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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, 2017

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 001-38103

GRAPHIC

Janus Henderson Group plc
(Exact name of registrant as specified in its charter)

Jersey, Channel Islands
(State or other jurisdiction of
incorporation or organization)
  98-1376360
(I.R.S. Employer Identification No.)

201 Bishopsgate EC2M 3AE
United Kingdom

(Address of principal executive offices)

 

N/A
(Zip Code)

+44 (0) 20 7818 1818
(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, $1.50 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 o    No ý

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 or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o (Not applicable. See Item 1 Business.)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

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

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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, 2017, the aggregate market value of common equity held by non-affiliates was $6,635,447,229.18. As of February 22, 2018, there were 200,406,138 shares of the Company's common stock, $1.50 par value per share, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

   


Table of Contents


JANUS HENDERSON GROUP PLC
2017 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

 
   
  Page

 

PART I

   

Item 1.

 

Business

  2

Item 1A.

 

Risk Factors

  11

Item 1B.

 

Unresolved Staff Comments

  26

Item 2.

 

Properties

  26

Item 3.

 

Legal Proceedings

  26

Item 4.

 

Mine Safety Disclosures

  26

 

PART II

   

Item 5.

 

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

  27

Item 6.

 

Selected Financial Data

  29

Item 7.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations of Janus Henderson Group plc

  31

Item 7A.

 

Quantitative and Qualitative Disclosures about Market Risk

  56

Item 8.

 

Financial Statements and Supplementary Data

  59

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

  125

Item 9A.

 

Controls and Procedures

  125

Item 9B.

 

Other Information

  125

 

PART III

   

Item 10.

 

Directors, Executive Officers and Corporate Governance

  125

Item 11.

 

Executive Compensation

  135

Item 12.

 

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

  150

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

  155

Item 14.

 

Principal Accountant Fees and Services

  159

 

PART IV

   

Item 15.

 

Exhibits and Financial Statement Schedules

  160

Item 16.

 

Form 10-K Summary

  167

 

Signatures

  168

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PART I

FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K contain "forward-looking statements" within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, as amended, Section 21E of the Securities Exchange Act of 1934 ("Exchange Act"), as amended, and Section 27A of the Securities Act of 1933, as amended ("Securities Act"). Such forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors which may cause the actual results, performance or achievements of Janus Henderson Group plc (the "Company") and its consolidated subsidiaries (collectively, the "Group" or "JHG") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements and future results could differ materially from historical performance. Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "projects", "estimates", "plans", "may increase", "may fluctuate", "forecast", "seeks", "targets", "outlook" and similar words and expressions and future or conditional verbs such as "will", "should", "would", "may", "could" and variations or negatives of these words, are generally forward-looking in nature and not historical facts. Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements. These statements are based on the beliefs and assumptions of Company management based on information currently available to management.

Various risks, uncertainties, assumptions and factors that could cause future results to differ materially from those expressed by the forward-looking statements included in this Annual Report on Form 10-K include, but are not limited to, risks, uncertainties, assumptions and factors specified in the Company's prospectus dated March 21, 2017, as filed with the Securities and Exchange Commission ("SEC") pursuant to Rule 424(b) under the Securities Act of 1933, as amended (File No. 333-216824) (the "Prospectus") and this Annual Report on Form 10-K included under headings such as "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations of Janus Henderson Group plc", and "Quantitative and Qualitative Disclosures about Market Risk", and in other filings and furnishings made by the Company with the SEC from time to time. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this Annual Report on Form 10-K may not occur. In particular, any discussion of potential merger synergies is forward looking and uncertain. Forward-looking statements by their nature address matters that are, to different degrees, subject to numerous assumptions and known and unknown risks and uncertainties, which change over time and are beyond the control of the Company and its management. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this Annual Report on Form 10-K. The Company does not assume any duty and does not undertake to update forward-looking statements, to report events or to report the occurrence of unanticipated events, whether as a result of new information, future developments or otherwise, should circumstances change, nor does the Company intend to do so, except as otherwise required by securities and other applicable laws and regulations.

ITEM 1.    BUSINESS

Janus Henderson Group plc ("JHG" or "the Group"), a company incorporated and registered in Jersey, Channel Islands, is an independent global asset manager, specializing in active investment across all major asset classes.

On May 30, 2017 (the "Closing Date"), JHG (previously Henderson Group plc ("Henderson")) completed a merger of equals with Janus Capital Group Inc. ("JCG") (the "Merger"). As a result of the Merger, JCG and its consolidated subsidiaries became subsidiaries of JHG.

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JHG is a client-focused global business with over 2,300 employees worldwide, and assets under management ("AUM") of $370.8 billion as of December 31, 2017. JHG has operations in North America, the United Kingdom ("UK"), Continental Europe, Latin America, Asia and Australia. JHG focuses on active fund management by investment managers with unique individual perspectives, who are free to implement their own investment views, within a strong risk management framework.

JHG manages a broad range of actively managed investment products for institutional and retail investors across five capabilities: Equities, Quantitative Equities, Fixed Income, Multi-Asset and Alternatives.

Clients entrust money to JHG — either their own or money they manage for their clients — and expect the Group to deliver the benefits specified in their mandate or by the prospectus for the fund in which they invest. JHG measures the amount of these funds as AUM. Growth in AUM is a key objective of the Group. AUM increases or decreases primarily depending on its ability to attract and retain client investments, and on investment performance, market and currency movements. To the extent that the Group invests in new asset management teams or businesses or divests from existing ones, this is also reflected in AUM.

Clients pay a management fee, which is usually calculated by reference to a percentage of AUM. 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. As of December 31, 2017, performance fees were generated from a diverse group of funds and accounts. Management and performance fees are the primary drivers of the Group's revenue. JHG believes that the more diverse the range of investment strategies from which management and performance fees are derived, the more successful its business model will be.

Investment Offerings

Equities

The Group offers a wide range of equity strategies encompassing different geographic focuses and investment styles. The equity teams include those with a global perspective, those with a regional focus — U.S., Europe, Asia and Australia — and those invested in specialist sectors. These teams generally apply processes based on fundamental research and bottom-up stock picking.

Quantitative Equities

The Intech Investment Management LLC ("Intech") business applies advanced mathematics and systematic portfolio rebalancing intended to harness the volatility of movements in stock prices — a reliable source of excess returns and risk control. With more than 30 years of volatility expertise, the Intech team employs a distinctive quantitative approach based on observations of actual price movements, not on subjective forecasts of companies' future performance.

Fixed Income

JHG's Fixed Income teams provide coverage across the asset class, applying a wide range of innovative and differentiated techniques. These teams include those adopting global unconstrained approaches through to those with more focused mandates — based in the United States ("U.S."), Europe, Asia and Australia. The capabilities of these teams can be accessed through individual strategies and are combined where appropriate to form multi-strategy offerings.

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Multi-Asset

JHG Multi-Asset includes teams in the U.S. and UK. In the U.S., the team manages Global Asset Allocation strategies. In the UK, JHG has asset allocation specialists, traditional multi-manager investors and those focused on alternative asset classes.

Alternatives

JHG Alternatives includes teams with different areas of focus and approach. Diversified Alternatives brings together a cross-asset class combination of alpha generation, risk management and efficient beta replication strategies. These include Multi-Strategy, Liquid Alternatives, Agriculture and Global Commodities/Managed Futures, while other strategies focus on Absolute Return, Volatility and Tail Risk. Additionally, the management of the Group's direct UK commercial property offering is sub advised to TH Real Estate.

Distribution

Distribution Channels

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

Intermediary Channel

The intermediary channel distributes mutual funds and exchange-traded funds ("ETFs") through financial intermediaries including banks, broker-dealers, financial advisors, UK Open Ended Investment Companies ("OEICs"), Société d'Investissement À Capital Variable ("SICAV"), fund platforms and discretionary wealth managers. 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, 2017, assets in the intermediary channel totaled $164.1 billion, or 44% of total Group assets.

Institutional Channel

The institutional channel serves corporations, endowments, pension funds, foundations, Taft-Hartley funds, public fund clients and sovereign entities, with distribution direct to the plan sponsor and through consultants. At December 31, 2017, assets in the institutional channel totaled $144.7 billion, or 39% of total Group assets.

Self-Directed Channel

The self-directed channel serves existing individual investors who invest in JHG products through a mutual fund supermarket or directly with JHG. Exchange-traded notes ("ETNs") associated with VelocityShares are also part of the self-directed channel. At December 31, 2017, assets in the self-directed channel totaled $62.0 billion, or 17% of total Group assets.

While JHG seeks to leverage its global model where possible, it also recognizes the importance of tailoring its services to the needs of clients in different regions. For this reason, JHG maintains a local presence in most of the markets in which it operates and provides investment material that takes into account local customs, preferences and language needs. JHG has a global distribution team of over 600 client-facing staff.

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JHG's brand centers on the proposition of Knowledge. Shared, which leverages the Group's deep pool of intellectual capital to deliver investment thought leadership and transparency to clients, thereby building and strengthening trusted relationships.

Products and Services

The Group's global product team maintains oversight of a broad range of products, including locally domiciled pooled funds in the U.S., the UK, Luxembourg, Japan, Singapore and Australia, hedge funds, segregated mandates and closed-ended vehicles. The team provides governance for all funds and strategies, and gauges the suitability of new offerings as well as ensuring that existing products remain suited to the clients to which they are marketed.

Intellectual Property

JHG has used, registered, and/or applied to register certain trademarks, service marks and trade names to distinguish the Group's sponsored investment products and services from those of its competitors in the jurisdictions in which it operates, including the U.S., the UK, the European Union ("EU"), Australia, China, Japan and Singapore. These trademarks, service marks and trade names are important to JHG and, accordingly, the company enforces its trademark, service mark and trade name rights. The Group's brand has been, and continues to be, extremely well received both in the asset management industry and with clients.

Seasonality

JHG's revenue streams are not seasonal in nature, with management fees and other income generally accruing evenly through the year. Performance fees are recognized when the prescribed performance hurdles have been achieved and it is probable that the fee will be earned as a result. The hurdles coincide with the underlying fund year ends. Given the uncertain nature of performance fees, they tend to fluctuate from period to period. Finance income includes interest received and investment income. While interest received accrues over the year, investment income, which includes movements in seed capital investments, can fluctuate period to period. This fluctuation depends upon how that particular investment performs each month.

Competition

The investment management industry is relatively mature and saturated with competitors that provide services similar to JHG. As such, JHG encounters significant competition in all areas of its business. JHG competes with other investment managers, mutual fund advisers, brokerage and investment banking firms, insurance companies, hedge funds, venture capitalists, banks and other financial institutions, many of which are larger, have proprietary access to 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.

JHG 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.

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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 JHG and advisory clients of JHG. 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 JHG.

U.S. Regulation

Certain of JHG's 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 U.S. Commodity Futures Trading Commission ("CFTC").

Investment Advisers Act of 1940

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

JHG'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 JHG's subsidiaries, as well as the distribution of certain commingled funds and exchange-traded products

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("ETPs"). 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 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 JHG 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 JHG subsidiary as well as some transactions by the fiduciaries (and several other related parties) to such plans.

CFTC

The CFTC has regulations that require certain JHG subsidiaries to register as a commodity pool operator ("CPO") and commodity trading adviser ("CTA") 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, CTAs 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 and/or CTA 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 management companies, may be designated as SIFIs in the future. If JHG 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. JHG is not a designated SIFI.

International Regulation

UK

The Financial Conduct Authority ("FCA") regulates JHG and certain of its subsidiaries and products and services it offers in the UK. FCA authorization is required to conduct any investment management related business in the UK under the Financial Services and Markets Act 2000 (the

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"FSMA"). The FCA's rules and guidance under that act govern a firm's capital resources requirements, senior management arrangements, systems and controls, conduct of business, and interaction with clients and the markets. The FCA also regulates the design and manufacture of investment funds intended for public distribution and, on a more limited basis, those that are for investment by professional investors.

Europe

In addition to the above, certain of the Group's UK-regulated entities must comply with a range of EU regulatory measures. Some of these apply directly to UK firms while others have been implemented through member states' law. They include the EU Markets in Financial Instruments Directive ("MiFID"). MiFID regulates the provision of investment services and conduct of investment activities throughout the European Economic Area. MiFID establishes detailed requirements for the governance, organization and conduct of business of investment firms and regulated markets. It also includes pre- and post-trade transparency requirements for equity markets and extensive transaction reporting requirements. These requirements were substantially revised and extended to non-equities from January 3, 2018, as a result of the implementation of the revised MiFID. The Markets in Financial Instruments Directive II ("MiFID II") will have a substantial impact on the EU financial services sector, including asset managers. The UK has adopted the MiFID rules into national legislation, principally via the FSMA and the FCA rules. The other EU member states in which JHG has a presence have also implemented MiFID in their local legal and regulatory regimes.

The EU's Alternative Investment Fund Managers Directive ("AIFMD"), was required to be transposed into EU member state law by July 2013 with a transitional period until July 2014. AIFMD regulates managers of, and service providers to, alternative investment funds ("AIFs") that are domiciled and offered in the EU and that are not authorized as retail funds under the Undertakings for Collective Investment in Transferable Securities Directive. JHG has two subsidiaries regulated as Alternative Investment Fund Managers. The AIFMD also regulates the marketing within the EU of all AIFs, including those domiciled outside the EU. In general, AIFMD has a staged implementation up to 2018. Compliance with the AIFMD's requirements may restrict AIF marketing and imposes compliance obligations in the form of remuneration policies, capital requirements, reporting requirements, leverage oversight, valuation, stakes in EU companies, the domicile, duties and liability of custodians and liquidity management.

UCITS are investment funds regulated at the EU level under the UCITS Directive V ("UCITS V"). UCITS are capable of being freely marketed throughout the EU on the basis of a single authorization in a member state — so-called passporting. UCITS V covers a range of matters relating to UCITS including the fund structure and domicile of UCITS, service providers to UCITS and marketing arrangements.

Luxembourg

A JHG subsidiary, Henderson Management S.A. ("HMSA"), is authorized and regulated in Luxembourg by the Commission de Surveillance du Secteur Financier as a UCITS Management Company. Two umbrella funds, Henderson Horizon Fund and Henderson Gartmore Fund, have appointed HMSA as their management company. Henderson Horizon Fund and Henderson Gartmore Fund are OEICs incorporated under the laws of Luxembourg in the form of an SICAV authorized as a UCITS.

Singapore

In Singapore, the Group's subsidiary is subject to, among others, the Securities and Futures Act, the Financial Advisers Act and the subsidiary legislation promulgated pursuant to these acts, which are

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administered by the Monetary Authority of Singapore. JHG's asset management subsidiary and its employees conducting regulated activities specified in the Securities and Futures Act and/or the Financial Advisers Act are required to be licensed with the Monetary Authority of Singapore.

Australia

In Australia, JHG's subsidiaries are subject to various Australian federal and state laws and are regulated by the Australian Securities and Investments Commission ("ASIC"). ASIC regulates companies, financial markets and financial services in Australia. ASIC imposes certain conditions on licensed financial services organizations that apply to the Group's subsidiaries, including requirements relating to capital resources, operational capability and controls. As JHG's chess depository interests ("CDIs") are quoted and traded on the financial market operated by the Australian Securities Exchange ("ASX"), Henderson is also required to comply with the ASX listing rules and the ASX Principles.

Hong Kong

In Hong Kong, JHG's subsidiary is subject to the Securities and Futures Ordinance ("SFO"), and its subsidiary legislation, which governs the securities and futures markets and regulates, among other things, offers of investments to the public and provides for the licensing of dealing in securities and asset management activities and intermediaries. This legislation is administered by the Securities and Futures Commission ("SFC"). The SFC is also empowered under the SFO to establish standards for compliance as well as codes and guidelines. JHG's subsidiaries and its employees conducting any of the regulated activities specified in the SFO are required to be licensed with the SFC, and are subject to the rules, codes and guidelines issued by the SFC from time to time.

Japan

In Japan, the Group's subsidiary is subject to the Financial Instruments and Exchange Act and the Act on Investment Trusts and Investment Corporations. These laws are administered and enforced by the Japanese Financial Services Agency, which establishes standards for compliance, including capital adequacy and financial soundness requirements, customer protection requirements and conduct of business rules.

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.

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 JHG'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.

