets (2)

  $ 189.1   $ 183.1   $ 173.9  
(1)
Excludes money market flows. Sales and redemptions of money market funds are presented net on a separate line due to the short-term nature of the investments.

(2)
Excludes VelocityShares assets of $3.2 billion and $2.4 billion as of December 31, 2015 and 2014, respectively, as VelocityShares is not the named advisor or subadvisor to its branded products.

 
  Year ended December 31,  
 
  2015   2014   2013  

Average assets under management: (1)

             

Fundamental equity

  $ 99.5   $ 94.0   $ 93.0  

Fixed income

  39.5   31.3   27.7  

Mathematical equity

    50.3     49.1     43.3  

Money market

  1.3   1.4   1.4  

Total

  $ 190.6   $ 175.8   $ 165.4  
(1)
Does not include VelocityShares assets at December 31, 2015 and 2014, as VelocityShares is not the named advisor or subadvisor to its branded products.

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Assets and Flows by Investment Discipline

JCG, through its subsidiaries, offers investment products based on a diversified set of investment disciplines. Janus offers growth and core equity, global and international equity as well as balanced, fixed income, ETPs and retail money market investment products. INTECH offers mathematical-based investment products, and Perkins offers value-disciplined investment products. Assets and flows by investment discipline are as follows (in billions):

 
  Growth /
Core (1)
  Global /
International
  Mathematical
Equity
  Fixed
Income (1)
  Value   Total
Company
(Excluding
Money
Market and
ETPs)
  ETPs (2)   Money
Market
  Total
Company
 

December 31, 2015

  $ 64.9   $ 22.5   $ 47.6   $ 44.4   $ 8.4   $ 187.8   $ 3.2   $ 1.3   $ 192.3  

Sales

    13.8     9.3     6.6     16.2     1.8     47.7     12.6     0.7     61.0  

Redemptions

  (14.2 ) (7.0 ) (11.0 ) (12.9 ) (5.2 ) (50.3 ) (9.3 ) (0.7 ) (60.3 )

Net sales (redemptions)

    (0.4 )   2.3     (4.4 )   3.3     (3.4 )   (2.6 )   3.3         0.7  

Market/fund performance

  1.4   (0.1 ) 1.0   (0.4 ) (0.4 ) 1.5   (2.5 )   (1.0 )

Acquisitions (3)

                7.1         7.1             7.1  

December 31, 2014

  $ 63.9   $ 20.3   $ 51.0   $ 34.4   $ 12.2   $ 181.8   $ 2.4   $ 1.3   $ 185.5  

Sales

    10.6     5.5     6.6     13.7     2.5     38.9     1.1     0.6     40.6  

Redemptions

  (13.7 ) (5.2 ) (8.3 ) (9.3 ) (7.3 ) (43.8 ) (0.4 ) (0.7 ) (44.9 )

Net sales (redemptions)

    (3.1 )   0.3     (1.7 )   4.4     (4.8 )   (4.9 )   0.7     (0.1 )   (4.3 )

Market/fund performance

  6.2   0.7   5.1   1.1   1.1   14.2   (0.6 )   13.6  

Acquisitions (2)

                            2.3         2.3  

December 31, 2013

  $ 60.8   $ 19.3   $ 47.6   $ 28.9   $ 15.9   $ 172.5   $   $ 1.4   $ 173.9  

Sales

    10.5     3.3     5.2     12.6     3.4     35.0         0.6     35.6  

Redemptions

  (19.2 ) (5.6 ) (9.9 ) (11.7 ) (8.3 ) (54.7 )   (0.7 ) (55.4 )

Net sales (redemptions)

    (8.7 )   (2.3 )   (4.7 )   0.9     (4.9 )   (19.7 )       (0.1 )   (19.8 )

Market/fund performance

  15.7   3.7   12.1   1.6   3.8   36.9       36.9  

December 31, 2012

  $ 53.8   $ 17.9   $ 40.2   $ 26.4   $ 17.0   $ 155.3   $   $ 1.5   $ 156.8  

Notes:

(1)
Growth/Core and Fixed Income disciplines reflect an even split of the Janus Balanced fund between the two categories.

(2)
VelocityShares was acquired in the fourth quarter 2014; prior to that JCG did not offer ETPs.

(3)
Kapstream was acquired on July 1, 2015.

Valuation of Assets Under Management

The fair value of assets under management is derived from the cash and investment securities underlying JCG's investment products. Investment security values are determined using unadjusted or adjusted quoted market prices and independent third-party price quotes in active markets. The fair value of the vast majority of the equity securities underlying JCG's investment products is derived from readily available and reliable market price quotations while the fair value of a majority of the fixed income securities is derived from evaluated pricing from independent third-party providers. JCG uses adjusted market prices to value certain international equity securities in its domestic and non-domestic mutual funds to adjust for stale pricing that may occur between the close of certain foreign exchanges and the NYSE. Security prices are adjusted based upon historical impacts for similar post-close activity. For fixed income securities with maturities of 60 days or less, the amortized cost method is used to determine the value. Securities for which market prices are not readily available or are considered unreliable are internally valued using appropriate methodologies for each security type or by engaging third-party specialists.

The pricing policies for mutual funds advised by JCG's subsidiaries (the "Funds") are established by the Funds' Independent Board of Trustees and are designed to test and validate fair value

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measurements. Responsibility for pricing securities held within separate and subadvised accounts may be delegated by the separate or subadvised clients to JCG or another party. JCG validates pricing received from third-party providers by comparing pricing between primary and secondary vendors. Any discrepancies are identified and resolved.

JCG performs a number of procedures to validate the pricing received from third-party providers. For actively traded equity securities, prices are received daily from both a primary and secondary vendor. For fixed income securities, prices are received daily from a primary vendor and weekly from a secondary vendor. Prices from the primary and secondary vendors are compared to identify any discrepancies. In the event of a discrepancy, a price challenge may be issued to both vendors. Securities with significant price changes require additional research, which may include a review of all news pertaining to the issue and issuer and any corporate actions. All fixed income prices are reviewed by JCG's fixed income trading desk to incorporate market activity information available to JCG's traders. In the event the traders have received price indications from market makers for a particular issue, this information is transmitted to the pricing vendors.

All pricing vendors are subject to an annual on-site due diligence review that includes a detailed discussion about the methodologies used, particularly for evaluated prices, and any changes to the methodologies.

JCG is generally not the pricing agent for securities held within separate and subadvised accounts. However, JCG does perform a daily reconciliation between the pricing performed by the pricing agent and the pricing applied based on JCG's procedures. Any pricing discrepancies are resolved with the client designated pricing agent.

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. Certain mutual funds and separate accounts are also subject to performance fees, which vary based on a product's relative performance as compared to an established benchmark index over a specified period of time 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 domestic and international 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 JCG's operating

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results. The following graph depicts the direct relationship between average assets under management and revenues:

GRAPHIC

Results of Operations

Revenues

 
  Year ended December 31,    
   
 
 
  2015 vs.
2014
  2014 vs.
2013
 
 
  2015   2014   2013  

Revenues (in millions):

                     

Investment management fees          

  $ 913.7   $ 849.1   $ 813.0     7.6 %   4.4 %

Performance fees

  (9.8 ) (48.0 ) (82.2 ) 79.6 % 41.6 %

Shareowner servicing fees and other

    172.3     152.1     143.1     13.3 %   6.3 %

Total revenues

  $ 1,076.2   $ 953.2   $ 873.9   12.9 % 9.1 %

Investment Management Fees

Investment management fees increased $64.6 million from 2014 to 2015 primarily due to an 8.4% increase in average assets under management driven by market appreciation, the addition of $7.1 billion in assets under management related to the Kapstream acquisition, and a reduction in long-term net outflows.

Investment management fees increased $36.1 million from 2013 to 2014 primarily as a result of a 6.3% increase in average assets under management driven by market appreciation in addition to a reduction in long-term net outflows. Revenue increased at a lower rate than average assets primarily due to a product mix shift toward lower yielding products and channels.

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Performance Fees

Performance fee revenue is derived from certain mutual funds and separate accounts. Performance fee revenue consisted of the following for the years ended December 31, 2015, 2014 and 2013 (in millions):

 
  December 31,  
 
  2015   2014   2013  

Mutual fund performance fees

  $ (28.8 ) $ (59.7 ) $ (87.8 )

Separate account performance fees

    19.0     11.7     5.6  

Total performance fees

  $ (9.8 ) $ (48.0 ) $ (82.2 )

Negative mutual fund performance fees are driven by underperformance of certain mutual funds against their respective benchmarks. Fees improved by $30.9 million from 2014 to 2015, and by $28.1 million from 2013 to 2014, primarily as a result of improved investment performance and the roll-off of historical underperformance of certain mutual funds against their respective benchmarks.

Separate account performance fees relate largely to assets managed by INTECH. Separate account performance fees are recognized on a quarterly or annual basis and fluctuate based on changes in individual account performance relative to the respective benchmarks, account terms and assets under management.

Refer to Item 7A — Quantitative and Qualitative Disclosures about Market Risk, for a detailed discussion regarding the calculation of performance fees.

A summary of mutual fund and separate account assets subject to performance fees as of December 31, 2015 and 2014, is as follows (in billions):

 
  December 31,  
 
  2015   2014  

Mutual fund assets

  $ 42.0   $ 49.0  

Separate account assets

  $ 21.5   $ 17.3  

Shareowner Servicing Fees and Other

Shareowner servicing fees and other largely comprises transfer agent fees and revenue on VelocityShares-branded products. Shareowner servicing fees and other increased $20.2 million from 2014 to 2015 due to a full year of VelocityShares revenue included in 2015 and an increase in transfer agent fees due to an increase in average assets under management in 2015.

Operating Expenses

 
  Year ended December 31,    
   
 
 
  2015 vs.
2014
  2014 vs.
2013
 
 
  2015   2014   2013  

Operating Expenses (in millions):

                     

Employee compensation and benefits

  $ 352.5   $ 322.8   $ 292.7     9.2 %   10.3 %

Long-term incentive compensation

  76.8   51.3   63.1   49.7 % (18.7 )%

Marketing and advertising

    22.0     19.5     20.2     12.8 %   (3.5 )%

Distribution

  141.0   131.0   125.7   7.6 % 4.2 %

Depreciation and amortization          

    33.0     25.6     28.7     28.9 %   (10.8 )%

General, administrative and occupancy

  128.6   113.3   104.4   13.5 % 8.5 %

Total operating expenses

  $ 753.9   $ 663.5   $ 634.8     13.6 %   4.5 %

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Employee Compensation and Benefits

Employee compensation and benefits increased $29.7 million from 2014 to 2015 principally due to higher base salaries, higher commissions on increased sales and higher incentive compensation as a result of higher operating income. The company-wide incentive compensation plan is designed to link variable compensation to operating income. Higher incentive compensation on higher operating income contributed to the $30.1 million increase from 2013 to 2014.

JCG is expecting net headcount additions of 15 to 20 employees in 2016, predominately in distribution roles. The expected net increase in headcount will contribute to an increase in employee compensation and benefits in 2016.

Long-Term Incentive Compensation

Long-term incentive compensation increased $25.5 million from 2014 to 2015 primarily due to $20.5 million of expense from new awards granted during 2015. Also contributing to the variance were increases of $12.2 million in senior profits interests awards expense for INTECH and $12.0 million for the reduction of Perkins senior profits interests expense in 2014. These increases were partially offset by decreases of $16.2 million from the vesting of awards granted in previous years and a decrease of $2.4 million due to mark-to-market adjustments for changes in fair value of mutual fund share awards and investments related to deferred compensation plans.

JCG generally grants long-term incentive awards in January or February of each year. The 2016 annual grant totaled $66.2 million and will generally be recognized ratably over a four-year period. Long-term incentive compensation expense for the year ended December 31, 2016, is currently expected to be approximately $70 million to $75 million.

Long-term incentive compensation decreased $11.8 million from 2013 to 2014, primarily due to a decrease of $13.4 million from the vesting of awards granted in previous years, a decrease of $12.6 million in Perkins senior profits interests awards expense, a decrease of $4.2 million due to mark-to-market adjustments for changes in fair value of mutual fund share awards and investments related to deferred compensation plans and a decrease in expense of $2.3 million related to forfeiture rate estimate adjustments. These decreases were partially offset by an increase of $21.2 million of expense from new awards granted during 2014 including $3.4 million of expense related to the INTECH awards granted in October 2014.

Refer to Item 7 — Liquidity and Capital Resources, of this Annual Report on Form 10-K for a detailed discussion of the INTECH long-term incentive awards.

Distribution

Distribution represents fees paid to financial intermediaries for distribution of JCG's investment products. Distribution increased $10.0 million from 2014 to 2015 primarily due to an increase in average assets under management. Distribution fees are calculated based on a contractual percentage of the market value of assets under management distributed through third-party intermediaries.

Depreciation and Amortization

Depreciation and amortization increased $7.4 million from 2014 to 2015 primarily due to increased amortization of deferred commissions driven by higher mutual fund sales on certain share classes, the amortization of intangibles related to the Kapstream acquisition and higher depreciable assets related to property and equipment purchases. Depreciation and amortization decreased $3.1 million from 2013 to 2014 primarily due to the intangible assets associated with INTECH client relationships becoming fully amortized in the first quarter of 2014.

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General, Administrative and Occupancy

General, administrative and occupancy increased $15.3 million from 2014 to 2015. JCG recognized $5.2 million and $1.2 million in VelocityShares and Kapstream contingent consideration fair value adjustments, respectively, in 2015, including the monthly accretion of the liability to the future value of the contingent consideration. The Company also recognized $2.1 million in investment bank advisory fees and other deal costs related to the Kapstream acquisition and $2.8 million related to a third quarter 2015 operational error.