Other

The Group's operations in Taiwan and Ireland are regulated by the Financial Supervisory Commission of Taiwan and the Central Bank of Ireland, respectively.

Employees

As of December 31, 2017, JHG had 2,356 full-time equivalent employees. None of JHG's employees are represented by a labor union.

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Available Information

Copies of JHG'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.

JHG 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 JHG's website (http://en-us.janushenderson.com). The contents of JHG's website are not incorporated herein for any purpose.

JHG's Officer Code of Ethics for Chief Executive Officers and Senior Financial Officers (including its Chief Executive Officers, 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 JHG's website (http://www.snl.com/irw/corporateprofile/4147331). Any future amendments to or waivers of the Officer Code will be posted to the Investor Relations section of JHG's website.

Corporate Information

JHG is a public limited company incorporated in Jersey, Channel Islands and tax resident in the UK Its principal business address is 201 Bishopsgate, London, EC2M 3AE, United Kingdom and its telephone number is +44 (0)20 7818 1818.

JHG is a "foreign private issuer" as defined in Rule 3b-4 promulgated by the SEC under the Exchange Act and in Rule 405 under the Securities Act. As a result, it is eligible to file its annual reports pursuant to Section 13 of the Exchange Act on Form 20-F (in lieu of Form 10-K) and to file its interim reports on Form 6-K (in lieu of Forms 10-Q and 8-K). However, JHG has elected to file its annual and interim reports on Forms 10-K, 10-Q and 8-K, including any instructions therein that relate specifically to foreign private issuers.

Pursuant to Rule 3a12-3 under the Exchange Act regarding foreign private issuers, the proxy solicitations of JHG are not subject to the disclosure and procedural requirements of Regulation 14A under the Exchange Act, and transactions in the JHG's equity securities by its officers, directors and significant shareholders are exempt from the reporting and liability provisions of Section 16 of the Exchange Act.

Additional Financial Information

See additional financial information about geographical areas in Part II, Item 8, Financial Statements and Supplementary Data, Note 20 — Geographic Information.

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ITEM 1A.    RISK FACTORS

JHG faces numerous risks, uncertainties and other factors that are substantial and inherent to its business, including market and investment performance risks, business and strategic risks, operational and technology risks, legal and regulatory risks, risks related to taxes and Jersey company risks. The following are significant factors that could affect JHG's business.

Market and Investment Performance Risks

JHG's results of operations and financial condition 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 AUM will cause a decline in revenue and negatively impact operating results and the financial condition of JHG. AUM may decline for various reasons, many of which are not under the control of JHG.

Factors that could cause AUM and revenue to decline include the following:

Declines in equity markets.  JHG's AUM are concentrated in the U.S. and European equity markets. Equity securities may decline in value as a result of many factors, including an issuer's actual or perceived financial condition and growth prospects, investor perception of an industry or sector, changes in currency exchange rates, changes in regulations and geopolitical and economic risks. Declines in the equity markets as a whole, or in the market segments in which JHG investment products are concentrated, may cause AUM to decrease.

Declines in fixed income markets.  Fixed income investment products may decline in value as a result of many factors, principally increases in interest rates, changes in currency exchange rates, changes in relative yield among instruments with different maturities, geopolitical and general economic risks, 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.

Relative investment performance.  JHG's investment products are often judged on their performance as compared to benchmark indices or peer groups, as well as being judged on an absolute return basis. Any period of underperformance of investment products relative to peers may result in the loss of existing assets and affect the ability of JHG to attract new assets. In addition, as of December 31, 2017 approximately 17% of JHG's AUM were subject to performance fees. Performance fees are based either on each product's investment performance as compared to an established benchmark index or on its positive absolute return over a specified period of time. If JHG investment products subject to performance fees underperform their respective benchmark index or produce a negative absolute return for a defined period, the revenue and thus results of operations and financial condition of JHG may be adversely affected. In addition, performance fees subject JHG's revenue to increased volatility. Further, certain JHG U.S. mutual fund contracts, representing approximately 12% of JHG's AUM at December 31, 2017, are subject to fulcrum performance fees and as a result, performance fees earned can be negative as well as positive.

JHG's revenue and profitability would be adversely affected by any reduction in assets under management as a result of redemptions and other withdrawals from the funds and accounts managed.

Redemptions or withdrawals may be caused by investors (in response to adverse market conditions or pursuit of other investment opportunities or as a consequence of damage to JHG's reputation, among other factors) reducing their investments in funds and accounts in general or in the market segments on which JHG focuses; investors taking profits from their investments; poor investment performance of the funds and accounts managed by JHG; and portfolio risk characteristics, which could cause investors to move assets to other investment managers. Poor performance relative to

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competing products provided by other investment management firms tends to result in decreased sales, increased redemptions of fund shares and the loss of or reduction in AUM in private institutional accounts, with corresponding decreases in revenue. Failure of the JHG funds and accounts to perform well could, therefore, have a material adverse effect on the results of operations and financial condition of the Group.

Changes in the value of seeded investment products could affect JHG's non-operating income or earnings and could increase the volatility of its earnings.

JHG has a significant seed portfolio and periodically adds new investment strategies to its investment product offerings, and provides the initial cash investment or "seeding" to facilitate the launch of the product. JHG 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 negatively impact JHG's earnings and financial condition.

Disruption to the operations of third parties whose functions are integral to the Group's ETNs and ETFs platforms, collectively referred to as ETPs, may adversely affect the prices at which ETPs trade, particularly during periods of market volatility.

The trading price of an ETPs shares fluctuates continuously throughout trading hours. While an ETPs creation/redemption feature and the arbitrage mechanism are designed to make it more likely that the ETP's shares normally will trade at prices close to the ETFs net asset value ("NAV"), exchange prices may deviate significantly from the ETPs NAV. ETP market prices are subject to numerous potential risks, including trading halts invoked by a stock exchange, inability or unwillingness of market markers, authorized participants, settlement systems or other market participants to perform functions necessary for an ETPs arbitrage mechanism to function effectively, or significant market volatility. If market events lead to instances where ETPs trade at prices that deviate significantly from an ETPs NAV, or trading halts are invoked by the relevant stock exchange or market, investors may lose confidence in ETP products and redeem their holdings, which may cause AUM, revenue and earnings to decline.

Illiquidity in certain securities in which JHG invests may negatively impact the financial condition of the Group's investment products, and may impede the ability of JHG funds to effect redemptions.

JHG is exposed to the risk that some of its funds or mandates invest in certain securities or other assets in which the secondary trading market is illiquid or in which there is no secondary trading market at all. Illiquidity may occur with respect to the securities of a specific issuer, of issuers within a specific industry or sector, of issuers within a specific geographic region or regions, with respect to an asset class or an investment type, or with respect to the market as a whole. An illiquid trading market may increase market volatility and may make it impossible for funds or mandates to sell investments promptly without suffering a loss. This may have an adverse impact on the investment performance of such funds and mandates and on the AUM, revenues and results of operations of JHG.

Investors in certain funds managed by JHG have contractual terms that provide for a shorter notice period than the time period during which these funds may be able to sell underlying investments within the fund. This liquidity mismatch may be exacerbated during periods of market illiquidity and, in circumstances in which there are high levels of investor redemptions, it may be necessary for JHG to impose restrictions on redeeming investors or suspend redemptions. Such actions may increase the risk of legal claims by investors, regulatory investigation and/or fines and adversely affect the reputation of JHG.

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JHG could be adversely impacted by changes in assumptions used in calculating pension assets and liabilities.

JHG provides retirement benefits for its current and former employees in the UK through the Janus Henderson Group Pension Scheme (the "UK Pension Scheme"). The UK Pension Scheme operates a number of defined benefit sections, which closed to new entrants on November 15, 1999, and a money purchase section. As of December 31, 2014, the UK Pension Scheme had a funding deficit of £39.2 million on a technical provisions basis. The Group has agreed with the trustees of the UK Pension Scheme to make contributions of $11.4 million (£8.4 million) per year for four years beginning in 2017 to recover the deficit. JHG may be required to increase its contributions in the future to cover any increased funding shortfall and/or expenses in the UK Pension Scheme, which could adversely impact JHG's results and financial condition.

The following issues could adversely affect the funding of the defined benefits under the UK Pension Scheme and materially affect JHG's funding obligations: (i) poorer than anticipated investment performance of pension fund investments; (ii) the trustees of the UK Pension Scheme switching investment strategy to one with a lower weighting of return-seeking assets; (iii) changes in the corporate bond yields which are used in the measurement of the UK Pension Scheme's liabilities; (iv) longer life expectancy (which will make pensions payable for longer and therefore more expensive to provide, whether paid directly from the UK Pension Scheme or secured by the purchase of annuities); (v) adverse annuity rates (which tend, in particular, to depend on prevailing interest rates and life expectancy), as these will make it more expensive to secure pensions with an insurance company; (vi) a change in the actuarial assumptions by reference to which JHG's contributions are assessed, for example changes to assumptions for long term price inflation; (vii) any increase in the risk-based levy assessed by and payable to the Pension Protection Fund by the UK Pension Scheme; (viii) other events occurring which make past service benefits more expensive than predicted in the actuarial assumptions by reference to which JHG's past contributions were assessed; (ix) changes to the regulatory regime for funding defined benefit pension schemes in the UK; and (x) the UK Pensions Regulator exercising its power to trigger a winding up of the UK Pension Scheme thereby triggering a buy-out debt on the employers or the UK Pensions Regulator using its powers under the Pensions Act 2004 to make other members of the JHG group liable for any deficit in the UK Pension Scheme's funding (although, in practice, it is assumed that the Pensions Regulator would be unlikely to exercise these powers while JHG continues to fund the UK Pension Scheme appropriately).

The global scope of JHG's business subjects the Group to currency exchange rate risk that may adversely impact revenue and income.

JHG generates a substantial portion of its revenue in pounds sterling, euro and Australian dollars. As a result, JHG is subject to foreign currency exchange risk relative to the USD, JHG's financial reporting currency, through its non-U.S. operations. Fluctuations in the exchange rates to the U.S. dollar may affect JHG's financial results from one period to the next. In addition, the Group has risk associated with the foreign exchange revaluation of balances held by certain subsidiaries for which the local currency is different from the Group's functional currency.

JHG could be impacted by counterparty or client defaults.

In periods of significant market volatility, the deteriorating financial condition of one financial institution may materially and adversely impact the performance of others. JHG, and the funds and accounts it manages, have exposure to many different counterparties, and routinely execute transactions with counterparties across the financial industry. JHG, and the funds and accounts it manages, may be exposed to credit, operational or other risk in the event of a default by a counterparty or client, or in the event of other unrelated systemic market failures.

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Business and Strategic Risks

JHG may fail to successfully implement a strategy for the combined business, which could negatively impact the Group's assets under management, results of operations and financial condition.

Through the combination of JCG and Henderson, the Group intends to establish an independent, active asset manager with a globally relevant brand, footprint, investment proposition and client service. No assurance can be given that the Group will successfully achieve this objective or that this objective will lead to increased revenue and net income, or to the creation of shareholder value. The failure to successfully implement a strategy for JHG could adversely affect the Group's AUM, results of operations and financial condition.

JHG operates in a highly competitive environment and revenue from fees may be reduced.

The investment management business is highly competitive. In addition, established firms as well as new entrants to the asset management industry have, in recent years, expanded their application of technology, including through the use of robo-advisers, in providing services to clients. JHG's traditional fee structures 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, as evidenced by the movement toward passively managed mutual funds and the growth of lower cost funds such as exchange traded, smart beta and quant funds. Fees for actively managed investment products may come under increased pressure if such products fail to outperform returns for comparable passively managed products or as a consequence of regulatory intervention. Fee reductions on existing or future new business as well as changes in regulations pertaining to fees could adversely affect the Group's results of operations and financial condition. Additionally, JHG will compete 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 the Group's assets under management, results of operations and financial condition.

The Group'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 characterized by the frequent movement of portfolio managers, analysts and salespeople 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 the Group's ability to retain key personnel and could result in legal claims. If JHG is unable to retain key personnel, particularly those personnel responsible for managing client funds that account for a high proportion of JHG's revenue, it could adversely affect the Group's AUM, results of operations and financial condition.

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

JHG'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, multi-managers, banks and other distribution channels. These companies generally offer their clients various investment products in addition to, and competitive with, products offered by JHG. In addition, JHG'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

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number of third parties distributing JHG'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 the Group's business prospects, AUM, results of operations and financial condition.

The global scope of JHG's business subjects the Group to market-specific political, economic and other risks that may adversely impact the Group's revenue and income generated overseas.

The Group's global portfolios and revenue derived from managing these portfolios are subject to significant risks of loss as a result of political, economic, and diplomatic developments, currency fluctuations, social instability, changes in governmental policies, expropriation, nationalization, asset confiscation and changes in legislation related to non-U.S. ownership. Political events in any country or region could result in significant declines in equity and/or fixed income securities exposed to such a country or region and, to the extent that JHG has a concentration of AUM in such a country or region could result in a material adverse effect on the AUM, results of operations and financial condition of the combined company. In addition, international trading markets, particularly in some emerging market countries, are often smaller, less liquid, less regulated and significantly more volatile than those in the U.S. As the Group's business grows in non-U.S. markets, any ongoing and future business, political, economic or social unrest affecting these markets may have a negative impact on the long-term investment climate in these and other areas and, as a result, on JHG's AUM and the corresponding revenue and income generated from these markets may be negatively affected.

Harm to JHG's reputation or poor investment performance of JHG's products could reduce the level of assets under management or affect sales, potentially negatively impacting the Group's revenue and net income. JHG's reputation is critical to the success of the Group.

JHG believes that its brand name is well received both in the asset management industry and with its clients, reflecting the fact that the brand, like the business, is based in part on trust and confidence. If the reputation of JHG is harmed, existing clients may reduce amounts held in, or withdraw entirely from, funds advised by JHG, or funds may terminate or reduce AUM under their management agreements with JHG, which could reduce the amount of AUM of the Group and cause the Group to suffer a corresponding loss in revenue and income. The investment performance of JHG, along with achieving and maintaining superior distribution and client services, is also critical to the success of the business. Strong investment performance has historically stimulated sales of JHG investment products. Poor investment performance as compared to third-party benchmarks or competitive products has in the past, and could in the future, lead to a decrease in sales of investment products managed by JHG and stimulate redemptions from existing products, generally lowering the overall level of AUM and reducing management fees. No assurance can be given that past or present investment performance in the investment products JHG manages will be indicative of future performance. Any poor investment performance may negatively impact the revenue and net income of JHG. The reputation of JHG could also be damaged by factors such as litigation, regulatory action, loss of key personnel, misconduct, operational failures (including any failures during the integration process), mismanagement, loss of client data, fraud (by employees or third parties), failure to manage conflicts of interest or satisfy fiduciary responsibilities, and negative publicity or press speculation (whether or not any such allegations or claims are valid or ultimately disproved, dismissed or withdrawn). Reputational harm or poor investment performance may cause JHG to lose current clients and it may be unable to continue to attract new clients or develop new business. If JHG fails to address, or appears to fail to address, successfully and promptly the underlying causes of any reputational harm or poor investment performance, it may be unsuccessful

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in repairing any existing harm to its reputation or performance and the Group's future business prospects would likely be affected.

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

At December 31, 2017, JHG's goodwill and intangible assets totaled $4.7 billion. 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. JHG has recorded goodwill and intangible asset impairments in the past and could incur similar charges in the future. Under accounting pronouncements generally accepted in the United States of America ("GAAP"), goodwill and intangible assets with indefinite lives are not amortized but are tested for impairment annually or more often if an event or circumstance indicates that an impairment loss may have been incurred. Other intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives and reviewed for impairment whenever there is an indication of impairment. 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 JHG's AUM, results of operations and financial condition.

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

JHG derives revenue from investment management agreements with investment funds, institutional and other investors. With respect to investment management agreements with U.S. mutual funds, these agreements may be terminated by either party with notice, or in the event of an "assignment" (as defined in the Investment Company 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 investment funds and institutional and other investors generally may terminate their investment management agreements upon written notice for any reason and without penalty. Such U.S. mutual funds, investments funds or other investors may choose to exercise such termination rights as a result of the uncertainty caused by the Merger or if the employees with whom they have a relationship leave the business during or following the integration process. The 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 the Group's AUM, results of operations and financial condition.

Integration efforts related to the Merger are ongoing and JHG may face significant challenges in implementing such integration.

Certain integration processes are complex, time-consuming and ongoing and the Group may face significant challenges implementing such integration in a timely manner.

Failure to properly address conflicts of interest could harm JHG's reputation, business and results of operations.

JHG's business will require continuously managing actual and potential conflicts of interest, including situations where the Group's services to a particular client conflict, or are perceived to conflict, with the interests of another client or those of JHG. The risk of actual or potential conflicts of interest occurring may be increased as a result of the Merger and it is possible that conflicts between aspects of Janus's and Henderson's existing businesses will be identified during the integration process. The willingness of clients to enter into transactions in which such a conflict might arise may be affected if the Group fails, or appears to fail, to deal appropriately with conflicts of interest. In addition, potential or perceived conflicts could give rise to litigation or regulatory enforcement actions.

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Operational and Technology Risks

JHG could be subject to losses and reputational harm if the Group, or its agents, fail to properly safeguard sensitive and confidential information or as a result of cyberattacks.

JHG will be dependent on the continued effectiveness of its information and cyber security policies, procedures and capabilities to protect its computer and telecommunications systems and the data that resides in or is transmitted through such systems.

As part of JHG's normal operations, the Group maintains and transmits confidential information about its clients and employees as well as proprietary information relating to its business operations. JHG maintains a system of internal controls designed to provide reasonable assurance that fraudulent activity, including misappropriation of assets, fraudulent financial reporting and unauthorized access to sensitive or confidential data, is either prevented or detected on a timely basis. Nevertheless, all technology systems remain vulnerable to unauthorized access and may be corrupted by cyberattacks, computer viruses or other malicious software code, the nature of which threats are constantly evolving and becoming increasingly sophisticated. In addition, authorized persons could inadvertently or intentionally release confidential or proprietary information. Although JHG takes precautions to password protect and encrypt its mobile electronic hardware, if such hardware is stolen, misplaced or left unattended, it may become vulnerable to hacking or other unauthorized use, creating a possible security risk and resulting in potentially costly actions by JHG. Breach or other failure of JHG's technology systems, including those of third parties with which the Group does business, or failure to timely and effectively identify and respond to any such breach or failure, could result in the loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by the incident, additional security costs to mitigate against future incidents and litigation costs resulting from the incident. Moreover, loss of confidential customer identification information could harm JHG's reputation, result in the termination of contracts by the Group's existing customers and subject the Group to liability under laws that protect confidential personal data, resulting in increased costs or loss of revenue. The increasing prevalence and sophistication of cyberattacks generally and the heightened profile of JHG as a result of its increased scale and breadth of global activities may result in an increase in the volume and sophistication of cyberattacks on JHG specifically. This may increase the amount of investment that the Group will need to make to minimize the risk of harm to its business and potentially increase the risk that, despite such investment, the Group will be a victim of a successful cyberattack. Recent well-publicized security breaches at other companies have exposed failings by companies to keep pace with the threats posed by cyberattackers and have led to enhanced government and regulatory scrutiny of the measures taken by companies to protect against cyberattacks, and may in the future result in heightened cyber security requirements, including additional regulatory expectations for oversight of vendors and service providers which could lead to increased costs or fines or public censure which could lead to a damaged reputation and loss of customers (and a decrease in AUM, lower revenue and reduced net income) as a result.

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

Intech's investment process (which relates to approximately 13% of JHG's AUM as of December 31, 2017) 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 is highly dependent on certain key Intech employees. If Intech is unable to retain key personnel or properly transition key personnel responsibilities to others, if the mathematical investment strategies developed by Intech fail to produce the intended results, or if errors occur in the development or implementation of Intech's mathematical models, Intech may not be able to maintain its historical level of investment performance, which could adversely affect JHG's

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AUM, results of operations and financial condition and could also result in legal claims against JHG or regulatory investigations in respect of its operations.

Failure to establish adequate controls and risk management policies, the circumvention of controls and policies, or fraud as well as failure to maintain adequate infrastructure or failures in operational or risk management processes and systems could have an adverse effect on the Group's assets under management, results of operation and financial condition.

JHG has a comprehensive risk management process and will continue to enhance various controls, procedures, policies and systems to monitor and manage risks to its business; however, there can be no assurances that such controls, procedures, policies and systems will successfully identify and manage internal and external risks to the business. JHG is subject to the risk that its employees, contractors or other third parties may deliberately seek to circumvent established controls to commit fraud or act in ways that are inconsistent with the Group's controls, policies and procedures (including insider trading). Any operational errors or negligence by the employees of, or others acting on behalf of, JHG or weaknesses in the internal controls over those processes could result in losses for JHG, a requirement for JHG to compensate clients for losses suffered and/or regulatory fines. Persistent or repeated attempts involving conflicts of interests, circumvention of policies and controls, fraud or insider trading could have a materially adverse impact on JHG's reputation and could lead to costly regulatory inquiries.

The JHG business is also highly dependent on the integrity, security and reliability of its information technology systems and infrastructure. If any of the critical systems or infrastructure do not operate properly or are disabled, the ability of JHG to perform effective investment management on behalf of its clients could be impaired. In addition, the failure to maintain an infrastructure commensurate with the size and scope of JHG's business, including any expansion, could impede the Group's productivity and growth, which could negatively impact AUM, results of operations and financial condition.

JHG's infrastructure, including its technological capacity, data centers and office space, will be vital to the operations and competitiveness of its business. The failure to maintain an infrastructure commensurate with the increased size and scope of JHG's business, including any expansion, could impede the Group's productivity and growth, which could negatively impact assets under management, results of operations and financial condition, and increase operational risk.

Insurance may not be available on a cost-effective basis to help protect JHG from potential liabilities.

JHG faces the inherent risk of liability related to litigation from clients, third-party vendors or others. To help protect against these potential liabilities, JHG has purchased insurance in amounts, and against risks, that JHG considers appropriate, where such insurance is available at prices it deems acceptable. There can be no assurance, however, that a claim or claims will be covered by insurance or, if covered, will not exceed the limits of available insurance coverage, that any insurer will remain solvent and will meet its obligations to provide JHG with coverage or that insurance coverage will continue to be available with sufficient limits at a reasonable cost. Insurance costs are impacted by market conditions and the risk profile of the insured, and may increase significantly over relatively short periods. In addition, certain insurance coverage may not be available or may only be available at prohibitive costs. Renewals of insurance policies may expose JHG to additional costs through higher premiums or the assumption of higher deductibles or co-insurance liability.

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JHG's business may be vulnerable to failures of support systems and client service functions provided by third-party vendors.

JHG's client service capabilities as well as its ability to obtain prompt and accurate securities pricing information and to process client transactions and reports will be significantly dependent on communication and information systems and services provided by third-party vendors. 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 JHG are essential to the Group'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 impact client relationships, result in financial loss and potentially give rise to regulatory action and claims against JHG. A failure of third-party systems or services could adversely affect JHG's AUM, results of operations and financial condition.

JHG depends on third-party service providers and other key vendors for various fund administration, accounting, custody, risk analytics, market data, market indices and transfer agent roles, and other distribution and operational needs. If JHG's third-party service providers or other key vendors fail to fulfill their obligations, experience service interruptions or otherwise provide inadequate service, it could lead to operational and regulatory problems, including with respect to certain of the Group's products, which could result in losses, enforcement actions, or reputational harm and which could negatively impact the Group's, AUM, results of operations and financial condition.

Failure to maintain adequate business continuity plans could have a material adverse impact on JHG and its products.

Significant portions of JHG's business operations and those of its critical third-party service providers will be concentrated in a few geographic areas, including the UK, U.S., Luxembourg and Australia. Should JHG, or any of its critical service providers, experience a significant local or regional disaster or other business continuity problem, the Group's continued success will depend in part on the safety and availability of its personnel, its office facilities, and the proper functioning of its computer, telecommunication and other related systems and operations. The failure by JHG, or any of its critical service providers, to maintain updated adequate business continuity plans, including backup facilities, could impede the Group's ability to operate in the event of a disruption. This could negatively impact the Group's AUM, results of operations and financial condition. JHG has developed various backup systems and contingency plans but no assurance can be given that they will be adequate in all circumstances that could arise or that material interruptions and disruptions will not occur. In addition, JHG will rely to varying degrees on outside vendors for disaster contingency support, and, notwithstanding any due diligence or oversight carried out by JHG, no assurance can be given that these vendors will be able to perform in an adequate and timely manner. If JHG, or any of its critical service providers, is unable to respond adequately to such an event in a timely manner, the Group may be unable to continue its business operations, which could lead to a damaged reputation and loss of customers, resulting in a decrease in AUM, lower revenue and reduced net income.

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

JHG'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 will increase JHG's vulnerability to adverse economic, market and industry conditions; limit JHG's flexibility in planning for or reacting to changes in business operations or to the asset management industry overall; and place JHG at a disadvantage in relation to competitors that have lower debt levels. Any or all of the above events and factors could adversely affect JHG's AUM, results of operations and financial condition.

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Legal and Regulatory Risks

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

JHG and its employees are periodically involved in various legal proceedings and regulatory investigations. Among other things, such matters may result in fines, censure, suspension of personnel and revocation of licenses. Any of these outcomes could adversely affect JHG's AUM, results of operations and financial condition. Additionally, JHG 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 Group, which may lower sales and increase redemptions.

JHG operates in an industry that is highly regulated in most countries, and any enforcement action or adverse changes in the laws or regulations governing its business could adversely affect its results of operations or financial condition.

Like all investment management firms, JHG's activities are highly regulated in almost all countries in which it conducts business. The Group is subject to regulation in the U.S., the UK, Europe, Australia and in other international markets, including regulation by the SEC, FINRA, the CFTC, the NFA, the Australian Securities and Investments Commission in Australia, and the FCA in the UK, Subsidiaries operating in the EU are subject to various EU Directives, which are implemented by member state national legislation. JHG's operations elsewhere in the world are regulated by similar regulatory organizations.

Laws and regulations applied at the international, national, state or provincial and local level generally grant governmental agencies and industry self-regulatory authorities broad administrative discretion over JHG's activities, including the power to limit or restrict its business activities, conduct examinations, risk assessments, investigations and capital adequacy reviews, and impose remedial programs to address perceived deficiencies. As a result of regulatory oversight, JHG could face requirements which negatively impact the way in which it conducts business, increase compliance costs, impose additional capital requirements and/or involve enforcement actions which could lead to sanctions up to and including the revocation of licenses to operate certain businesses, the suspension or expulsion from a particular jurisdiction or market of any of its business organizations or key personnel, or the imposition of fines and censures on it or its employees. Judgments or findings of wrongdoing by regulatory or governmental authorities, or in private litigation against JHG, could affect its reputation, increase its costs of doing business and/or negatively impact revenues, any of which could have an adverse impact on JHG's results of operations or financial condition.

JHG may also 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 costs and burdens of compliance with these and other current and future reporting and operational requirements and regulations have increased significantly and may continue to increase the cost of offering mutual funds and other investment products and services, which could adversely affect JHG's AUM, results of operations and financial condition.

The regulatory environment in which JHG operates frequently changes and has seen a significant increase in regulation in recent years. Various changes in laws and regulations have been enacted or otherwise developed in multiple jurisdictions globally and various other proposals remain under consideration by legislators, regulators, and other government officials and other public policy commentators. Certain enacted provisions and certain other proposals are potentially far reaching and, depending upon their implementation, could have a material impact on JHG's business. JHG

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may be adversely affected as a result of the new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations.

Proposed Changes in the U.S. Regulatory Framework

In the U.S., the government and other institutions have taken action, and may continue to take further action, in response to the volatility in the global financial markets. For example, the Dodd-Frank Act was signed into law in July 2010. Certain provisions have required JHG, and other provisions will or may require JHG, to change and or impose new limitations on the manner in which it conducts business and has increased regulatory burdens and related compliance costs. Rulemaking is still ongoing for the Dodd-Frank Act and any further actions could include new rules and requirements that may be applicable to JHG, the effect of which could have additional adverse consequences to JHG's business and results of operations.

Regulators also continue to examine the different aspects of the asset management industry. For example, in December 2014, the Chairperson of the SEC announced a comprehensive agenda for regulatory change governing the U.S. asset management industry and directed SEC staff to develop a five-part series of new regulations addressing the topics of enhanced portfolio reporting, liquidity risk management, leverage and use of derivatives, adviser wind up and stress testing for funds and advisers. This resulted in new regulations regarding enhanced portfolio reporting (the Investment Company Reporting Modernization Act) and liquidity risk management (Liquidity Risk Management Rule). These new industry rules can be expected to add additional reporting, operational and compliance costs and may affect the development of new products. JHG believes these proposals could increase operational and compliance costs. It is unclear whether any of the former SEC Chairperson's other initiatives will result in any new rulemaking.

The DOL has adopted regulations, effective June 9, 2017 (with the delay of some provisions until July 1, 2019), that will treat as fiduciaries any person who provides investment advice or recommendations to employee benefit plans (plan fiduciaries, plan participants and plan beneficiaries) and, Individual Retirement Accounts ("IRAs") owners. The new regulations, when fully implemented, will have wide-ranging consequences for JHG and its U.S. distribution partners and product lines. Under the new rules, firms and individuals who recommend financial products to retirement investors would be required to act in the best interest of the investor and, to receive variable compensation, would be required to enter into a contract with clients and produce complex disclosure documents intended to highlight financial conflicts of interest that may arise from the compensation the financial adviser receives from firms like JHG.

With the commencement of President Trump's new administration, the regulatory moratorium imposed by President Trump on January 20, 2017, the possibility for the repeal of aspects of the Dodd-Frank Act, delay of portions of the DOL's fiduciary rule and other deregulation, and other political uncertainty in the U.S. following the 2016 Presidential and Congressional elections, the regulatory environment in the U.S. may experience increased volatility. At this time, it is not possible to determine the impact such reforms would have on JHG's business.

Proposed Changes in the European Union Regulatory Framework

The EU has promulgated or is considering various new or revised directives pertaining to financial services, including investment managers. Such directives are progressing at various stages, and have been, are being, or will or would be implemented by national legislation in member states. MiFID II is an example of such regulation, which seeks to promote a single market for wholesale and retail transactions in financial instruments. MiFID II, which came into effect on January 3, 2018, addresses the conduct of business rules for intermediaries providing investment services and the effective, efficient and safe operation of financial markets. Key elements of MiFID II in relation to

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investor protection measures include changes to the extent to which retrocessions may be paid and the use of trading commissions to fund research. Such regulatory changes will have a direct impact on the revenue of JHG's asset management business as they reduce JHG's ability to utilize commissions to pay for research services which will result in operational changes and increased costs allocated to research services.

Various regulators promulgated or are considering other new disclosure or suitability requirements pertaining to the distribution of investment funds and other investment products or services, including enhanced standards and requirements pertaining to disclosures made to retail investors at the point of sale. As with the Dodd-Frank Act, the Group does not believe implementation of these directives will fundamentally change the asset management industry or cause JHG to reconsider its fundamental strategy, but certain provisions may require JHG to change or impose new limitations on the manner in which it conducts business and may result in increased fee and margin pressure from clients. They also have increased regulatory burdens and compliance costs, and will or may continue to do so. Certain provisions, such as MiFID II, may have unintended adverse consequences on the liquidity or structure of the financial markets. Similar developments are being implemented or considered in other jurisdictions where JHG does business; such developments could have similar effects.

The full impact of potential legal and regulatory changes or possible enforcement proceedings on the JHG business cannot be predicted. Such changes have imposed, and may continue to impose, new compliance costs and/or capital requirements, including costs related to information technology systems, or may impact JHG in other ways that could have an adverse impact on JHG's results of operations or financial condition. Similarly, regulatory enforcement actions which impose significant penalties or compliance obligations or which result in significant reputational harm could have similar adverse effects on JHG. Moreover, certain legal or regulatory changes could require JHG to modify its strategies, businesses or operations, and it may incur other new constraints or costs, including the investment of significant management time and resources in order to satisfy new regulatory requirements or to compete in a changed business environment. In recent years, certain regulatory developments have also added pressures regarding fee levels. In addition, the 2016 presidential election in the U.S., and recent elections in Europe, have created additional uncertainty as to the future regulatory environment and how it may impact JHG.