Non-Operating Income and Expenses

 
  Year ended December 31,    
   
 
 
  2015 vs.
2014
  2014 vs.
2013
 
 
  2015   2014   2013  

Non-operating income and expenses (in millions):

                     

Interest expense

  $ (27.7 ) $ (33.1 ) $ (41.1 )   (16.3 )%   (19.5 )%

Investment gains (losses), net

  (8.2 ) (1.9 ) 6.5   331.6 % (129.2 )%

Loss on early extinguishment of debt

    (36.3 )       (13.5 )   n/m     n/m  

Other income, net

  3.2   3.0   4.5   6.7 % (33.3 )%

Income tax provision

    (94.0 )   (102.3 )   (73.3 )   (8.1 )%   39.6 %

Noncontrolling interests

  (3.5 ) (1.0 ) (7.5 ) 250.0 % (86.7 )%

n/m — Not meaningful

Interest Expense and Loss on Early Extinguishment of Debt

Interest expense decreased $5.4 million from 2014 to 2015 primarily due to interest expense savings realized in conjunction with the Company's third quarter 2015 debt restructuring. In July 2015, JCG issued $300.0 million of 2025 Senior Notes. The proceeds from the 2025 Senior Notes and cash on hand were used to redeem the Company's outstanding 2017 Senior Notes in August 2015. JCG recognized a loss on early extinguishment of debt of $36.3 million in the third quarter 2015 as a result of the redemption. The decrease was also driven by the repayment of debt during 2014, including the 6.119% Senior Notes that matured in April 2014 ("2014 Senior Notes"), and the remainder of the 3.250% Convertible Senior Notes that matured in July 2014 ("2014 Convertible Notes").

Interest expense decreased $8.0 million from 2013 to 2014 primarily as a result of the June 2013 exchange of $110.0 million aggregate principal amount of JCG's existing 2014 Convertible Notes for $116.6 million aggregate principal amount of newly issued, 0.750% Convertible Senior Notes due 2018 ("2018 Convertible Notes"). The decrease was also driven by the repayment of the 2014 Senior Notes that matured on April 15, 2014, and the repayment of the remainder of the 2014 Convertible Notes that matured on July 15, 2014.

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Investment Gains (Losses), Net

The components of investment gains (losses), net for the years ended December 31, 2015, 2014 and 2013, are as follows (in millions):

 
  Year ended December 31,  
 
  2015   2014   2013  

Seeded investment products

  $ (11.1 ) $ 8.6   $ 28.9  

Noncontrolling interest in seeded investment products

    0.4     (0.6 )   3.4  

Investments in advised mutual funds

  (0.2 ) (0.1 ) 8.5  

Index swaps, credit default swaps and futures

    2.6     (11.2 )   (37.4 )

Economic hedge for deferred compensation plans

  0.1   1.3   3.0  

Other

        0.1     0.1  

Investment gains (losses), net

  $ (8.2 ) $ (1.9 ) $ 6.5  

Investment gains (losses), net decreased $6.3 million from 2014 to 2015, and $8.4 million from 2013 to 2014, primarily due to the mark-to-market of seeded investment products partially offset by the net investment gains (losses) on the index swaps, credit default swaps and futures.

The index swaps, credit default swaps and futures are part of the Company's seed capital hedging strategy to mitigate a portion of the earnings volatility created by the mark-to-market accounting of seeded investment products. JCG may modify or discontinue this hedging strategy at any time.

Other Income, Net

The components of other income, net for the years ended December 31, 2015, 2014 and 2013, are as follows (in millions):

 
  Year ended December 31,  
 
  2015   2014   2013  

Dividend income

  $ 8.1   $ 5.6   $ 3.8  

Interest income

    0.7     0.6     0.5  

Foreign currency gains (losses), net

  (5.8 ) (3.2 ) 0.2  

Other, net

    0.2          

Total other income, net

  $ 3.2   $ 3.0   $ 4.5  

Dividend income relates to dividends received from certain seeded investment products. Foreign currency losses of $5.8 million for the year ended December 31, 2015, relate largely to foreign currency losses on Australian dollars that were held in advance of the Kapstream acquisition and were subject to mark-to-market adjustments during the second quarter 2015.

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Income Tax Provision

JCG's effective tax rate was 37.1%, 39.7% and 37.5% for the years ended December 31, 2015, 2014 and 2013, respectively. JCG's income tax provision for the years ended December 31, 2015, 2014 and 2013, includes the following (in millions):

 
  Year ended
December 31,
 
 
  2015   2014   2013  

Reversal of income tax contingency reserves as a result of the expiration of statutes of limitations and audit settlements

  $ 0.9   $ 1.0   $ 1.3  

Tax benefit from the reversal of income tax contingency reserves

  $ 0.5   $ 0.6   $ 0.8  

Tax expense related to the expiration and vesting of certain equity-based compensation awards

  $   $ 7.8   $ 5.0  

As of January 1, 2016, the Company's statutory tax rate changed from 37.25% to 37.40% as a result of changes to certain state tax rates.

LIQUIDITY AND CAPITAL RESOURCES

JCG's capital structure, together with available cash balances, cash flows generated from operations, existing capacity under the Company's credit facility and further capital and credit market activities, if necessary, should provide JCG with sufficient resources to meet present and future cash needs, including operating, debt and other obligations as they come due and anticipated future capital requirements.

Short-Term Liquidity and Capital Resources

The following table summarizes key balance sheet data relating to JCG's liquidity and capital resources as of December 31, 2015 and 2014 (in millions):

 
  December 31,  
 
  2015   2014  

Cash and cash equivalents:

         

Cash and cash equivalents held domestically

  $ 283.5   $ 392.3  

Cash and cash equivalents held outside the U.S. (1)

  79.7   60.2  

Cash and cash equivalents held by consolidated seeded investment products (2)

    1.2      

Total cash and cash equivalents

  $ 364.4   $ 452.5  

Accounts receivable

  $ 137.8   $ 130.9  

Investment securities:

 

 

 


 
 

Seeded investment products (3)

  $ 306.6   $ 326.6  

Investments in advised mutual funds and the economic hedging of deferred compensation plans

  20.5   17.4  

Total investment securities

  $ 327.1   $ 344.0  

Long-term debt (including current portion)

  $ 406.1   $ 450.5  
(1)
As of December 31, 2015 and 2014, cash held outside of the U.S. may not be entirely available for general corporate purposes due to approximately $28 million and

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(2)
Cash and cash equivalents held by consolidated seeded investment products are not available for general corporate purposes.

(3)
Includes noncontrolling interests in consolidated seeded investment products of $13.8 million and $41.0 million, respectively.

Cash and cash equivalents consist primarily of cash on hand and short-term investments with an initial maturity of three months or less when purchased, including investments in money market funds. JCG believes that existing cash and cash from operations should be sufficient to satisfy its short-term capital requirements. Expected short-term uses of cash include ordinary operating expenditures, seed capital investments, dividend payments, income tax payments, common share repurchases and interest payments on outstanding debt. JCG may use available cash for general corporate purposes, investments and acquisitions. In addition, JCG may repurchase its outstanding debt securities in open market transactions, privately negotiated transactions, exchanges, tender offers or otherwise. Any repurchase of outstanding debt securities and common stock will depend on prevailing market conditions, JCG's liquidity requirements, contractual and legal restrictions, and other factors.

Common Stock Repurchases

As part of its capital and liquidity management, JCG maintains a share repurchase program to offset dilution resulting from stock-based compensation and to return capital to shareholders. Share repurchases as part of publicly announced programs during the years ended December 31, 2015 and 2014, were as follows:

 
  Year ended December 31,
 
  2015   2014

Total cost (in millions)

  $  74.8   $  84.4

Shares repurchased

  4,796,788   6,755,292

Average price per share

  $  15.59   $  12.49

The share repurchase program is conducted within the parameters of Rule 10b5-1 under the Exchange Act.

As of December 31, 2015, approximately $313 million is available for share repurchases under the current authorization.