To the extent that existing or future regulations affecting the sale of JHG products and services or investment strategies cause or contribute to reduced sales or increased redemptions of its products, impair the investment performance of its products or impact its product mix, JHG's aggregate assets under management, results of operations or financial condition might be adversely affected.

JHG may have increased regulatory capital requirements imposed on it by regulators, which could negatively impact the Group's ability to return capital or pay dividends to shareholders or its results of operations and financial condition.

JHG's regulators typically have broad discretion to impose increased regulatory capital requirements on the regulated entities in their respective groups. It is possible that the regulatory capital requirements that JHG's business is subject to currently may be subject to change and could increase. The imposition of increased regulatory capital requirements could negatively impact the Group's ability to return capital or pay dividends to shareholders, restrict its ability to make future acquisitions or, should the Company be required to raise additional capital, negatively impact its results of operations and financial condition.

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Failure to comply with client contractual requirements and/or investment guidelines could negatively impact JHG's assets under management, results of operations and financial condition.

Many of the investment management agreements under which JHG manages assets or provides services will specify investment guidelines or requirements that the Group will be required to observe in the provision of its services. Laws and regulations will also impose similar requirements for certain accounts. A failure to follow these guidelines or requirements could result in damage to the Group's reputation or in clients seeking to recover losses, withdrawing their assets or terminating their contracts, any one of which could cause revenues and profitability to decline. In addition breach of these investment guidelines or requirements could result in regulatory investigation, censure and/or fine. The risk of breach of such investment guidelines or requirements may be increased during the integration process as the businesses of Janus and Henderson are combined.

The UK electorate voted in favor of a UK exit from the EU in a referendum, which could adversely impact JHG's business, results of operations and financial condition.

The UK Government held an "in-or-out" referendum in June 2016 on the UK's membership in the EU. The UK electorate voted in favor of a UK exit from the EU ("Brexit"). The UK is still negotiating with EU governing bodies to determine the terms of the UK's exit from the EU. At present, it is not possible to predict the outcome of those negotiations or the future relationship the UK will have with the EU. However, JHG remains headquartered in the UK and conducts business in Europe through subsidiaries and branches in the EU as well as conducting cross-border business into the EU from the UK. Depending on the terms of Brexit, JHG could face additional costs, including possibly additional taxation, and other challenges, including new impediments to conducting EU business and costs of restructuring and other changes to facilitate continuing European business activities.

UK asset management firms could lose their current level of access to the single EU market and, as a result of Brexit, JHG may incur additional costs due to having to locate more activities within the EU. A decline in trade between the UK and EU could affect the attractiveness of the UK as a global investment center and could have a detrimental impact on UK economic growth. Although JHG has a diverse international customer base, its results could be adversely affected by the market impacts of reduced UK economic growth and greater volatility in the pound sterling. There could also be changes to UK and EU immigration policies as a result of Brexit, which could lead to restrictions on the free movement of investment and support staff between the UK and the EU.

Any of the foregoing factors could have a material adverse effect on JHG's business, results of operations or financial condition.

JHG may be subject to claims of lack of suitability.

If clients of JHG suffer losses on funds or investment mandates managed by the Group, they may seek compensation from JHG on the basis of allegations that the funds and/or investment mandates were not suitable for such clients or that the fund prospectuses or other marketing materials contained material errors or were misleading. Despite the controls relating to disclosure in fund prospectuses and marketing materials, it is possible that such action may be successful, which in turn could adversely affect the business, financial condition and results of operations of the Group. Any claim for lack of suitability may also result in regulatory investigation, censure and/or fine and may damage the reputation of JHG.

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As a foreign private issuer, JHG is not subject to certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, which may limit the information publicly available to our shareholders.

As a foreign private issuer, JHG is not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and therefore there may be less publicly available information about the company than if it were a U.S. domestic issuer. For example, JHG is not subject to the proxy rules in the U.S. and disclosure with respect to its annual meetings will be governed by Jersey law and ASX requirements. In addition, JHG's officers, directors and significant shareholders are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder. Therefore, JHG's shareholders may not know on a timely basis when the company's officers, directors and significant shareholders purchase or sell shares.

Risks Related to Taxes

Additional tax liabilities could have a material impact on the Group's financial condition, results of operations and/or liquidity.

JHG operates in a number of territories, and will accordingly be subject to tax in several jurisdictions. The tax rules to which JHG are subject to tax are complex, and the Group as a whole, must make judgments (including certain judgments based on external advice) as to the interpretation and application of these rules. The tax affairs of the Group will in the ordinary course be reviewed by tax authorities, which may disagree with certain positions that JHG has taken, or that members of the Group have taken or will take in the future, and assess additional taxes. JHG regularly assesses the likely outcomes of such tax inquiries, investigations or audits in order to determine the appropriateness of their respective tax provisions. However, there can be no assurance that JHG will accurately predict the outcomes of these inquiries, investigations or audits, and the actual outcomes of these inquiries, investigations or audits could have a material impact on the Group's financial results.

Changes to tax laws could adversely affect JHG.

Any change in tax law, interpretation or practice, or in the terms of tax treaties, in a jurisdiction where the Group is subject to tax could increase the amount of tax payable by the Group. On December 22, 2017, the Tax Cuts and Jobs Act, (the "Act"), was signed into law. The Act enacts broad changes to the existing U.S. federal income tax code, including reducing the federal corporate income tax rate from 35% to 21%, amongst many other complex provisions. The ultimate impact of such tax reforms may differ from our current estimates due to changes in interpretations and assumptions made by us as well as the issuance of any further regulations or guidance that may alter the operation of the U.S. federal income tax code. Various uncertainties also exist in terms of how U.S. states and any foreign countries within which the Group operate will react to these U.S. federal income tax reforms. The overall impact of the Act on the Group's future financial results is subject to uncertainties and the Group's financial results could be adversely impacted by certain other aspects of the Act.

The IRS may assert that JHG is to be treated as a domestic corporation or otherwise subject to certain adverse consequences for U.S. federal income tax purposes.

Although JHG is a public limited company incorporated in Jersey, Channel Islands and tax resident in the UK, the U.S. Internal Revenue Services (the "IRS") may assert that JHG, as a result of the Merger, should be treated as a U.S. corporation (and, therefore, a U.S. tax resident) for U.S. federal

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income tax purposes pursuant to section 7874 of the U.S. Internal Revenue Code of 1986, as amended ("Section 7874").

Section 7874 provides that if, following an acquisition of a U.S. corporation by a non-U.S. corporation, at least 80% of the acquiring non-U.S. corporation's stock (by vote or value) is considered to be held by former shareholders of the U.S. corporation by reason of holding stock of such U.S. corporation (such percentage referred to as the "ownership percentage" and such test referred to as the "80% ownership test"), and the "expanded affiliated group" which includes the acquiring non-U.S. corporation does not have substantial business activities in the country in which the acquiring non-U.S. corporation is created or organized, then the non-U.S. corporation would be treated as a U.S. corporation for U.S. federal income tax purposes even though it is a corporation created and organized outside the U.S.

JHG does not believe that the 80% ownership test was satisfied as a result of the Merger. If the 80% ownership test were satisfied and, as a result, JHG were treated as a U.S. corporation for U.S. federal income tax purposes, JHG could be liable for substantial additional U.S. federal income tax on its operations and income. Additionally, if JHG were treated as a U.S. corporation for U.S. federal income tax purposes, non-U.S. JHG shareholders would generally be subject to U.S. withholding tax on the gross amount of any dividends paid by JHG to such shareholders.

Section 7874 also provides that if, following an acquisition of a U.S. corporation by a non-U.S. corporation, the ownership percentage is equal to or greater than 60% but less than 80% (such test the "60% ownership test"), then the U.S. corporation and its affiliates could be prohibited from using their foreign tax credits or other U.S. federal tax attributes to offset the income or gain recognized by reason of the transfer of property to a non-U.S. related person or any income received or accrued by reason of a license of any property by such U.S. entity to a non-U.S. related person. Further, certain JCG stock compensation held directly or indirectly by management prior to the Merger would be subject to an excise tax at a rate equal to 15%. In addition, under U.S. Treasury temporary regulations, JHG's ability to integrate certain non-U.S. operations or to access cash earned by non-U.S. subsidiaries may be limited. JHG does not believe that the 60% ownership test was satisfied as a result of the Merger.

Because there is only limited guidance on the manner in which the ownership percentage is to be determined, there can be no assurance that the IRS will agree with the position that JHG is to be treated as a non-U.S. corporation or that JHG is not to be subject to the other adverse U.S. federal income tax consequences associated with satisfying the 60% ownership test.

Jersey Company Risks

JHG's ordinary shares are governed by the laws of Jersey, Channel Islands, which may not provide the level of legal certainty and transparency afforded by incorporation in a U.S. state.

JHG is organized under the laws of Jersey, Channel Islands, a British crown dependency that is an island located off the coast of Normandy, France. Jersey is not a member of the EU. Jersey, Channel Islands legislation regarding companies is largely based on English corporate law principles. However, there can be no assurance that the laws of Jersey, Channel Islands, will not change in the future or that it will serve to protect investors in a similar fashion afforded under corporate law principles in the U.S., which could adversely affect the rights of investors.

U.S. shareholders may not be able to enforce civil liabilities against JHG.

Certain of JHG's directors and executive officers are not residents of the U.S. A substantial portion of the assets of such persons are located outside the U.S. As a result, it may not be possible for investors to effect service of process within the U.S. upon such persons.

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Judgments of U.S. courts may not be directly enforceable outside of the U.S. and the enforcement of judgments of U.S. courts outside of the U.S. may be subject to limitations. Investors may also have difficulties pursuing an original action brought in a court in a jurisdiction outside the U.S. for liabilities under the securities laws of the U.S.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

JHG has 31 offices across the UK, Europe, North America, Asia and Australia. JHG's corporate headquarters is located in London, where it occupies approximately 107,000 square feet on a long-term lease which expires in 2028. JHG also has significant operations in Denver, Colorado occupying approximately 217,000 square feet of office space in two separate locations. The two leases in Denver, Colorado expire in 2018 and 2025. The remaining 28 offices total approximately 125,000 square feet and are all leased. In the opinion of management, the space and equipment leased by the Group are adequate for existing operating needs.

ITEM 3.    LEGAL PROCEEDINGS

From time to time, JHG may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm JHG's business. JHG is currently not aware of any such legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on its AUM, financial condition or operating results.

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

JHG Common Stock

Post-Merger, JHG's common stock is traded on the New York Stock Exchange (the "NYSE") (symbol: JHG). Prior to the Merger, Henderson Group plc shares were listed on the London Stock Exchange. The following table presents the high and low sale prices as reported on the appropriate market for each completed quarter in 2017 and 2016.

 
  2017  
Quarter
  High   Low  

First

  £ 2.45   £ 2.12  

Second (pre-merger)

  £ 2.44   £ 2.26  

Second (post-merger)

  $ 33.99   $ 30.60  

Third

  $ 35.77   $ 31.60  

Fourth

  $ 38.47   $ 34.52  

 

 
  2016  
Quarter
  High   Low  

First

  £ 3.10   £ 2.15  

Second

  £ 2.69   £ 1.95  

Third

  £ 2.54   £ 1.98  

Fourth

  £ 2.71   £ 2.19  

On April 26, 2017, Henderson redenominated its ordinary shares from Great British pound ("GBP") to USD, resulting in a change in par value from £0.125 to $0.1547 per share. Also on April 26, 2017, the shareholders approved a 10-to-1 share consolidation, which took effect on May 30, 2017. Refer to the share redenomination and consolidation section within Note 2 — Summary of Significant Accounting Policies for additional information.

The following graph illustrates the cumulative total shareholder return (rounded to the nearest whole dollar) of JHG's common stock over the five-year period ending December 29, 2017, the last trading day of 2017, 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, 2012, in JHG's common stock and in each of the foregoing indices and assumes

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reinvestment of dividends, if any. This data is not intended to forecast future performance of JHG's common stock.

GRAPHIC

On December 31, 2017, there were approximately 47,324 holders of record of JHG's common stock.

Dividends

The payment of cash dividends is within the discretion of JHG's Board of Directors and depends on many factors, including, but not limited to, JHG'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 JHG's Board of Directors.

The following cash dividends were declared and paid during 2017:

Dividend
per share
  Date
declared
  Dividends paid
(in millions)
  Date paid
£  0.0730   February 9, 2017   $ 102.6   May 19, 2017
£  0.0185   April 19, 2017   $ 26.0   May 19, 2017
$  0.3200   August 7, 2017   $ 63.7   September 1, 2017
$  0.3200   November 8, 2017   $ 63.7   December 1, 2017

JHG declared dividends of £0.104 per share during 2016.

On February 5, 2018, JHG's Board of Directors declared a fourth quarter 2017 cash dividend of $0.32 per share. The dividend will be paid on March 2, 2018, to shareholders of record at the close of business on February 16, 2018.

Common Stock Purchases

Some of the Group's executives and employees receive rights over JHG ordinary shares as part of their remuneration arrangements and employee entitlements. These entitlements may be satisfied

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either by the transfer of existing ordinary shares acquired on-market or by the issue of ordinary shares. The following table presents JHG ordinary shares purchased on-market by month during 2017 in satisfaction of employee awards and entitlements.

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

  1,046,305   $ 2.36      

February

    1,126,364     2.28          

March

  7,898,665   2.29      

April

    2,463,300     2.41          

May

  40,398   30.85      

June

    165,577     26.80          

July

  754   25.15      

August

    94,394     26.99          

September

  19,711   33.15      

October

    9,595     34.07          

November

  104,508   27.52      

December

    16,775     37.28          

Total

  12,986,346   $ 3.22      

At the Annual General Meeting held on April 26, 2017, shareholders authorized JHG to make on-market purchases of up to 10% of the issued share capital of the Group at completion of the Merger. Shareholders will be asked to renew this authority at the 2018 Annual General Meeting. The Group did not make any on-market or off-market share purchases during 2017 in connection with any share buy-back program and as at the date of this report, there were no current on-market or off-market buy-backs of the Group's securities.

ITEM 6.    SELECTED FINANCIAL DATA

The selected financial data below was derived from the Group's 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 JHG, and Part II, Item 8, Financial Statements and Supplementary Data. The selected financial data presents four years of data prepared in accordance with GAAP. Selected financial data for 2013 is only available in International Financial Reporting

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Standards ("IFRS") and cannot be provided on a restated basis without unreasonable effort or expense. The Group has limited ability to convert the data from IFRS to GAAP.

 
  Year ended December 31,  
 
  2017 (1)   2016   2015   2014  
 
  (dollars in millions, except per share data and operating data)
 

Consolidated income statement:

                 

Operating revenues

  $ 1,743.7   $ 999.9   $ 1,155.1   $ 1,105.7  

Operating expenses

  1,301.4   767.8   837.8   807.2  

Operating income

    442.3     232.1     317.3     298.5  

Interest expense (2)

  (11.9 ) (6.6 ) (20.1 ) (19.3 )

Investment gains (losses), net (3)

    18.0     (11.7 )   39.7     285.9  

Other non-operating income (expenses), net

  (1.0 ) (1.9 ) 0.6   (1.5 )

Income tax benefit (provision) (4)

    211.0     (34.6 )   (6.1 )   (52.6 )
     

Net income

  658.4   177.3   331.4   511.0  

Net loss (income) attributable to

                         

noncontrolling interests (5)

  (2.9 ) 11.7   (1.6 ) (7.7 )

Net income attributable to JHG

  $ 655.5   $ 189.0   $ 329.8   $ 503.3  
     
       
       

Earnings per share attributable to JHG common shareholders:

 

 

 


 

 


 

 


 
 

Diluted

  $ 3.93   $ 1.66   $ 2.78   $ 4.21  

Weighted-average diluted common

 

 

 


 

 


 

 


 
 

shares outstanding (in millions)

    162.3     1,111.1     1,154.5     1,154.4  

Dividends declared and paid per share:

 

 

 


 

 


 

 


 
 

GBP

  £ 0.0915   £ 0.1040   £ 0.0950   £ 0.0845  

USD

  $ 0.6400   $   $   $  

Consolidated balance sheet (as of December 31):

   
 
   
 
   
 
   
 
 

Total assets

  $ 7,272.7   $ 2,433.4   $ 2,835.2   $ 2,840.5  

Long-term debt (including current portion)

 
$

379.2
 
$

 
$

220.9
 
$

233.0
 

Deferred income taxes, net

  $ 752.6   $ 70.7   $ 86.3   $ 87.5  

Other non-current liabilities

  $ 99.6   $ 39.0   $ 49.4   $ 52.6  

Redeemable noncontrolling interests (6)

 
$

190.3

 

$

158.0

 

$

82.9

 

$

4.4
 

Cash flow:

   
 
   
 
   
 
   
 
 

Cash flows provided by operating activities

  $ 444.1   $ 235.1   $ 388.9   $ 226.8  

Operating data (in billions):

   
 
   
 
   
 
   
 
 

Ending AUM

  $ 370.8   $ 124.7   $ 135.6   $ 126.5  

Average AUM

  $ 262.1   $ 129.4   $ 127.7   $ 121.2  
(1)
Data presented for the year ended December 31, 2017, includes the impact of the Merger starting from the Closing Date and thus is not comparable to results presented in the prior periods, which only relate to Henderson. Refer to Item 8 — Financial Statements and Supplementary Data, Note 4 — Acquisitions for additional information on the Merger.

(2)
The Group repaid its 7.25% Senior Notes due 2016 (the "2016 Senior Notes") in March 2016 thus interest expense decreased in 2016 compared to 2015 and 2014.

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(3)
The Group sold its property business for a gain of $245.3 million and a share in a joint venture in 2014.The Group's share in the joint venture was sold in 2015 and an $18.9 million gain was recognized.

(4)
The Group's income tax provision in 2015 was extraordinarily low primarily due to one-off tax benefits, which included a reduction in the UK tax rate, tax benefits arising from the exercise of stock-based compensation awards and the settlement of tax positions with the UK tax authorities. The Group's income tax provision in 2017 includes a one-time tax benefit of $340.7 million related to new U.S. tax legislation.

(5)
The Group's net loss (income) attributable to noncontrolling interests in 2015 and 2014 is primarily due to its investment in private equity seed investments.

(6)
The increase in redeemable noncontrolling interest in 2016 is primarily due to an increase in third-party ownership in seed capital.

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

Business Overview

JHG is an independent global asset manager, specializing in active investment across all major asset classes. JHG actively manages a broad range of investment products for institutional and retail investors across five capabilities: Equities, Quantitative Equities, Fixed Income, Multi-Asset and Alternatives.

On the Closing Date, JCG and Henderson completed a merger of equals. As a result of the Merger, JCG and its consolidated subsidiaries became subsidiaries of Henderson, which was renamed to Janus Henderson Group plc. For purposes of this section, each reference to the "Group" or "JHG" refers to Janus Henderson Group plc and its consolidated subsidiaries.

Segment Considerations

JHG is a global asset manager and manages a range of investment products, operating across various product lines, distribution channels and geographic regions. However, information is reported to the chief operating decision-makers, the Co-Chief Executive Officers ("Co-CEOs"), on an aggregated basis. Strategic and financial management decisions are determined centrally by the Co-CEOs and, on this basis, the Group operates as a single segment investment management business.

Revenue

Revenue primarily consists of management fees and performance fees. Management fees are generally based upon a percentage of the market value of AUM and are calculated using either the daily, month-end or quarter-end average asset balance in accordance with contractual agreements. Accordingly, fluctuations in the financial markets have a direct effect on the Group's operating results. Additionally, AUM may outperform or underperform the financial markets and therefore may fluctuate in varying degrees from that of the general market.

Performance fees are specified in certain fund and client contracts and are based on investment performance either on an absolute basis or compared to an established index over a specified period of time. This is often subject to a hurdle rate. Performance fees are recognized at the end of the contractual period (typically monthly, quarterly or annually) if the stated performance criteria are achieved. Certain fund and client contracts allow for negative performance fees where there is underperformance against the relevant index.

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2017 SUMMARY

2017 Highlights

Financial Summary

Results are reported on a GAAP basis. Adjusted non-GAAP figures are presented in the Non-GAAP Financial Measures section.

Revenue for the year ended December 31, 2017 was $1,743.7 million, an increase of $743.8 million, or 74%, from December 31, 2016. This increase was driven primarily by legacy JCG revenues of $680.8 million in 2017. Average AUM (excluding JCG) increased by 6% and positively affected management fees during 2017, compared to 2016. Performance fees improved in 2017 by $55.4 million compared to 2016, which contributed to the increase in revenue. These increases are partially offset by lower average management fee margins and adverse foreign currency translation.

Total operating expenses for the year ended December 31, 2017 were $1,301.4 million, an increase of $533.6 million, or 69%, compared to operating expenses for the year ended December 31, 2016. Legacy JCG operations contributed $405.0 million to operating expenses in 2017 and total deal and integration costs in 2017 contributed $126.2 million.

Operating income for the year ended December 31, 2017, was $442.3 million, an increase of $210.2 million, or 91%, compared to the year ended December 31, 2016. The Group's operating margin was 25.4% in 2017, compared to 23.2% in 2016. Legacy JCG operations contributed $275.8 million to operating income in the year ended December 31, 2017. This was partially offset by an increase of $110.5 million of deal and integration costs related to the Merger and a reduction in expenditures year-over-year as the Group concentrated on integration.

Net income attributable to JHG in the year ended December 31, 2017 was $655.5 million, an increase of $466.5 million, or 247%, compared to the year ended December 31, 2016. During the year ended December 31, 2017, the Group recorded a one-time tax benefit of $340.7 million due to changes in U.S. tax laws. Legacy JCG operations contributed $173.1 million to net income attributable to JHG in 2017. Performance fees improved in 2017 and contributed $55.4 million to the year-over-year change. These increases were partially offset by deal and integration costs related to the Merger.

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Investment Performance of Assets Under Management

The following table is a summary of investment performance as of December 31, 2017:

Percentage of assets under management outperforming benchmark (1)
  1 year   3 years   5 years  

Equities

  64 % 60 % 67 %

Fixed Income

    93 %   95 %   98 %

Quantitative Equities

  90 % 27 % 87 %

Multi-Asset

    86 %   87 %   89 %

Alternatives

  93 % 76 % 100 %

Total Group

    76 %   66 %   79 %
(1)
Includes JCG performance.

Assets Under Management

The Group's AUM as of December 31, 2017, was $370.8 billion, an increase of $246.1 billion, or 197% from December 31, 2016, driven primarily by net acquisitions of $205.8 billion representing JCG's AUM of $206.5 billion, offset by disposals of $0.7 billion. Positive market movements in the period contributed $31.7 billion and the weakening of the USD resulted in favorable foreign exchange movements of $11.6 billion. This was partially offset by net outflows of $3.0 billion, which includes flows from JCG from the Closing Date.

During 2017, the USD weakened against all major currencies. As of December 31, 2017, approximately 36% of the Group's AUM was non-USD denominated, resulting in a favorable currency effect, particularly in products exposed to GBP.

JHG's ETNs are not included within the AUM as JHG is not the named adviser or subadviser to ETNs. ETN assets totaled $4.0 billion as of December 31, 2017.

Asset and flows by capability for the years ended December 31, 2017, 2016 and 2015 (includes JCG activity from the Closing Date), are as follows (in billions):

 
  Closing AUM
Dec. 31,
2016 (1)
  Sales   Redemptions (2)   Net sales
(redemptions)
  Markets   FX (3)   Acquisitions &
disposals
  Closing AUM
Dec. 31,
2017
 

By capability

                                 

Equities

  $ 63.6   $ 32.6   $ (32.6 ) $   $ 21.2   $ 5.2   $ 99.7   $ 189.7  

Fixed Income

  34.7   17.2   (15.7 ) 1.5   1.5   3.8   38.6   80.1  

Quantitative Equities

        1.6     (5.2 )   (3.6 )   5.4     0.1     48.0     49.9  

Multi-Asset

  9.0   2.8   (3.8 ) (1.0 ) 2.7   0.9   20.0   31.6  

Alternatives

    17.4     7.7     (7.6 )   0.1     0.9     1.6     (0.5 )   19.5  
               

TOTAL

  $ 124.7   $ 61.9   $ (64.9 ) $ (3.0 ) $ 31.7   $ 11.6   $ 205.8   $ 370.8  

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Table of Contents

 
  Closing AUM
Dec. 31,
2015 (1)
  Sales   Redemptions (2)   Net sales
(redemptions)
  Markets   FX (3)   Acquisitions &
disposals
  Closing AUM
Dec. 31,
2016 (1)
 

By capability

                                 

Equities

  $ 68.6   $ 16.2   $ (19.9 ) $ (3.7 ) $ 3.0   $ (4.3 ) $   $ 63.6  

Fixed Income

  36.5   10.6   (10.5 ) 0.1   2.7   (4.6 )   34.7  

Multi-Asset

    10.4     0.6     (1.4 )   (0.8 )   1.1     (1.7 )       9.0  

Alternatives

  20.1   7.7   (8.5 ) (0.8 )   (1.9 )   17.4  

TOTAL

  $ 135.6   $ 35.1   $ (40.3 ) $ (5.2 ) $ 6.8   $ (12.5 ) $   $ 124.7  

 

 
  Closing AUM
Dec. 31,
2014 (1)
  Sales   Redemptions (2)   Net sales
(redemptions)
  Markets   FX (3)   Acquisitions &
disposals
  Closing AUM
Dec. 31,
2015 (1)
 

By capability

                                 

Equities

  $ 60.7   $ 22.8   $ (16.1 ) $ 6.7   $ 3.9   $ (2.8 ) $ 0.1   $ 68.6  

Fixed Income

  29.9   13.8   (11.4 ) 2.4   (0.2 ) (1.8 ) 6.2   36.5  

Multi-Asset

    11.3     1.0     (1.5 )   (0.5 )   0.2     (0.6 )       10.4  

Alternatives

  24.6   10.5   (6.2 ) 4.3   0.4   (0.9 ) (8.3 ) 20.1  

TOTAL

  $ 126.5   $ 48.1   $ (35.2 ) $ 12.9   $ 4.3   $ (6.1 ) $ (2.0 ) $ 135.6  
(1)
AUM as of December 31, 2016, 2015 and 2014 has been reclassified between capabilities following the completion of the Merger.

(2)
Redemptions include the impact of client transfers which could cause a positive balance on occasion.

(3)
FX reflects movements in AUM resulting from changes in foreign currency rates as non-USD denominated AUM is translated into USD.

Closing Assets Under Management

The following table presents the closing AUM, split by client type and client location as of December 31, 2017 (in billions):

By client type
  Closing AUM
December 31, 2017
 

Intermediary

  $ 164.1  

Institutional

    144.7  

Self-directed

  62.0  

Total

  $ 370.8  

 

By client location
  Closing AUM
December 31, 2017
 

Americas

  $ 192.8  

EMEA

    120.2  

Asia-Pacific

  57.8  

Total

  $ 370.8  

Valuation of Assets Under Management

The fair value of AUM is based on the value of the underlying cash and investment securities of the funds, trusts and segregated mandates. A significant proportion of these securities are listed or quoted on a recognized securities exchange or market and are regularly traded thereon; these investments are valued based on unadjusted quoted market prices. Investments including, but not limited to, over-the-counter derivative contracts, (which are dealt in or through a clearing firm), exchange or financial institution will be valued by reference to the most recent official settlement price quoted by the appointed market vendor and in the event no price is available from this source,

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a broker quotation may be used. Physical property held is valued monthly by a specialist independent appraiser.

When a readily ascertainable market value does not exist for an investment, the fair value is calculated based on the expected cash flows of its underlying net asset base, taking into account applicable discount rates and other factors. Judgment is used to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. The Fair Value Pricing Committee is responsible for determining or approving these unquoted prices, which are reported to those charged with governance of the funds and trusts. For funds that invest in markets that are closed at their valuation point, an assessment is made daily to determine whether a fair value pricing adjustment is required to the fund's valuation. This may be due to significant market movements in other correlated open markets, scheduled market closures or unscheduled market closures as a result of natural disaster or government intervention.

For legacy Henderson funds, third-party administrators hold a key role in the collection and validation of prices used in the valuation of the securities. Daily price validation is completed using techniques such as day-on-day tolerance movements, invariant prices, excessive movement checks and intra-vendor tolerance checks. The JHG Data Management Team performs oversight of this process and completes annual due diligence on the processes of third parties.

For legacy JCG funds, the Group 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 day to day 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 JHG's fixed income trading desk to incorporate market activity information available to JHG'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.

JHG leverages the expertise of its fund management teams across the business to cross-invest assets and create value for its clients. Where cross investment occurs, assets and flows are identified and the duplication is removed.

Results of Operations

Operating Revenues

 
  Year ended December 31,    
   
 
 
  2017 vs.
2016
  2016 vs.
2015
 
 
  2017   2016   2015  

Revenue (in millions):

                     

Management fees

  $ 1,465.1   $ 867.8   $ 914.7     68.8 %   (5.1 )%

Performance fees

  103.9   54.8   150.8   89.6 % (63.7 )%

Shareowner servicing fees

    71.5             n/m*     n/m*  

Other revenue

  103.2   77.3   89.6   33.5 % (13.7 )%

Total revenue

  $ 1,743.7   $ 999.9   $ 1,155.1     74.4 %   (13.4 )%
*
n/m — Not meaningful

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Table of Contents

Management fees

Management fees increased by $597.3 million, or 68.8%, during the year ended December 31, 2017, compared to the same period in 2016 with the inclusion of seven months of legacy JCG management fees of $584.9 million as the largest driver. Average AUM (excluding JCG) increased by 6% and positively affected management fees during the year ended December 31, 2017, compared to the same period in 2016. Positive market movements contributed $80.2 million to the increase in management fees over the year. These increases are partially offset by the effect of adverse foreign currency translations ($11.0) million, net outflows causing a decrease in management fees ($50.3) million, and lower average gross fee margins. Lower margins are primarily from a change in product mix (i.e., switch in share classes as a result of the Retail Distribution Review within Europe to a lower fee share class), and are partially offset by a decrease in distribution expenses.

Management fees decreased by $46.9 million, or (5.1%), from 2015 to 2016, despite average AUM increasing by 1.3% year-over-year. Although average institutional AUM increased by 6.1%, average retail AUM decreased by 1.5% resulting in a mix shift from higher margin retail fees to lower margin institutional fees. In addition, management fee margins decreased due to the share class change as explained above. As a result, distribution costs also fell during the period.

The impact of foreign currency fluctuations, markets and 2016 outflows caused a net decrease in management fees, which was partially offset by a net favorable full year impact of 2015 inflows and the full year favorable impact of acquisitions.

Performance fees

Performance fees are derived across a number of product ranges. Pooled fund and segregated mandate performance fees are recognized on a quarterly or annual basis, while mutual fund performance fees are recognized on a monthly basis. Performance fees by product type consisted of the following for the years ended December 31, 2017, 2016 and 2015 (in millions):

 
  Year ended December 31,    
   
 
 
  2017 vs.
2016
  2016 vs.
2015
 
 
  2017   2016   2015  

Performance fees (in millions):

                     

SICAVs

  $ 49.1   $ 18.1   $ 72.7     171.3 %   (75.1 )%

UK OEICs & Unit Trusts

  22.8   8.6   18.1   165.1 % (52.5 )%

Offshore Absolute Return

    8.2     13.6     38.1     (39.7 )%   (64.3 )%

Segregated Mandates

  17.8   8.2   5.9   117.1 % 39.0 %

Private Accounts

    13.2             n/m*     n/m*  

Investment Trusts

  11.8   4.6   14.4   156.5 % (68.1 )%

Mutual Funds

    (19.5 )           n/m*     n/m*  

Other

  0.5   1.7   1.6   (70.6 )% 6.3 %

Total performance fees

  $ 103.9   $ 54.8   $ 150.8     89.6 %   (63.7 )%
*
n/m — Not meaningful

Performance fees increased by $49.1 million, or 89.6%, during the year ended December 31, 2017, compared to the same period in 2016. The increase for the year ended December 31, 2017, compared to the same period in 2016, was primarily due to an increase in SICAV performance fees. Performance fees for UK OEICs and Unit Trusts also increased in the period. These increases are partially offset by $6.3 million of net negative performance fees related to legacy JCG.

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Table of Contents

For the year ended December 31, 2016, performance fees decreased by $96.0 million compared to 2015, primarily due to lower SICAV fees which for long-only funds typically only pay out a performance fee if relative and absolute performance is positive. Offshore Absolute Return fees decreased by 64.3% in 2016 compared to 2015 primarily due to lower performance fees on pooled hedge funds.