Dividends

Dividends paid during the year ended December 31, 2015, are summarized as follows:

Dividend
per share
  Date declared   Dividends paid
(in millions)
  Date paid
$ 0.08   January 15   $ 15.0   February 27
$ 0.09   April 16   $ 16.8   May 22
$ 0.09   July 16   $ 16.8   August 21
$ 0.09   October 15   $ 16.6   November 20

On April 16, 2015, JCG's Board of Directors approved an increase of $0.01 per share, or 13%, in the Company's regular quarterly dividend. The approved quarterly rate of $0.09 per share represents an expected annualized dividend rate of $0.36 per share of common stock.

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On January 19, 2016, JCG's Board of Directors declared a regular quarterly cash dividend of $0.09 per share, which will be paid on February 25, 2016, to stockholders of record at the close of business on February 12, 2016.

The payment of cash dividends is within the discretion of JCG's Board of Directors and depends on many factors, including, but not limited to, JCG's results of operations, financial condition, capital requirements, restrictions imposed by financing agreements, general business conditions and legal requirements.

Long-Term Liquidity and Capital Resources

The following table presents contractual obligations and associated maturities at December 31, 2015 (in millions):

 
  Less than
1 year
  1 to 3 years   3 to 5 years   More than
5 years
 

Debt

  $   $ 158.6   $   $ 300.0  

Interest payments

    16.2     32.2     29.2     73.1  

Capital leases

  1.5   2.5   1.6    

Operating leases

    17.2     31.0     22.3     42.6  

Total

  $ 34.9   $ 224.3   $ 53.1   $ 415.7  

Debt maturing in 1 to 3 years represents the fair value of the 2018 Convertible Notes as of December 31, 2015. The information presented above does not include commitments for capital expenditures in the normal course of business. JCG expects to fund its long-term commitments using existing cash, cash generated from operations, refinancing debt or accessing capital and credit markets as necessary.

2018 Convertible Notes

The 2018 Convertible Notes will mature on July 15, 2018, unless earlier converted or repurchased. Holders of the 2018 Convertible Notes may convert the notes early if the last reported sale price of JCG's common stock is greater than or equal to $14.09 per share of common stock for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the preceding quarter. As of January 1, 2016, the 2018 Convertible Notes meet the criteria for early conversion. See Part II, Item 8 Financial Statements and Supplementary Data, Note 8 — Debt, of this Annual Report on Form 10-K for a further discussion of the 2018 Convertible Notes and the associated convertible note hedge and warrants.

Perkins Senior Profits Interests Awards

On December 31, 2008, Perkins granted senior profits interests awards designed to retain and incentivize key employees to grow the business. These awards vested on the fifth anniversary of grant and were entitled to a total of 5% of Perkins' annual taxable income. These awards had a formula-driven terminal value based on revenue and relative investment performance of products managed by Perkins. Participants carried a put right that would require JCG to terminate the awards in exchange for the then-applicable formula price on December 31, 2014, the sixth anniversary of grant. The value of the put right at December 31, 2014, was $5.9 million. On January 27, 2015, participants exercised their right to put the senior profits interests awards to JCG. The Company settled the awards with a $5.9 million cash payment to participants on February 13, 2015.

On November 18, 2013, Perkins granted additional senior profits interests awards, which fully vest on December 31, 2018, and are entitled to a total of 10% of Perkins' annual taxable income. The

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entitlement to a percentage of Perkins' annual taxable income over the vesting period is tiered and starts at 2% in 2015 and increases 2% each year thereafter until reaching 10% after fully vesting on December 31, 2018. In addition, these awards have a formula-driven terminal value based on Perkins' revenue. JCG can call and terminate any or all of the awards on December 31, 2018, and each year thereafter. Holders of such interests can require JCG to purchase the interests in exchange for the then-applicable formula price on December 31, 2018. The senior profits interests awards are also subject to termination at premiums or discounts to the formula at the option of JCG or certain employees, as applicable, upon certain corporate or employment-related events affecting Perkins or certain employees. As of December 31, 2015, the formula-driven value was nil and there was no liability on JCG's Consolidated Balance Sheets associated with the Perkins senior profits interests awards granted in 2013.

INTECH Long-Term Incentive Awards

In October 2014, INTECH granted long-term incentive awards to retain and incentivize employees. The awards consist of appreciation rights, profits interests and phantom interests and were designed to give recipients an equity-like stake in INTECH. The profits interests and phantom interests awards entitles recipients to 9.1% of INTECH's pre-incentive profits and replaced a portion of the prior discretionary bonus pool. In July 2015 and October 2015, additional phantom interests were granted to certain employees. As of December 31, 2015, total profits interests and phantom interests awarded entitles recipients to 9.2% of INTECH's pre-incentive profits.

The appreciation rights had a grant date fair value of $23.2 million, which is being amortized on a straight-line basis over the 10-year vesting schedule, and are exercisable upon termination of employment from INTECH and to the extent vested. Upon exercise, the appreciation rights are settled in INTECH equity. The fair value of the appreciation rights was estimated using the Black-Scholes option pricing model.

INTECH profits interests and phantom interests entitle holders to periodic distributions of a portion of INTECH operating income. Distributions are made during employment and, for profits interests, post-employment for up to 10 years. Phantom interests are entitled to a one-time distribution at termination of employment. Compensation expense for post-employment distributions is based upon the present value of expected future distributions and is being recognized pro rata over the 10-year vesting schedule for profits interests and five years for phantom interests. The present value of these payments was determined using a 2% discount rate, which represented the interest rate on a 20-year U.S. Treasury note. As of December 31, 2015, the total undiscounted estimated post-employment payments for profits interests and phantom interests is $54.1 million (the majority will not be paid until 10 to 20 years after the grant date). The estimated post-employment payments will be evaluated and adjusted quarterly, as necessary, with changes recorded in results of operations.

Contingent Consideration

Contingent consideration was a component of the purchase price of both Kapstream and VelocityShares.

The Kapstream contingent consideration is payable in Australian dollars at 18 months and 36 months after the acquisition date if certain Kapstream assets under management reach defined targets. The total maximum payment over the entire contingent consideration period is $9.1 million as of December 31, 2015. The fair value of the contingent consideration is calculated on a quarterly basis by forecasting certain Kapstream assets under management over the contingency period and determining whether the forecasted amounts meet the defined targets. Significant unobservable inputs used in the valuation are limited to forecasted Kapstream assets under management.

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The VelocityShares contingent consideration is payable on the first, second, third and fourth anniversaries of the acquisition, in amounts up to $10.0 million each for the first and second anniversaries, and $8.0 million each for the third and fourth anniversaries. The total maximum payment over the entire contingent consideration period is $36.0 million. In November 2015, VelocityShares reached the defined net revenue target and the Company paid the first contingent consideration amount of $10.0 million, which represents the maximum amount for the first anniversary. As of December 31, 2015, the Company expects to pay an additional $17.6 million in total contingent consideration.

INTECH Noncontrolling Interests

INTECH ownership interests held by a founding member had an estimated fair value of $5.2 million and $5.9 million as of December 31, 2015 and 2014, respectively, representing approximately 1.0% aggregate ownership of INTECH for both periods. This founding member is entitled to retain his remaining INTECH interests until his death and has the option to require JCG to purchase his ownership interest of INTECH at fair value.

Other Sources of Liquidity

Long-Term Incentive Stock Plans

On May 10, 2005, JCG shareholders approved the 2005 Long-Term Incentive Stock Plan ("2005 Plan"), which allowed the Board of Directors to grant up to 15.0 million shares of equity-based awards, including stock options and restricted stock. Subsequent to the annual grant in January 2016, 3.3 million shares of stock options and less than 0.1 million shares of restricted stock are available to be granted under the 2005 Plan.

On April 29, 2010, JCG shareholders approved the 2010 Long-Term Incentive Stock Plan ("2010 Plan"), which allows JCG to grant up to 4.4 million shares of equity-based awards, including stock options and restricted stock. On April 26, 2012, JCG shareholders approved an amendment to the 2010 Plan to increase the number of shares available to grant by 9.0 million shares for a total of 13.4 million shares of equity-based awards available to grant under the 2010 Plan. On April 24, 2015, JCG shareholders approved an amendment to the 2010 Plan to increase the number of shares available to grant by 11.0 million shares for a total of 24.4 million shares of equity-based awards available to grant under the 2010 Plan. Subsequent to the annual grant in January 2016, approximately 7.8 million shares of equity-based awards are available to be granted under the 2010 Plan.

JCG also has an Employment Inducement Award Plan ("EIA Plan") with 0.8 million shares of equity-based awards available to be granted as of December 31, 2015. The EIA Plan is not a shareholder-approved plan.

Off-Balance Sheet Arrangements

Other than certain lease agreements, JCG is not party to any off-balance sheet arrangements that may provide, or require the Company to provide, financing, liquidity, market or credit risk support that is not reflected in JCG's consolidated financial statements. Refer to the preceding contractual obligation table for future obligations associated with operating leases.

Credit Facility

At December 31, 2015, JCG had a $200 million, unsecured, revolving credit facility (the "Credit Facility") with JPMorgan Chase Bank, N.A., as administrative agent and swingline lender. The Credit Facility can be used by JCG and its subsidiaries for working capital needs and general corporate

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purposes. The Credit Facility bears interest on borrowings outstanding at the London Interbank Offered Rate ("LIBOR") plus a spread, which is based on JCG's credit rating. JCG is required to pay a quarterly commitment fee on any unused portion of the Credit Facility, which is also based on JCG's credit rating. The Credit Facility has a maturity date of November 23, 2018.

The Credit Facility contains financial covenants with respect to leverage and interest coverage. The financing leverage ratio cannot exceed 3.00x, and the interest coverage ratio must equal or exceed 4.00x. At December 31, 2015, JCG's financing leverage ratio was 0.98x and the interest coverage ratio was 16.86x. JCG was in compliance with all covenants, and there were no borrowings under the Credit Facility at December 31, 2015, or during the year ended December 31, 2015.

Cash Flows

A summary of cash flow data for the years ended December 31, 2015, 2014 and 2013, is as follows (in millions):

 
  Year ended December 31,  
 
  2015   2014   2013  

Cash flows provided by (used for):

             

Operating activities

  $ 274.4   $ 218.4   $ 224.1  

Investing activities

  (150.7 ) 67.5   (235.3 )

Financing activities

    (207.2 )   (177.4 )   (29.7 )

Effect of exchange rate changes on cash and cash equivalents

  (4.6 ) (0.5 ) (1.6 )

Net change in cash and cash equivalents

    (88.1 )   108.0     (42.5 )

Cash balance at beginning of period

  452.5   344.5   387.0  

Cash balance at end of period

  $ 364.4   $ 452.5   $ 344.5  

Certain prior period amounts have been revised to conform to current period presentation. Cash flows related to consolidated seeded investment products are now presented on a gross basis, within the "Purchases of securities by consolidated seeded investment products, net of sales" and "Third-party investments in consolidated seeded investment products, net of redemptions" captions on JCG's Consolidated Statements of Cash Flows. See Part II, Item 8 — Financial Statements and Supplementary Data, Note 2 — Summary of Significant Accounting Policies for further information.

Operating Activities

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 amount and timing of cash receipts and payments. Over the 2013 to 2015 time period, changes in other current assets, accounts payable and accrued compensation payable have had the biggest impact on operating cash flows.

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Investing Activities

Cash provided by (used for) investing activities for the years ended December 31, 2015, 2014 and 2013, is as follows (in millions):

 
  Year ended December 31,  
 
  2015   2014   2013  

Acquisition of Kapstream, net of cash acquired of $7.3 million

  $ (81.4 ) $   $  

Acquisition of VelocityShares, net of cash acquired of $4.3 million

   
   
(28.4

)
 
 

Purchase of property and equipment

 

(13.7

)


(11.4

)


(7.6

)

Purchases and settlements of investment securities:

   
 
   
 
   
 
 

Seeded investment products

  (77.6 ) (144.1 ) (118.6 )

Investments related to deferred compensation plans

    (0.5 )   (0.1 )   (0.2 )

Debt securities

      (102.7 )

Seed capital derivative instruments

    (12.9 )   (24.4 )   (70.2 )

Total purchases and settlements of investment securities

  (91.0 ) (168.6 ) (291.7 )

Proceeds from sales, settlements and maturities of investment securities:

   
 
   
 
   
 
 

Seeded investment products

  52.4   178.5   73.8  

Investments related to deferred compensation plans

    1.1     44.4     52.3  

Debt securities

    100.0    

Seed capital derivative instruments

    14.1     13.9     31.5  

Total proceeds from sales, settlements and maturities of investment securities

  67.6   336.8   157.6  

Purchase of securities by consolidated seeded investment products, net of sales

   
(32.2

)
 
(60.9

)
 
(93.6

)

Cash provided by (used for) investing activities

  $ (150.7 ) $ 67.5   $ (235.3 )

During 2014, seeding of investment products included a $100.0 million investment in the Global Unconstrained Bond strategy. The investment included $48.0 million and $52.0 million allocated to JCG's domestic and international trusts, respectively.

During 2013, seeding of investment products included a $73.7 million investment in a euro-denominated investment product. JCG's investment in the euro-denominated investment product was fully redeemed in 2014.

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Financing Activities

Cash used for financing activities for the years ended December 31, 2015, 2014 and 2013, is as follows (in millions):

 
  Year ended December 31,  
 
  2015   2014   2013  

Repayment of long-term debt

  $ (380.3 ) $ (98.9 ) $ (8.9 )

Proceeds from the issuance of debt

    297.1          

Proceeds from the issuance of stock warrants

      10.5  

Purchase of convertible note hedge

            (16.1 )

Contingent consideration

  (8.6 )    

Third-party investments in consolidated seeded investment products, net of redemptions

    32.2     60.9     93.6  

Proceeds from stock option exercises and employee stock purchases

  11.0   8.4   8.0  

Purchase of noncontrolling interests

    (0.4 )   (1.5 )   (34.1 )

Repurchase of common stock

  (91.8 ) (87.2 ) (33.4 )

Dividends paid to JCG shareholders

    (65.2 )   (58.4 )   (39.8 )

Other financing activities

  (1.2 ) (0.7 ) (9.5 )

Cash used for financing activities

  $ (207.2 ) $ (177.4 ) $ (29.7 )

In July 2015, JCG issued $300.0 million of 2025 Senior Notes, which pay interest at 4.875% semiannually on February 1 and August 1 of each year and mature on August 1, 2025. JCG incurred $2.6 million of debt issuance costs associated with the issuance of the notes that were recorded in other non-current assets on JCG's Consolidated Balance Sheets and will be amortized to interest expense over the 10-year term of the notes. The 2025 Senior Notes include an unamortized discount of $2.8 million at December 31, 2015, which will also be amortized over the 10-year term of the notes. The proceeds from the 2025 Senior Notes and cash on hand were used to fully redeem the 2017 Senior Notes.