The following table outlines performance fees by product type and includes information on fees earned, number of funds generating performance fees, AUM generating performance fees, number of funds eligible to earn performance fees, AUM with an un-crystalized performance fee, performance fee participation rate, performance fee frequency and performance fee methodology (dollars in millions, except where noted):

 
  UK OEICs &
Unit Trusts
  SICAVs   Offshore
Absolute
Return
Funds
  Segregated
Mandates /
Managed
CDO / Private
Equity /
Property /
Other
  Investment
Trusts
  Australia
MIS
  U.S. Mutual
Funds

Performance fees — Year ended December 31, 2017

  $  22.8       $  49.2       $    8.2       $  31.4       $  11.8       $    —       $  (19.5)  

Performance fees — Year ended December 31, 2016

  $    8.6       $  18.1       $  13.6       $    9.2       $    4.6       $  0.7       $      —    

Performance fees — Year ended December 31, 2015

  $  18.1       $  72.7       $  38.1       $    7.5       $  14.4       $    —       $      —    

Number of funds generating performance fees in FY17 (1)

  3       18       24       72       5       —       13    

Number of funds generating performance fees in FY16 (1)

  3       14       16       14       3       2       —    

Number of funds generating performance fees in FY15 (1)

  5       13       22       30       8       —       —    

AUM December 31, 2017 generating FY17 performance fees (in billions)

  $    3.1       $  11.7       $    1.9       $  36.3       $    2.8       $    —       $  43.0    

AUM December 31, 2016 generating FY16 performance fees (in billions)

  $    2.4       $    5.2       $    1.4       $    4.7       $    1.1       $  0.1       $      —    

AUM December 31, 2015 generating FY15 performance fees (in billions)

  $    1.9       $  12.4       $    2.3       $    5.7       $    3.1       $    —       $      —    

Number of funds eligible to earn performance fees at December 31, 2017

  4       25       21       76       8       2       19    

Number of funds eligible to earn performance fees at December 31, 2016

  4       26       22       45       8       2       —    

Number of funds eligible to earn performance fees at December 31, 2015

  5       26       29       54       8       2       —    

AUM December 31, 2017 with an un-crystallized performance fee at December 31, 2017, vesting in 2018 (in billions) (2)

  $    3.5       $  11.9       $    0.3       $    n/a       $    1.8       $    —       $    n/a    

AUM December 31, 2016 with an un-crystallized performance fee at December 31, 2016, vesting in 2017 (in billions) (2)

  $    2.3       $    3.1       $    1.3       $    n/a       $    0.6       $  n/a       $    n/a    

AUM December 31, 2015 with an un-crystallized performance fee at December 31, 2015, vesting in 2016 (in billions) (2)

  $    1.4       $    7.6       $    1.9       $    n/a       $    1.6       $    —       $    n/a    

Performance fee participation rate percentage (3)

  15%-20%   10%-20%   10%-20%   5%-28%   15%   15%   +/–15%

Performance fee frequency

  Quarterly

Annually and Quarterly

Annually

Quarterly, Semi-
Annually and Annually


Annually

Semi-
Annually


Monthly

Performance fee methodology (4)

  Relative / Absolute plus HWM   Relative plus HWM   Absolute plus HWM   Bespoke   Relative plus HWM   Relative plus HWM   Relative plus HWM
(1)
For Offshore Absolute Return Funds this excludes funds earning a performance fee on redemption and only includes those with a period end crystallization date.

(2)
Reflects the total AUM of all funds with a Performance Fee opportunity at any point in the relevant year.

(3)
Participation rate reflects JHG's share of outperformance.

(4)
Relative performance is measured versus applicable benchmarks, and is subject to a High Water Mark (HWM) for relevant funds.

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Table of Contents

Shareowner servicing fees

Shareowner servicing fees are primarily composed of mutual fund servicing fees, such as transfer agent fees. The activity in the year ended December 31, 2017 relates to legacy JCG.

Adoption of updated revenue recognition guidance, particularly relating to principal-agent considerations, will significantly increase shareowner servicing fees in 2018 and onward. The Group anticipates recognizing approximately $97 million in additional shareowner servicing fees on an annualized basis, with a corresponding amount recognized as distribution expenses based on respective annualized figures in 2017. For further discussion, refer to Item 8. Financial Statements and Supplementary Data, Note 3 — Recent Accounting Pronouncements.

Other revenue

Other revenue increased by $25.9 million during the year ended December 31, 2017, compared to the year ended December 31, 2016. Legacy JCG was the largest driver contributing $30.7 million to the year ended December 31, 2017. The increase due to legacy JCG was partially offset by unfavorable foreign currency translation and a $2.4 million reduction in relation to OEIC trading, primarily due to reduced trading in the UK Property Fund.

Other revenue decreased $12.3 million during the year ended December 31, 2016, compared to 2015, of which $10.1 million is due to the adverse impact of translation of non-USD denominated income.

Operating Expenses

 
  Year ended December 31,    
   
 
 
  2017 vs.
2016
  2016 vs.
2015
 
 
  2017   2016   2015  

Operating expenses (in millions):

                     

Employee compensation and benefits

  $ 543.3   $ 273.5   $ 317.1     98.6 %   (13.7 )%

Long-term incentive plans          

  150.8   87.5   85.9   72.3 % 1.9 %

Distribution expenses

    277.3     209.1     235.6     32.6 %   (11.2 )%

Investment administration

  43.8   46.2   48.3   (5.2 )% (4.3 )%

Marketing

    31.2     13.9     14.2     124.5 %   (2.1 )%

General, administrative and occupancy

  202.2   109.8   113.3   84.2 % (3.1 )%

Depreciation and amortization

    52.8     27.8     23.4     89.9 %   18.8 %
       

Total operating expenses

  $ 1,301.4   $ 767.8   $ 837.8   69.5 % (8.4 )%

Employee compensation and benefits

During the year ended December 31, 2017, employee compensation and benefits increased $269.8 million compared to the year ended December 31, 2016. This increase was primarily driven by the inclusion of legacy JCG, which contributed $190.9 million to the year ended December 31, 2017. Deal and integration costs of $47.5 million for the year ended December 31, 2017, also contributed to the year-over-year variance. The year ended December 31, 2017 was also impacted by favorable foreign currency translation of $10.7 million.

During the year ended December 31, 2016, employee compensation and benefits decreased $43.6 million, compared to 2015, which was primarily driven by the favorable impact of translation of non-USD denominated expenses of $35.9 million. Fixed staff costs increased by $19.4 million, primarily due to a full-year impact of the Perennial acquisition offset by lower bonus costs of $27.1 million largely reflecting weaker business performance.

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Table of Contents

Long-term incentive plans

Long-term incentive plans increased $63.3 million during the year ended December 31, 2017, compared to the year ended December 31, 2016. The increase was primarily driven by legacy JCG, which contributed $52.4 million in the year ended December 31, 2017. In addition, deal and integration costs of $17.0 million for the year ended December 31, 2017 contributed to the year-over-year variance. These increases were offset by a $4.4 million decrease in social security expenses, driven by lower vesting outcome for the Long-Term Incentive Plan ("LTIP") 2014, and vesting of the final Employee Share Ownership Plan ("ESOP") matching award in the previous year. Favorable foreign currency translation of $3.4 million also benefited the year ended December 31, 2017.

Long-term incentive plans increased by $1.6 million from 2015 to 2016. The increase was primarily due to $11.3 million of higher amortization of bonus deferrals which were in turn a function of increasing bonus awards throughout the last three years. This was partially offset by lower social security costs on award vestings as a result of a decrease in share price and by the favorable impact of translation of non-USD denominated expense of $9.7 million.

Distribution expenses

Distribution expenses are paid to financial intermediaries for the distribution of JHG's retail investment products and are typically calculated based on the amount of the intermediary sourced AUM. For the year ended December 31, 2017, distribution expenses increased by $68.2 million. The increase was primarily driven by JCG, which contributed $80.4 million in the year ended December 31, 2017. The remaining change for the year ended December 31, 2017, was due to the UK OEIC and SICAV product mix, as discussed in the Management fees section.

For the year ended December 31, 2016, distribution expenses decreased by $26.5 million, which was mainly due to product mix and lower average Retail AUM, partially offset by one-time adjustments.

Adoption of updated revenue recognition guidance, particularly relating to principal-agent considerations, will significantly increase distribution expenses in 2018 and onward. The Group anticipates recognizing approximately $97 million in additional distribution expense on an annualized basis, with a corresponding amount recognized as shareowner services based on respective annualized figures in 2017. For further discussion, refer to Item 8. Financial Statements and Supplementary Data, Note 3 — Recent Accounting Pronouncements.

Investment administration

Investment administration expenses, which represent back-office operations, decreased $2.4 million during the year ended December 31, 2017, compared to the same period in 2016. The decrease was primarily due to favorable foreign currency translation of $1.8 million for the year ended December 31, 2017.

On October 19, 2017, the Group signed an agreement with BNP Paribas which is expected to close in March 2018. Under the agreement, BNP Paribas will assume responsibility for the majority of JHG's back-office (including fund administration and fund accounting), middle-office and custody functions in the U.S. As a result of the agreement, the Group currently estimates investment administration expense savings of approximately $8 million in 2018.

Marketing

Marketing expenses for the year ended December 31, 2017, increased by $17.3 million, compared to the year ended December 31, 2016. The increase was primarily driven by legacy JCG and

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Merger-related costs. Expenses in relation to the Merger increased $5.5 million during the year ended December 31, 2017. Legacy JCG contributed $13.0 million to the year ended December 31, 2017. These increases were partially offset by favorable foreign currency translation for the year ended December 31, 2017.

General, administrative and occupancy

General, administrative and occupancy expenses increased by $92.4 million during the year ended December 31, 2017, compared to the year ended December 31, 2016. Deal and integration costs related to the Merger, including legal and advisory fees, contributed $49.6 million to the year ended December 31, 2017. Legacy JCG (exclusive of deal and integration costs) contributed $56.9 million to the year ended December 31, 2017. The year ended December 31, 2017, benefited from a $6.9 million credit in relation to a sales tax refund dating from April 2013 and a $4.3 million favorable foreign currency translation.

During the year ended December 31, 2016, general, administrative and occupancy decreased by $3.5 million compared to 2015. The Group was impacted by foreign currency translation in the amount of $19.6 million and other favorable variances included one-off legal and professional costs incurred in 2015. This was offset by deal costs associated with the Merger and increases in information technology costs.

In 2018, the Group will begin incurring research costs associated with MiFID II. MiFID II is legislative framework that is intended to strengthen investor protection and improve the functioning of financial markets making them more efficient, resilient and transparent. Currently, the Group's estimate of 2018 MiFID II research costs is approximately $19 million.

Depreciation and amortization

Depreciation and amortization expense increased by $25.0 million during the year ended December 31, 2017, compared to 2016. This was primarily due to amortization of intangibles recognized as a result of the Merger.

During the year ended December 31, 2016, amortization and depreciation expense increased by $4.4 million compared to 2015, primarily due to the impairment of intangibles in relation to contracts from the disposal of the Volantis UK Small Cap alternative team assets in 2017.

Non-Operating Income and Expenses

 
  Year ended December 31,    
   
 
 
  2017 vs.
2016
  2016 vs.
2015
 
 
  2017   2016   2015  

Non-operating income and expenses (in millions):

                     

Interest expense

  $ (11.9 ) $ (6.6 ) $ (20.1 )   80.3 %   (67.2 )%

Investment gains (losses), net

  18.0   (11.7 ) 39.7   253.8 % (129.5) %

Other non-operating income (expenses), net

    (1.0 )   (1.9 )   0.6     (47.4 )%   416.7 %

Income tax provision

  211.0   (34.6 ) (6.1 ) 709.8 % 467.2 %

Interest expense

Interest expense increased by $5.3 million during the year ended December 31, 2017, compared to the year ended December 31, 2016. As a result of the Merger, the Group recognized interest expense on the 0.750% Convertible Senior Notes due 2018 (the "2018 Convertible Notes") with a principal value of $116.6 million and the 4.875% Senior Notes due 2025 ("2025 Senior Notes") with a principal value of $300.0 million.

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During the year ended December 31, 2016, interest expense decreased by $13.5 million compared to 2015, following the repayment of the 2016 Senior Notes in March 2016 and a favorable translation impact of $2.3 million.

Investment gains (losses), net

The components of investment gains (losses), net for the years ended December 31, 2017, 2016 and 2015, are as follows (in millions):

 
  Year ended December 31,    
   
 
 
  2017 vs.
2016
  2016 vs.
2015
 
 
  2017   2016   2015  

Investment gains (losses), net (in millions):

                     

Gain (loss) on investment securities and derivatives

  $ 4.0   $ (12.4 ) $ 18.3     (132.3 )%   (167.8 )%

Gain on sale of equity method investments

      18.9   n/m*   n/m*  

Gain on sale of Volantis

    10.2             n/m*     n/m*  

Other

  3.8   0.7   2.5   442.9 % (72.0) %

Investment gains (losses), net

  $ 18.0   $ (11.7 ) $ 39.7     253.8 %   (129.5 )%
*
n/m — Not meaningful

Investment gains (losses), net improved $29.7 million during the year ended December 31, 2017 compared to 2016. Legacy JCG contributed $1.8 million to the year ended December 31, 2017. The year ended December 31, 2017, was also impacted by the sale of Volantis, which resulted in the recognition of a $10.2 million gain. The remaining variance for the year ended December 31, 2017 is due to fair value adjustments associated with investment securities and derivatives.

Investment gains in 2015 primarily represent a gain on sale of equity method investments of $18.9 million which related to the disposal of the TIAA Henderson Real Estate Limited ("THRE") joint venture and a gain on sale of available for sale investments of $18.3 million on the disposal of the property fund seed capital investments. In addition in 2016, the Group recorded an unrealized loss on a legacy Asian private equity investment of $17.7 million, mainly as a result of macro-economic issues in India.

Income Tax Provision

The Group's effective tax rates for the years ended December 31, 2017, 2016 and 2015, are as follows:

 
  Year ended December 31,  
 
  2017   2016   2015  

Effective tax rate

  (47.1 )% 16.3 % 1.8 %

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the "Act"). The Act includes a number of changes to existing U.S. tax laws that impact JHG, most notably a permanent reduction in the U.S. corporate income tax rate from 35 percent to 21 percent for tax years beginning after December 31, 2017. In accordance with ASC Topic 740, Income Taxes, JHG recognized the income tax effects of the Act in its 2017 financial statements, the reporting period in which the Act was signed into law. As a result of this rate change, JHG's deferred tax assets and liabilities were revalued to account for the estimated future impact of the lower federal corporate income tax rate. The revaluation resulted in a non-cash tax benefit of $345.4 million. In addition, an estimate of the one-time mandatory tax on earnings of certain foreign subsidiaries that were previously tax deferred of $4.7 million was recorded. These estimates are determined in accordance with recently issued

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SEC issued guidance provided in Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act ("SAB 118") allowing taxpayers to record a reasonable estimate of the impact of the U.S. legislation. In accordance with SAB 118, the actual impact from the Act may vary from the estimated amounts.

The benefit of the Act's rate change in 2017 is partially offset by the inclusion of the U.S. based JCG entities for the seven months after the Merger at the higher U.S. tax rates than the UK statutory rate, the predominant driver for 2016.

For the year ended December 31, 2016, the Group's effective tax rate increased to 16.3% from 1.8% for the year ended December 31, 2015. The increase in the effective tax rate was due to a number of 2015 tax benefits that either did not occur in 2016 or did not occur at the same level in 2016 and changes in the Group's global mix of pre-tax profits and business growth in higher tax jurisdictions.

During 2016, tax legislation enacted in the UK to reduce the corporation tax rate in future years resulted in a $4.0 million net non-cash benefit (2015: $8.1 million benefit) related to the revaluation of certain deferred tax assets and liabilities. The UK corporation tax rate decreased from 20% to 19% with effect from April 1, 2017 and then to 17% with effect from April 1, 2020.

The Group anticipates its annual statutory tax rate will be in the 21% to 23% range in 2018.

Non-GAAP Financial Measures

JHG reports its financial results in accordance with GAAP. However, in the opinion of JHG management, the profitability of the Group and its ongoing operations is best evaluated using additional non-GAAP financial measures. Management uses these performance measures to evaluate the business and adjusted values are consistent with internal management reporting.