Money Market Funds Advised by JCG

JCG advises money market funds that seek to provide capital preservation and liquidity, with current income as a secondary objective. JCG attempts to limit the money market funds' exposure to losses by investing in high-quality securities with short-term durations that present minimal credit risk. Adverse events or circumstances related to individual securities or the market in which the securities trade may cause other-than-temporary declines in value. JCG continuously evaluates the securities held by the money market funds to determine if any holdings are distressed or may become distressed in the near future. In such circumstances, JCG would consider whether taking any action, including, but not limited to, a potential election by JCG to provide support to the money market funds that could result in additional impairments and financial losses for the Company, would be appropriate. Under certain situations, JCG may elect to support one or more of the money market funds to enable them to maintain a net asset value equal to $1 through a variety of means, including but not limited to, purchasing securities held by the money market funds, reimbursing for any losses incurred or providing a letter of credit. However, JCG is not contractually or legally obligated to provide support, and has not provided support, to the money market funds. JCG's money market assets of $1.3 billion at December 31, 2015, have remained relatively stable over the past few years.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

JCG's 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.

JCG 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, as appropriate, 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. JCG's critical accounting policies and estimates include investment securities, goodwill and intangible assets, post-employment benefits, equity compensation and income taxes.

Valuation of Investment Securities

JCG records investment securities classified as trading and available-for-sale at fair value and investment securities classified as held-to-maturity at amortized cost. 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, JCG uses internally developed models to estimate fair value and independent third parties to validate assumptions, when appropriate. 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 JCG is valuing and the selected benchmark. Depending on the type of securities owned by JCG, 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 consolidated financial condition and results of operations.

JCG 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, JCG considers the duration, extent and circumstances of any decline in fair value.

For equity securities, JCG evaluates the securities in an unrealized loss position in the available-for-sale portfolio for other-than-temporary impairment on the basis of the duration of the decline in value of the security and severity of that decline as well as JCG's intent and ability to hold these securities for a period of time sufficient to allow for any anticipated recovery in the market value. If it is determined that the impairment on an equity security is other-than-temporary, an impairment loss equal to the difference between the carrying value of the security and its fair value is recognized within investment gains (losses), net on JCG's Consolidated Statements of Comprehensive Income. There were no other-than-temporary impairments of investment securities for the years ended December 31, 2015, 2014 and 2013.

Accounting for Goodwill and Intangible Assets

Goodwill and intangible assets constitute $2.0 billion, or approximately 68%, of total assets at December 31, 2015. 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. JCG 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.

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In connection with the purchase price allocation of acquisitions in which a majority interest is obtained, JCG relies on in-house financial expertise or uses a third-party expert, if considered necessary. Valuations generally rely on management's estimates and judgments as to financial forecasts, including revenue, 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 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, a process similar to a purchase price allocation is undertaken to determine the amount, if any, of the goodwill impairment. All assets, including previously unrecognized intangible assets and liabilities, are allocated based on their respective fair values and any unallocated value is assigned to goodwill. Because the allocation of fair value may include intangible assets not previously recognized, the amount of the goodwill impairment charge may significantly exceed the difference between the fair value of the reporting unit and its recorded value. For purposes of testing goodwill for impairment, JCG's single operating segment, its investment management business, also represents its single reporting unit.

Indefinite-lived intangible assets primarily represent brand name and trademark and investment management agreements. The assignment of indefinite lives to brand name and trademark and investment management agreements is based on the assumption that they are expected to generate cash flows over an indefinite period. Indefinite-lived intangible assets are tested for impairment by comparing the fair value of the assets to their recorded values.

To complete the tests for potential impairment of goodwill and indefinite-lived intangible assets, JCG uses a discounted cash flow analysis that requires assumptions regarding projected future earnings and discount rates. In projecting future earnings, JCG considers equity and fixed income market performance, performance compared to peers, significant changes in the underlying business and products, material and ongoing industry or economic trends, and other factors that may influence future earnings. Changes in the assumptions underlying the discounted cash flow analyses could materially affect JCG's impairment conclusion. Due to the significance of the goodwill and identified indefinite-lived intangible assets to JCG's Consolidated Balance Sheets, any impairment charge could have a material adverse effect on the Company's consolidated financial condition and results of operations.

The October 2015, 2014 and 2013 tests of goodwill and indefinite-lived intangible assets indicated that estimated fair values substantially exceeded their respective carrying values, and as such, no impairment charges were recognized. The impairment tests included certain underlying key assumptions regarding future overall market trends and Company operating performance. If actual future market results and Company operating performance vary significantly and unfavorably to those included in the Company's financial forecast, the Company may be subject to impairment charges related to its goodwill and indefinite-lived intangible assets.

Definite-lived intangible assets represent client relationships, which are amortized over their estimated lives using the straight-line method. The estimated lives of client relationships vary and range from 10 years to 17 years. Definite-lived intangible assets are tested only when there are indications of impairment. To complete the tests for potential impairment of definite-lived intangible assets, JCG uses a two-step process. The first step compares the fair value of the asset, based on undiscounted cash flows, to the recorded value of the asset. If the recorded value of the asset exceeds the fair value, a second step must be performed. The second step compares the fair value of the asset, based on discounted cash flows, to the carrying value of the asset. No impairment charges were recognized during the years ended December 31, 2015, 2014 and 2013.

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Post-Employment Benefits

In October 2014, INTECH granted long-term incentive awards to retain and incentivize employees. The awards consisted of appreciation rights, profits interests and phantom interests and were designed to give recipients an equity-like stake in INTECH. Profits interests and phantom interests entitle holders to periodic distributions of a portion of INTECH operating income. Distributions are made during employment and, for profits interests, post-employment for up to 10 years. Phantom interests are entitled to a one-time distribution at termination of employment. Compensation expense for post-employment distributions is based upon the present value of expected future distributions and is recognized pro rata over the 10-year vesting schedule for profits interests and five years for phantom interests. The present value of these payments was determined using a 2% discount rate, which represents the interest rate on a 20-year U.S. Treasury note. As of December 31, 2015, the total undiscounted estimated post-employment payments for profits interests and phantom interests is $54.1 million (the majority will not be paid until 10 to 20 years after the grant date). The estimated post-employment payments are evaluated and adjusted quarterly, as necessary, with changes recorded in results of operations.

Equity Compensation

JCG uses the Black-Scholes option pricing model to estimate the fair value of the INTECH appreciation rights. The assumptions used in the Black-Scholes option pricing model include dividend yield, expected volatility, risk-free interest rate and expected life. The dividend yield and expected volatility were determined using historical data from publicly traded peers. The risk-free interest rate is based on the 10-year U.S. Treasury note at the time of the grant. The expected life of the appreciation rights was estimated based upon the assumption that recipients terminate upon vesting and exercise 20% of their rights each year over the following five years. See Part II, Item 8, Financial Statements and Supplementary Data, Note 12 — Long-Term Incentive Compensation, of this Annual Report on Form 10-K for more information regarding the INTECH appreciation rights.

JCG granted price-vesting units to its Chief Executive Officer on December 31, 2015, 2014 and 2013. There are performance and service conditions associated with the vesting of the price-vesting units. See Part II, Item 8, Financial Statements and Supplementary Data, Note 12 — Long-Term Incentive Compensation, of this Annual Report on Form 10-K for more information regarding the price-vesting units.