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JHG pro forma results

The table below reflects the JHG pro forma combined results for the year ended December 31, 2017, as though the Merger had occurred on January 1, 2017.

 
  Year ended
December 31,
2017 — JHG
Statutory
  JCG January
2017 — May
2017
  Year ended
December 31,
2017 — JHG
Pro Forma
 

Revenue:

             

Management fees

  $ 1,465.1   $ 388.4   $ 1,853.5  

Performance fees

  103.9   (19.2 ) 84.7  

Shareowner servicing fees

    71.5     48.2     119.7  

Other revenue

  103.2   21.5   124.7  

Total revenue

    1,743.7     438.9     2,182.6  
     

Operating expenses:

             

Employee compensation and benefits

    543.3     155.0     698.3  

Long-term incentive plans

  150.8   32.0   182.8  

Distribution expenses

    277.3     57.2     334.5  

Investment administration

  43.8     43.8  

Marketing

    31.2     31.6     62.8  

General, administrative and occupancy

  202.2   62.3   264.5  

Depreciation and amortization

    52.8     13.9     66.7  
     

Total operating expenses

  1,301.4   352.0   1,653.4  

Operating income

    442.3     86.9     529.2  

Interest expense

  (11.9 ) (6.8 ) (18.7 )

Investment gains, net

    18.0     1.5     19.5  

Other non-operating (expense) income

  (1.0 ) 1.5   0.5  

Income before taxes

    447.4     83.1     530.5  

Income tax provision

  211.0   (31.4 ) 179.6  

Net income

    658.4     51.7     710.1  

Net (income) attributable to noncontrolling interests

  (2.9 ) (2.6 ) (5.5 )

Net income attributable to JHG

  $ 655.5   $ 49.1   $ 704.6  

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Alternative performance measures

The following is a reconciliation of pro forma revenue, pro forma operating income, pro forma net income attributable to JHG and pro forma diluted earnings per share to adjusted pro forma revenue, adjusted pro forma operating income, adjusted pro forma net income attributable to JHG and adjusted pro forma diluted earnings per share for the year ended December 31, 2017 (in millions, except per share and operating margin data):

 
  Year ended
December 31,
2017
 

Reconciliation of pro forma revenue to adjusted pro forma revenue

     

Pro forma revenue

  $ 2,182.6  

Distribution expenses (1)

  (334.5 )

Adjusted pro forma revenue

  $ 1,848.1  

Reconciliation of pro forma operating income to adjusted pro forma operating income

     

Pro forma operating income

  $ 529.2  

Employee compensation and benefits (2)

  54.1  

Long-term incentive plans (2)

    17.6  

Marketing (2)

  28.9  

General, administrative and occupancy (2)

    65.8  

Depreciation and amortization (3)

  36.3  

Adjusted pro forma operating income

  $ 731.9  

Pro forma operating margin (4)

  24.2 %

Adjusted pro forma operating margin (5)

    39.6 %

Reconciliation of pro forma net income attributable to JHG to adjusted pro forma net income attributable to JHG

 

 
 

Pro forma net income attributable to JHG

  $ 704.6  

Employee compensation and benefits (2)

  54.1  

Long-term incentive plans (2)

    17.6  

Marketing (2)

  28.9  

General, administrative and occupancy (2)

    65.8  

Depreciation and amortization (2)(3)

  36.3  

Interest expense (6)

    2.7  

Investment gains (losses), net (7)

  (13.2 )

Other non-operating income (expenses), net (6)

    1.7  

Income tax provision (8)

  (394.1 )

Adjusted pro forma net income attributable to JHG

    504.4  

Less: allocation of earnings to participating stock-based awards

  (14.2 )

Adjusted pro forma net income attributable to JHG common shareholders

  $ 490.2  

Weighted-average common shares outstanding — diluted (two class)

  197.9  

Pro forma diluted earnings per share (two class) (9)

  $ 3.46  

Adjusted pro forma diluted earnings per share (two class) (10)

  $ 2.48  
(1)
Distribution expenses are paid to financial intermediaries for the distribution of JHG's investment products. JHG management believes that the deduction of third-party distribution, service and advisory expenses from revenue in the computation of net revenue reflects the nature of these

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(2)
Adjustments primarily represent deal and integration costs in relation to the Merger, including severance costs, legal costs, consulting fees and write-down of legacy IT systems. JHG management believes these costs do not represent the ongoing operations of the Group.

(3)
Investment management contracts have been identified as a separately identifiable intangible asset arising on the acquisition of subsidiaries and businesses. Such contracts are recognized at the net present value of the expected future cash flows arising from the contracts at the date of acquisition. For segregated mandate contracts, the intangible asset is amortized on a straight-line basis over the expected life of the contracts. JHG management believes these non-cash and acquisition-related costs do not represent the ongoing operations of the Group.

(4)
Pro forma operating margin is pro forma operating income divided by pro forma revenue.

(5)
Adjusted pro forma operating margin is adjusted pro forma operating income divided by adjusted pro forma revenue.

(6)
Adjustments primarily represent fair value movements on options issued to Dai-ichi, deferred consideration costs associated with acquisitions prior to the Merger and increased debt expense as a consequence of the fair value uplift on debt due to acquisition accounting. JHG management believes these costs do not represent the ongoing operations of the Group.

(7)
Adjustment primarily relates to the gain recognized on disposal of the alternative UK small cap team ("Volantis team") on April 1, 2017 and adjustments related to deferred consideration costs for prior acquisitions. JHG management believes these gains do not represent the ongoing operation of the Group.

(8)
The tax impact of the adjustments is calculated based on the U.S. or foreign statutory tax rate as they relate to each adjustment; certain adjustments are either not taxable or not tax-deductible. In addition, the adjustment includes the impact of U.S. tax legislation passed in December 2017.

(9)
Pro forma diluted earnings per share is pro forma net income attributable to JHG common shareholders divided by weighted-average diluted common shares outstanding.

(10)
Adjusted pro forma diluted earnings per share is adjusted pro forma net income attributable to JHG common shareholders divided by weighted-average diluted common shares outstanding.

Liquidity and Capital Resources

JHG's capital structure, together with available cash balances, cash flows generated from operations, and further capital and credit market activities, if necessary, should provide the Group with sufficient resources to meet present and future cash needs, including operating and other obligations as they fall due and anticipated future capital requirements.

The following table summarizes key balance sheet data relating to JHG's liquidity and capital resources as of December 31, 2017 and 2016 (in millions):

 
  Year ended
December 31,
 
 
  2017   2016  

Cash and cash equivalents held by the Group

  $ 754.2   $ 279.0  

Investment securities held by the Group

  $ 280.4   $ 79.6  

Fees and other receivables

  $ 419.6   $ 165.5  

Debt

  $ 379.2   $  

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Cash and cash equivalents consist primarily of cash at banks held in money market funds. Cash and cash equivalents held by consolidated variable interest entities ("VIEs") and consolidated voting rights entities ("VREs") are not available for general corporate purposes and have been excluded from the table above.

Investment securities held by the Group represents seeded investment products (exclusive of consolidated VIEs and VREs), investments related to deferred compensation plans and other less significant investments.

The Group 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, 2018 Convertible Notes principal, interest and redemption payments, dividend payments, income tax payments, contingent consideration payments, defined benefit pension plan contributions and integration costs in relation to the Merger. JHG may also use available cash for other general corporate purposes and acquisitions.

Cash Flows

A summary of cash flow data for the years ended December 31, 2017, 2016 and 2015, is as follows (in millions):

 
  Year ended December 31,  
 
  2017   2016   2015  

Cash flows provided by (used for):

             

Operating activities

  $ 444.1   $ 235.1   $ 388.9  

Investing activities

  519.5   (108.3 ) 56.8  

Financing activities

    (504.7 )   (338.6 )   (221.5 )

Effect of exchange rate changes on cash and cash equivalents

  12.1   (48.7 ) (19.0 )

Net change in cash and cash equivalents

    471.0     (260.5 )   205.2  

Cash balance at beginning of year

  323.2   583.7   378.5  

Cash balance at end of year

  $ 794.2   $ 323.2   $ 583.7  

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.

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Investing Activities

Cash provided by (used for) investing activities for the years ended December 31, 2017, 2016 and 2015, is as follows (in millions):

 
  Year ended December 31,  
 
  2017   2016   2015  

Cash acquired from acquisition of JCG

  $ 417.2   $   $  

Acquisition of subsidiaries, net of cash acquired

            (57.8 )

Proceeds from:

             

Investment securities — VIEs, net

    122.4          

Investment securities — seed capital, net

  26.5   31.6   14.9  

Purchases of:

                   

Investment securities — VIEs, net

    (76.6 ) (9.3 )

Property, equipment and software

    (17.7 )   (14.2 )   (12.1 )

Investment income received by consolidated funds

  7.9   6.5    

Cash movement on deconsolidation of consolidated funds

    (11.2 )   (8.4 )    

Net cash paid on settled hedges

  (23.7 ) (47.9 )  

Proceeds from sale of interests in equity-method investments

            122.7  

Other

  (1.9 ) 0.7   (1.6 )

Cash provided by (used for) investing activities

  $ 519.5   $ (108.3 ) $ 56.8  

Cash inflows from investing activities in 2017 were primarily driven by the Group acquiring cash of $417.2 million in respect of the Merger, along with the Group receiving proceeds from disposal of investments within consolidated VIEs of $122.4 million and redemptions of seed capital investment securities of $26.5 million. JHG periodically adds new investment strategies to its investment product offerings by providing the initial cash investment or seeding. The primary purpose of seeded investment products is to generate an investment performance track record in a product to attract third-party investors. JHG may redeem invested seed capital for a variety of reasons, including when third-party investments in the relevant product are sufficient to sustain the investment strategy. These increases are partially offset by net cash paid to settle derivatives used in JHG's economic hedge program, and purchases of property, equipment and software.

In 2016, the Group's consolidated VIEs purchased investment securities of $76.6 million and paid $47.9 million on settled hedges, offset by the proceeds of disposal of seed capital investment securities of $31.6 million. In 2015, the Group received $122.7 million from the sale of the Group's investment in THRE; this was partially offset by $57.8 million of cash outflows in respect of consideration paid for the acquisitions of Perennial and 90 West.

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Financing Activities

Cash used for financing activities for the years ended December 31, 2017, 2016 and 2015, is as follows (in millions):

 
  Year ended December 31,  
 
  2017   2016   2015  

Proceeds from settlement of convertible note hedge

  $ 59.3   $   $  

Settlement of stock warrant

    (47.8 )        

Proceeds from issuance of options

  25.7      

Proceeds from stock-based compensation plans

    6.0     11.0     15.6  

Purchase of common stock for stock-based compensation plans

  (52.1 ) (54.3 ) (96.3 )

Dividends paid to shareholders

    (256.0 )   (157.5 )   (161.0 )

Repurchase of common stock as part of share repurchase program

      (38.2 )

Repayment of long-term debt

    (92.5 )   (203.4 )    

Third-party sales (redemptions) in consolidated seeded investment products, net

  (141.4 ) 65.6   58.4  

Other

    (5.9 )        

Cash used for financing activities

  $ (504.7 ) $ (338.6 ) $ (221.5 )

Cash outflows from financing activities in 2017 were primarily due to $256.0 million of dividends paid to JHG shareholders, third-party redemptions in consolidated seeded investment products of $141.4 million and payments of $92.5 million to satisfy early conversion notices in relation to the 2018 Convertible Notes. Settlement of the conversion notices, which included principal and the conversion feature, were wholly settled in cash.

Other Sources of Liquidity

At December 31, 2017, JHG had a $200 million, unsecured, revolving credit facility ("Credit Facility") with Bank of America Merrill Lynch International Limited, as coordinator, book runner and mandated lead arranger. The Credit Facility includes an option for JHG to request an increase to the overall amount of the Credit Facility of up to an additional $50.0 million. The Credit Facility had a maturity date of February 16, 2022, with two one-year extension options that can be exercised at the discretion of JHG with the lender's consent on the first and second anniversary of the date of the agreement, respectively. On the first anniversary of the date of the agreement, the Group exercised the option to extend the term of the Credit Facility by one year. The revised maturity date of the Credit Facility is February 16, 2023.

The Credit Facility became effective on the Closing Date and may be used for general corporate purposes. The Credit Facility bears interest on borrowings outstanding at the relevant interbank offer rate plus a spread.

The Credit Facility contains a financial covenant with respect to leverage. The financing leverage ratio cannot exceed 3.00x EBITDA. At the latest practicable date before the date of this report, JHG was in compliance with all covenants and there were no borrowings under the Credit Facility.

Regulatory Capital

JHG is subject to regulatory oversight by the SEC, FINRA, the U.S. CFTC, the FCA and other international regulatory bodies. The Group ensures it is compliant with its regulatory obligations at all

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times. The Group's main capital requirement relates to the FCA-supervised regulatory group (a sub-group of JHG), comprising Henderson Group Holdings Asset Management Limited, all of its subsidiaries and Janus Capital International Limited ("JCIL"). JCIL is included on the basis of an Article 134 relationship under the Banking Consolidation Directive. The combined capital requirement is £275.3 million ($372.4 million), resulting in capital above the regulatory group's regulatory requirement of £44.1 million ($59.7 million) as of December 31, 2017, based upon internal calculations and excluding unaudited current period profits. Capital requirements in other jurisdictions are not significant.

Contractual Obligations

The following table presents contractual obligations and associated maturities at December 31, 2017 (in millions):

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

Debt

  $ 97.6   $   $   $ 300.0  

Interest payments

    14.7     29.3     29.3     37.7  

Capital leases

  1.3   1.8      

Operating leases

    34.5     59.1     50.8     84.5  

Total

  $ 148.1   $ 90.2   $ 80.1   $ 422.2  

Debt maturing in less than one year represents the fair value of the liability and equity components of the 2018 Convertible Notes as of December 31, 2017. Debt maturing in more than five years represents the principal value of the 2025 Senior Notes.

Short-Term Liquidity Requirements

Convertible Notes

Upon closing of the Merger, JHG fully and unconditionally guaranteed the obligations of JCG under its 2018 Convertible Notes, which pay interest at 0.750% semiannually on January 15 and July 15 of each year and mature on July 15, 2018.

Holders of the 2018 Convertible Notes may convert the notes during a particular calendar quarter if the last reported sale price of JHG's common stock is greater than or equal to 130% of the applicable conversion price 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, 2018, the 2018 Convertible Notes met the conversion criteria and are convertible during the first quarter of 2018 at a conversion rate of 45.1535 shares of JHG common stock per $1,000 principal amount of the 2018 Convertible Notes, which is equivalent to a conversion price of approximately $22.15 per share of common stock.

During the year ended December 31, 2017, $59.1 million of principal was redeemed and settled with $92.5 million of cash. As of December 31, 2017, the remaining principal value of the 2018 Convertible Notes was $57.5 million. During the period from January 1, 2018 to February 22, 2018, an additional $22.5 million in principal was redeemed and settled with cash for a total cash outlay of $39.1 million, and additional conversion notices amounting to $25.4 million in principal had been received. JHG intends to settle the conversion notices with cash during the first quarter of 2018.

Options Sold to Dai-Ichi

On the Closing Date of the Merger, JHG sold 20 tranches of conditional options to Dai-ichi Life Holdings Inc. ("Dai-ichi"), with each tranche allowing Dai-ichi to purchase 500,000 JHG ordinary

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shares at a strike price of £29.972 per share (the terms of such options having been adjusted in accordance with the terms of the Dai-ichi Option Agreement to take account of the effect of the share consolidation). Refer to Note 2 — Summary of Significant Accounting Policies for additional information on the share consolidation. The cash consideration received for the options was £19.8 million ($25.7 million). As of December 31, 2017, the fair value of the options was $26.1 million. The options can be exercised by Dai-ichi during the period from the Closing Date of the Merger until October 3, 2018.

Common Stock Purchases

Some of the Group's executives and employees receive rights over JHG ordinary shares as part of their remuneration arrangements and employee entitlements. These entitlements may be satisfied either by the transfer of existing ordinary shares acquired on-market or by the issue of ordinary shares. See Part 2, Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Common Stock Purchases.