JCG records equity compensation net of estimated forfeitures over the vesting term. Determining the forfeiture estimate requires significant judgment about 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 expense recognized in that period and future periods.

Income Taxes

Significant management judgment is required in developing JCG's 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

JCG has not recorded a valuation allowance on its deferred tax assets of $60.3 million as of December 31, 2015, based on management's belief that future 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 JCG's historical trend of positive income changes,

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JCG may be required to record a valuation allowance on deferred tax assets, which could have a material adverse effect on the Company's consolidated financial condition and results of operations.

Income Tax Contingencies

At December 31, 2015, JCG had an accrued liability of $5.4 million related to tax contingencies for issues that may be raised by various taxing authorities. JCG decreased its income tax contingency reserves in 2015 by $0.9 million as a result of the expiration of statutes of limitations and audit settlements, creating a net tax benefit of $0.5 million. 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.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements is incorporated by reference from Part II, Item 8, Financial Statements and Supplementary Data, Note 3 — Recent Accounting Pronouncements, of this Annual Report on Form 10-K.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following information, together with information included in other parts of this Management's Discussion and Analysis of Financial Condition and Results of Operations, describes the key aspects of certain financial instruments that have market risk to JCG.

Investment Management Fees

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. Accordingly, fluctuations in the financial markets have a direct effect on JCG's operating results. In addition, fluctuations in interest rates may affect the value of assets under management in fixed income investment products. Although fluctuations in the financial markets have a direct effect on JCG's operating results, assets under management may overperform or underperform the financial markets. As such, quantifying the impact of the correlation between assets under management and JCG's operating results may be misleading. However, the graph in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Revenues, presents the historical relationship between revenues and average assets under management.

Performance Fees

Performance fee revenue is derived from certain mutual funds and separate accounts. As a result, JCG's revenues are subject to volatility beyond market-based fluctuations discussed in the investment management fees section above.

Separate account performance fees are specified in certain client contracts and are based on investment performance as compared to an established benchmark index over a specified period of time. Performance fees are recognized at the end of the contractual period if the stated performance criteria are achieved. JCG recognized separate account performance fees of $19.0 million, $11.7 million and $5.6 million for the years ended December 31, 2015, 2014 and 2013, respectively. At December 31, 2015 and 2014, $21.5 billion and $17.3 billion of assets under management were subject to separate account performance fees, respectively.

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The investment management fee paid by each mutual fund subject to a performance fee is the base management fee plus or minus a performance fee adjustment as determined by the relative investment performance of the fund compared to a specified benchmark index. The performance fee adjustment is up to a positive or negative 15 basis points, calculated using each fund's daily net average assets over the measurement period. The measurement period begins as a trailing period ranging from 12 to 18 months, and each subsequent month is added to each successive measurement period until a 36-month period is achieved. At that point, the measurement period becomes a rolling 36-month period. JCG recognized mutual fund performance fees of negative $28.8 million, negative $59.7 million and negative $87.8 million for the years ended December 31, 2015, 2014 and 2013, respectively. At December 31, 2015 and 2014, $42.0 billion and $49.0 billion of assets under management were subject to mutual fund performance fees, respectively. The addition of performance fees to all funds without such fees is subject to the approval of both a majority of the shareholders of the Funds and the Funds' Independent Board of Trustees.

Investment Securities

At December 31, 2015, JCG was exposed to equity market price risk as a result of investment securities on its Consolidated Balance Sheets that invest primarily in equity securities. The following is a summary of the effect that a hypothetical 10% increase or decrease in equity prices would have on JCG's investment securities subject to equity price fluctuations as of December 31, 2015 (in millions):

 
  Fair
value
  Fair value
assuming a 10%
increase
  Fair value
assuming a 10%
decrease
 

Investment securities:

             

Trading:

                   

Seeded investment products

  $ 104.2   $ 114.6   $ 93.8  

Investments related to deferred compensation plans

    11.1     12.2     10.0  

Investments in advised mutual funds

  4.2   4.6   3.8  

Available-for-sale:

                   

Seeded investment products

  11.4   12.5   10.3  

Total investment securities

  $ 130.9   $ 143.9   $ 117.9  

At December 31, 2015, JCG was exposed to interest rate risk and credit spread risk as a result of investment securities on its Consolidated Balance Sheets that invest primarily in debt securities. The following is a summary of JCG's fixed income securities and the effect that a hypothetical 100 basis

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point increase and decrease in interest rates would have on the fair value as of December 31, 2015 (in millions):

 
  Fair value   Fair value
assuming a
100 basis point
increase in
interest rates
  Fair value
assuming a
100 basis point
decrease in
interest rates
 

Investment securities:

             

Trading:

                   

Seeded investment products

  $ 131.4   $ 125.4   $ 138.2  

Investments related to deferred compensation plans

    5.2     5.0     5.5  

Available-for-sale:

             

Seeded investment products

    59.6     58.1     61.1  

Total investment securities

  $ 196.2   $ 188.5   $ 204.8  

Derivative Instruments

The Company maintains an economic hedge program that uses derivative instruments to hedge against market volatility of certain of its seed investments. Fluctuations in equity markets, debt markets, commodity markets and foreign currency markets are hedged by using index swaps, credit default swaps, futures contracts and forward contracts.

JCG was party to the following derivative instruments as of December 31, 2015 and 2014:

 
  December 31, 2015   December 31, 2014  
 
  Number of
contracts
  Notional value
(in millions)
  Fair value
(in millions)
  Number of
contracts
  Notional value
(in millions)
  Fair value
(in millions)
 

Index swaps

  6   $ 34.4   $ (0.1 ) 4   $ 56.8   $ 0.3  

Futures

    38   $ 91.7   $ 0.2     6   $ 74.9   $ (1.2 )

Credit default swaps

  2   $ 66.5   $ (0.5 )   $   $  

Foreign currency forward contracts

      $   $     7   $ 3.6   $  

JCG reassessed its hedging strategy related to foreign currency exposure on certain seeded investments during the third quarter 2015 and consequently exited its foreign currency forward positions. JCG was not party to any foreign currency derivatives as of December 31, 2015.

The derivative instruments are not designated as hedges for accounting purposes. Changes in fair value of the index swaps, index and commodity futures, and credit default swaps are recognized in investment gains (losses), net on JCG's Consolidated Statements of Comprehensive Income while changes in the fair value of the foreign currency forward contracts are recognized in other income, net on JCG's Consolidated Statements of Comprehensive Income.

Mutual Fund Share Awards

During 2015, 2014 and 2013, JCG granted $23.2 million, $22.7 million and $38.1 million, respectively, in compensation-related awards that are indexed to certain mutual funds managed by the Company. Upon vesting, participants receive the value of the award adjusted for gains or losses attributable to the mutual funds to which the awards were indexed, subject to tax withholding. Mark-to-market adjustments on mutual fund share awards create volatility within long-term incentive compensation expense on JCG's Consolidated Statements of Comprehensive Income. The level of

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volatility depends upon the amount of mutual fund share awards and the market and investment performance of products to which the awards are indexed.