At the Annual General Meeting held on April 26, 2017, shareholders authorized JHG to make on-market purchases of up to 10% of the issued share capital of the Group at completion of the Merger. Shareholders will be asked to renew this authority at the 2018 Annual General Meeting. The Group did not make any on-market or off-market share purchases during 2017 in connection with any share buy-back program and as of the date of this report, there were no current on-market or off-market buy-backs of the Group's securities.

Dividends

The payment of cash dividends is within the discretion of the Group's Board of Directors and depends on many factors, including, but not limited to, the Group's results of operations, financial condition, capital requirements, general business conditions and legal requirements. From the Closing Date, the Group intends to declare dividends quarterly in USD. Prior to this, the Group declared dividends in GBP on a semi-annual basis, with an extraordinary first quarter 2017 dividend declared on April 19, 2017.

Dividends declared and paid during the year ended December 31, 2017, representing the final 2016 and quarterly 2017 dividends were:

Dividend
per share
  Date declared   Dividends paid
(in millions)
  Date paid
£ 0.0730   February 9, 2017   $ 102.6   May 19, 2017
£ 0.0185   April 19, 2017   $ 26.0   May 19, 2017
$ 0.3200   August 7, 2017   $ 63.7   September 1, 2017
$ 0.3200   November 8, 2017   $ 63.7   December 1, 2017

On February 5, 2018, JHG's Board of Directors declared a fourth quarter 2017 cash dividend of $0.32 per share. The dividend will be paid on March 2, 2018, to shareholders of record at the close of business on February 16, 2018.The Board of Directors will review the numerous factors mentioned above when determining the first quarter 2018 dividend.

Long-Term Liquidity Requirements

Expected long-term commitments as of December 31, 2017, include principal and interest payments related to the 2025 Senior Notes, operating and capital lease payments, defined benefit pension plan contributions, Perkins and Intech senior profits interests awards, Intech appreciation rights and phantom interests, Intech non-controlling interests and contingent consideration related to the acquisitions of Geneva, Perennial, VelocityShares and Kapstream. JHG expects to fund its long-term

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commitments with existing cash, cash generated from operations or by accessing capital and credit markets as necessary.

2025 Senior Notes

Upon closing of the Merger, JHG fully and unconditionally guaranteed JCG's obligations under its 2025 Senior Notes. The 2025 Senior Notes have a principal of $300.0 million principal in issue, which pay interest at 4.875% semiannually on February 1 and August 1 of each year, and mature on August 1, 2025.

Perkins Senior Profits Interests Awards

Perkins became a wholly owned subsidiary of the Group as a result of the Merger.

On November 18, 2013, Perkins granted senior profits interests awards designed to retain and incentivize key employees to grow the business. These awards fully vest on December 31, 2018, with the holders entitled to a total of 10% of Perkins' annual taxable income. The 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% in 2019 after fully vesting on December 31, 2018. In addition, these awards have a formula-driven terminal value based on Perkins' revenue. JHG can call and terminate any or all of the awards on December 31, 2018, and each year thereafter. Holders of such interests can require JHG 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 JHG or certain employees, as applicable, upon certain corporate or employment-related events affecting Perkins or certain employees.

Intech

Intech became a subsidiary of the Group as a result of the Merger.

Intech ownership interests held by a founding member, representing approximately 1.1% aggregate ownership of Intech, provide this founding member with an entitlement to retain his remaining Intech interest until his death and provide the option to require JHG to purchase the ownership interests of Intech at fair value.

Intech has granted long-term incentive awards to retain and incentivize employees. The awards consist of appreciation rights, profits interests and phantom interests, and are designed to give recipients an equity-like stake in Intech. The grant date fair value of the appreciation rights is being amortized on a graded basis over the 10-year vesting period. The awards are exercisable upon termination of employment from Intech to the extent vested. The profits interests and phantom interests awards entitle recipients to 9.2% of Intech's pre-incentive profits.

Contingent Consideration

The total maximum contingent amount payable related to Perennial and Geneva over the entire contingent consideration period is $47.0 million and $70.4 million, respectively, as of December 31, 2017. For additional details of the contingent consideration in relation to the acquisition of Perennial and Geneva, please refer to Note 9 — Fair Value Measurements.

As a result of the Merger, the Group is also committed to contingent consideration payments in respect of the historic JCG acquisitions of Kapstream and VelocityShares.

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The outstanding Kapstream contingent cash consideration in respect to the initial acquisition of a 51% controlling interest is payable in the third quarter of 2018 if certain Kapstream AUM reach defined targets as of July 1, 2018. As of December 31, 2017, the total maximum payment remaining is $4.1 million.

On January 31, 2017, JCG acquired the remaining 49% voting interest in Kapstream. The transaction included contingent consideration of up to $43.8 million. The contingent consideration will be payable in three equal installments on the first, second and third anniversary dates of the acquisition if certain revenue targets are reached and it is indexed to the performance of the premier share class of the Kapstream Absolute Return Income Fund. On January 31, 2018, the first anniversary of the acquisition, Kapstream reached defined revenue targets and the Group paid $15.3 million in February 2018.

Outstanding contingent cash payments in relation to the historic acquisition of VelocityShares are contingent on certain VelocityShares' ETPs reaching defined net revenue targets on the third and fourth anniversaries of the acquisition (in November 2017 and November 2018, respectively). VelocityShares ETPs reached defined net revenue targets in November 2017, the third anniversary of the acquisition, and the Group paid contingent consideration of $3.6 million in January 2018. As of December 31, 2017, the remaining maximum payment for the fourth and final contingent consideration payment is $8.0 million.

Defined Benefit Pension Plan

The Group's latest triennial valuation of its defined benefit pension plan resulted in a deficit on a technical provision's basis of $39.2 million (£29.0 million). The Group agreed with the trustees of the plan to make contributions of $11.4 million (£8.4 million) per year for four years beginning in 2017 to recover the deficit.

Off-Balance Sheet Arrangements

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Group's consolidated financial statements and accompanying notes have been prepared in accordance with 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 and 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.

The Group 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. The Group's critical accounting policies and estimates relate to the areas of investment securities, contingent consideration, goodwill and intangible assets, retirement benefit plans, and income taxes.

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Valuation of Investment Securities

The Group records investment securities and classifies them as trading or available-for-sale at fair value. Fair value is generally determined using observable market data based on recent trading activity. Where observable market data is unavailable due to a lack of trading activity, the Group 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 the Group is valuing and the selected benchmark. Any variation in the assumptions used to approximate fair value could have a material adverse effect on JHG's Consolidated Balance Sheets and results of operations.

The Group periodically evaluates the carrying value of equity method investments and investment securities classified as available-for-sale for potential impairment. In determining if an impairment exists, the Group considers the duration, extent and circumstances of any decline in fair value. Where a fall in the value of an investment is prolonged or significant, it is considered an indication of impairment.

JHG evaluates the securities in an unrealized loss position in the available-for-sale portfolio for other than temporary impairment ("OTTI") on the basis of the duration of the decline in value of the security and severity of that decline as well as the Group's intent and ability to hold these securities for a period of time sufficient to allow for any anticipated recovery in the market value. For equity method investments, if circumstances indicate that an OTTI may exist, the investments are evaluated using market values where available, or the expected future cash flows of the investment.

If it is determined that the impairment on a security is other than temporary, the investment is written down to fair value. An impairment loss equal to the difference between the carrying value of the security and its fair value is recognized as an impairment charge within investment gains (losses), net in JHG's Consolidated Statements of Comprehensive Income. For available-for-sale investments, any amounts previously recognized in other comprehensive income in respect of cumulative changes in fair value are taken to net income on impairment.

There were no impairment charges recognized on investment securities for the years ended December 31, 2017, 2016 or 2015.

Contingent Consideration

Contingent consideration, resulting from business combinations, is recognized at fair value at the acquisition date as part of the business combination and discounted where the time value of money is material. The determination of the fair value is based on discounted cash flows, with the key assumptions being the probability of meeting each performance target and the discount factor applied. When the contingent consideration meets the definition of a financial liability, it is subsequently remeasured to fair value at each reporting date through net income. Finance charges, where discounting has been applied, are also recognized through net income.

Accounting for Goodwill and Intangible Assets

The recognition and measurement of goodwill and intangible assets requires 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. The judgment exercised by management in arriving at these valuations includes the selection of market growth rates, fund flow assumptions, expected margins and costs.

Goodwill represents the excess of cost over the fair value of the identifiable net assets of acquired companies and is not amortized.

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Indefinite-lived intangible assets primarily represent trademarks and investment management agreements. Investment management agreements without a contractual termination date are classified as indefinite lived intangible assets based upon the following: (i) there is no legal or statutory limitation on the contract period to manage these investment products; (ii) the Group expects to, and has the ability to operate these investment products indefinitely; (iii) the investment products have multiple investors and are not reliant on an individual investor or small group of investors for their continued operation; (iv) the current competitive environment does not indicate a finite life; and (v) there is a high likelihood of continued renewal based on historical experience. The assumption that investment management agreements are indefinite-lived assets is reviewed at least annually or more frequently if facts and circumstances indicate that the useful life is no longer indefinite.

Definite-lived intangible assets represent certain other investment management contracts, which are amortized over their estimated lives using the straight line method. The estimated lives of the definite-lived contracts held vary and range from three years to eight years.

Impairment Testing

Indefinite-lived intangible assets are tested for impairment by comparing the fair value of the assets to their recorded values

Goodwill and indefinite-lived intangible assets are tested for impairment annually (or more frequently if changes in circumstances indicate that carrying values may be impaired). The Group may first assess goodwill and indefinite-lived intangible assets for qualitative factors to determine whether it is necessary to perform a quantitative impairment test. The qualitative analysis considers entity-specific and macroeconomic factors and their potential impact on the key assumptions used in the determination of the fair value of the reporting unit or indefinite-lived intangible asset. A quantitative impairment test is performed if the results of the qualitative assessment indicate that it is more likely than not that the fair value of the related reporting unit is less than its carrying value or an indefinite-lived intangible asset is impaired, or if a qualitative assessment is not performed.

The quantitative goodwill impairment test requires goodwill impairments to be measured on the basis of the fair value of the reporting unit relative to the reporting unit's carrying amount.

The quantitative indefinite-lived intangible assets impairment test compares the fair value of the asset to its carrying value. If the carrying value is higher than the fair value, impairment is recognized in the amount of the difference in values.

The Group performed its annual impairment tests for goodwill and indefinite-lived intangible assets as of October 1, 2017. The Group elected to perform a qualitative assessment of the valuation of goodwill and indefinite-lived intangible assets and concluded it is more likely than not that the fair values of the Group's reporting unit and the specific intangible assets exceed their carrying values. The Group subsequently monitors market conditions and their potential impact on the assumptions used in the annual tests of fair value to determine whether circumstances have changed that would more likely than not reduce the fair value of the Group's reporting unit below its carrying value, or indicate that indefinite-lived intangible assets might be impaired. The Group considered, among other things, changes in AUM and weighted-average cost of capital by assessing whether these changes would impact the reasonableness of the assumptions used in impairment tests as of October 1, 2017. The Group also monitored fluctuations of JHG's common stock per share price to evaluate the Group's market capitalization relative to the reporting unit as a whole. Subsequent to October 1, 2017, there were no impairments to goodwill or indefinite-lived intangible assets as no events occurred or circumstances changed that would indicate these assets might be impaired.

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Definite-lived intangible assets are tested for impairment only when there are indications of impairment. There were no indicators of impairment or impairment charges recognized on definite-lived intangible assets during the years ended December 31, 2017, 2016 or 2015.

Retirement Benefit Plans

The Group provides employees with retirement benefits through both defined benefit and defined contribution plans.

The defined benefit obligation is determined annually by independent qualified actuaries using the projected unit credit method and is measured at the present value of the estimated future cash outflows using a discount rate based on AA rated corporate bond yields of appropriate duration. The plan assets are recognized at fair value. The funded status of the defined benefit pension plan, (the "plan"), being the resulting surplus or deficit of defined benefit assets less liabilities, is recognized in the Consolidated Balance Sheets, net of any taxes that would be deducted at source.

Actuarial gains and losses arise as a result of differences between actual experience and actuarial assumptions. The "10% corridor" method for recognizing actuarial gains and losses has been adopted by the Group. This means that cumulative actuarial gains or losses up to an amount equal to 10% of the higher of the liabilities and the assets of the scheme (the "corridor") have no immediate impact on net income and are instead recognized through other comprehensive income. Cumulative gains or losses greater than this corridor are amortized to net income over the average remaining future working lifetime of the active members in the plan.

Net periodic benefit cost is recorded as a component of net income in the Consolidated Statements of Comprehensive Income and includes service cost, interest cost and the expected return on plan assets.

The costs of, and period end obligations under, defined benefit pension plans are determined using actuarial valuations. The actuarial valuation involves making a number of assumptions including those related to the discount rate, the expected rate of return on assets, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty.

The below table shows the movement in funded status that would result from certain sensitivity changes (in millions):

 
  Decrease in
funded status at
December 31, 2017
 

Discount rate: –0.1%

  $ (13.6 )

Inflation: +0.1%

  $ (4.1 )

Life expectancy: +1 year at age 65

  $ (21.6 )

Market value of return seeking portfolio falls 25%

  $ (48.7 )

Income Taxes

The Group operates in several countries, states and other taxing jurisdictions through various subsidiaries and branches, and must allocate income, expenses and earnings under the various laws and regulations of each of these taxing jurisdictions. Accordingly, the provision for income taxes represents the total estimate of the liability that the Group has incurred for doing business each year in all of the locations. Annually the Group files tax returns that represent filing positions within each jurisdiction and settles return liabilities. Each jurisdiction has the right to audit those returns and may take different positions with respect to income and expense allocations and taxable earnings determinations. Because the determinations of the annual provisions are subject to judgments and

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estimates, it is possible that actual results will vary from those recognized in the Consolidated Financial Statements. As a result, it is likely that additions to, or reductions of, income tax expense will occur each year for prior reporting periods as actual tax returns and tax audits are settled.

In the assessment of uncertain tax positions, significant management judgment is required to estimate the range of possible outcomes and determine the probability, on a more likely than not basis, of favorable or unfavorable tax outcomes and the potential interest and penalties related to such unfavorable outcomes. Actual future tax consequences on settlement of the Group's uncertain tax positions may be materially different to management's current estimates.

Deferred tax assets, net of any associated valuation allowance, have been recognized based on management's belief that taxable income of the appropriate character, more likely than not, will be sufficient to realize the benefits of these assets over time. In the event that actual results differ from expectations, or if historical trends of positive operating income changes, the Group may be required to record a valuation allowance on some or all of these deferred tax assets, which may have a significant effect on the financial condition and results of operations of the Group. In assessing whether a valuation allowance should be established against a deferred income tax asset, the Group considers the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryback and carryforward periods, among other factors.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following information describes the key aspects of certain items for which the Group is exposed to market risk.

Management Fees

Management fee revenues are generally based upon a percentage of the market value of AUM and are calculated as a percentage of either the daily, month end or quarter end average asset balance in accordance with contractual agreements. Accordingly, fluctuations in the financial markets have a direct effect on the Group's operating results. Although fluctuations in the financial markets have a direct effect on the Group's operating results, AUM may outperform or underperform the financial markets. As such, quantifying the impact of correlation between AUM and the Group's operating results may be misleading.

Performance Fees

Performance fee revenue is derived from a number of funds and clients. As a result, the Group's revenues are subject to volatility beyond market based fluctuations discussed in the management fees section above. Performance fees are specified in certain fund and clients contracts and are based on investment performance either on an absolute basis or compared to an established index over a specified period of time. This is often subject to a hurdle rate. Performance fees are recognized at the end of the contractual period (typically monthly, quarterly or annually) if the stated performance criteria are achieved. The Group's performance fees are dependent on internal performance and market trends and will therefore be subject to year on year volatility. The Group recognized performance fees of $103.9 million, $54.8 million and $150.8 million for the years ended December 31, 2017, 2016 and 2015, respectively. At December 31, 2017 and 2016, $64.8 billion and $36.6 billion of AUM were subject to performance fees, respectively.

Investment Securities

At December 31, 2017, the Group was exposed to market price risk as a result of investment securities on its Consolidated Balance Sheet. The following is a summary of the effect that a

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hypothetical 10% increase or decrease in market prices would have on JHG's investment securities subject to market price fluctuations as of December 31, 2017 (in millions):

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

Investment securities:

             

Trading

  $ 678.1   $ 745.9   $