Deferred Compensation

JCG maintains deferred compensation plans for certain highly compensated employees and members of its Board of Directors. Eligible participants may defer a portion of their compensation and have the ability to earn a return by indexing their deferrals to mutual funds managed by the Company. The Company makes no contributions to the plan. To protect against market variability of the liability, the Company creates an economic hedge by investing in mutual funds that are consistent with the deferred amounts and mutual fund elections of the participants. Such investments remain assets of JCG. Changes in market value of the liability to participants are recognized as compensation in JCG's Consolidated Statements of Comprehensive Income, and changes in the market value of the economic hedge are recognized as investment gains (losses), net in JCG's Consolidated Statements of Comprehensive Income. At December 31, 2015 and 2014, investments related to deferred compensation plans totaled $16.3 million and $13.0 million, respectively.

Foreign Currency Exchange Sensitivity

JCG has international subsidiaries that conduct business in foreign countries. With respect to these operations, matters arise as to financial accounting and reporting for foreign currency transactions and for translating foreign currency financial statements into U.S. dollars. The exposure to foreign currency fluctuations is not material as the majority of the revenue earned and associated expenses incurred by international subsidiaries are denominated in U.S. dollars. However, the acquisition of Kapstream in July 2015, added additional foreign currency exchange exposure as its revenue and expenses are translated from Australian dollars to U.S. dollars. The exposure to foreign currency fluctuations may increase in the future as JCG continues to grow its international business and launch new products denominated in currencies other than the U.S. dollar.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

 
  Page

Financial Statements:

   

Reports of Independent Registered Public Accounting Firm — Deloitte & Touche LLP

  45

Management Report on Internal Control Over Financial Reporting

  47

Consolidated Balance Sheets as of December 31, 2015 and 2014

  48

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2014 and 2013

  49

Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 2013

  50

Consolidated Statements of Changes in Equity for the Years Ended December 31, 2015, 2014 and 2013

  51

Notes to Consolidated Financial Statements

  52

Financial Statement Schedules:

 
 

All schedules are omitted because they are not applicable or are insignificant, or the required information is shown in the consolidated financial statements or notes thereto.

   

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Janus Capital Group Inc.
Denver, CO

We have audited the accompanying consolidated balance sheets of Janus Capital Group Inc. and subsidiaries (the "Company") as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2016, expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ Deloitte & Touche LLP

Denver, CO
February 24, 2016

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Janus Capital Group Inc.
Denver, CO

We have audited the internal control over financial reporting of Janus Capital Group Inc. and subsidiaries (the "Company") as of December 31, 2015, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated financial statements as of and for the year ended December 31, 2015, of the Company, and our report dated February 24, 2016, expressed an unqualified opinion on those financial statements.

/s/ Deloitte & Touche LLP

Denver, CO
February 24, 2016

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MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Janus Capital Group Inc. ("JCG") management is responsible for establishing and maintaining adequate internal control over JCG's financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. JCG's internal control system was designed to provide reasonable assurance to JCG's management and Board of Directors regarding the preparation and fair presentation of published financial statements. There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal controls may vary over time.

JCG management has assessed the effectiveness of JCG's internal controls over financial reporting as of December 31, 2015. In making this assessment, JCG management used the framework set forth in the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013).

Based on the assessment using those criteria, JCG management believes that as of December 31, 2015, internal control over financial reporting is effective.

JCG's independent registered public accounting firm audited the financial statements included in the Annual Report on Form 10-K and has issued an audit report on management's assessment of JCG's internal control over financial reporting. This report appears on page 46 of this Annual Report on Form 10-K.

February 24, 2016

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JANUS CAPITAL GROUP INC.

CONSOLIDATED BALANCE SHEETS
(Dollars in Millions, Except Share Data)

 
  December 31,
2015
  December 31,
2014
 

ASSETS

         

Current assets:

   
 
   
 
 

Cash and cash equivalents

  $ 364.4   $ 452.5  

Investment securities

    327.1     344.0  

Accounts receivable

  137.8   130.9  

Other current assets

    41.4     59.8  

Total current assets

  870.7   987.2  

Other assets:

   
 
   
 
 

Property and equipment, net

  38.7   31.1  

Intangible assets, net

    1,352.5     1,257.4  

Goodwill

  602.8   509.7  

Other non-current assets

    6.8     7.8  

Total assets

  $ 2,871.5   $ 2,793.2  

LIABILITIES AND EQUITY

   
 
   
 
 

Current liabilities:

 

 

 


 
 

Accounts payable

  $ 6.9   $ 8.8  

Accrued compensation and benefits

  145.3   142.8  

Current portion of long-term debt

    108.9      

Other accrued liabilities

  74.2   78.0  

Total current liabilities

    335.3     229.6  

Other liabilities:

 

 

 


 
 

Long-term debt

    297.2     450.5  

Deferred income taxes, net

  498.9   478.4  

Other non-current liabilities

    46.2     41.2  

Total liabilities

  1,177.6   1,199.7  

Commitments and contingencies (See Note 16)

   
 
   
 
 

Redeemable noncontrolling interests

 

21.8

 


5.4
 

Equity:

   
 
   
 
 

Preferred stock ($1.00 par, 10,000,000 shares authorized, none issued)

     

Common stock ($0.01 par, 1,000,000,000 shares authorized; 183,660,673 and 185,153,490 shares outstanding, respectively)

    1.8     1.9  

Retained earnings

  1,589.8   1,540.3  

Accumulated other comprehensive loss, net of tax

    (8.9 )   (1.4 )

Total JCG shareholders' equity

  1,582.7   1,540.8  

Noncontrolling interests

    89.4     47.3  

Total equity

  1,672.1   1,588.1  

Total liabilities, redeemable noncontrolling interests and equity

  $ 2,871.5   $ 2,793.2  

   

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

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JANUS CAPITAL GROUP INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Millions, Except per Share Data)

 
  Year ended December 31,  
 
  2015   2014   2013  

Revenues:

             

Investment management fees

  $ 913.7   $ 849.1   $ 813.0  

Performance fees

  (9.8 ) (48.0 ) (82.2 )

Shareowner servicing fees and other

    172.3     152.1     143.1  

Total revenue

  1,076.2   953.2   873.9  

Operating expenses:

   
 
   
 
   
 
 

Employee compensation and benefits

  352.5   322.8   292.7  

Long-term incentive compensation

    76.8     51.3     63.1  

Marketing and advertising

  22.0   19.5   20.2  

Distribution

    141.0     131.0     125.7  

Depreciation and amortization

  33.0   25.6   28.7  

General, administrative and occupancy

    128.6     113.3     104.4  

Total operating expenses

  753.9   663.5   634.8  

Operating income

   
322.3
   
289.7
   
239.1
 

Interest expense

 

(27.7

)


(33.1

)


(41.1

)

Investment gains (losses), net

    (8.2 )   (1.9 )   6.5  

Other income, net

  3.2   3.0   4.5  

Loss on early extinguishment of debt

    (36.3 )       (13.5 )

Income before taxes

  253.3   257.7   195.5  

Income tax provision

    (94.0 )   (102.3 )   (73.3 )

Net income

  159.3   155.4   122.2  

Noncontrolling interests

    (3.5 )   (1.0 )   (7.5 )

Net income attributable to JCG

  $ 155.8   $ 154.4   $ 114.7  

Earnings per share attributable to JCG common shareholders:

   
 
   
 
   
 
 

Basic

  $ 0.84   $ 0.82   $ 0.62  

Diluted

  $ 0.80   $ 0.81   $ 0.62  

Other comprehensive loss, net of tax: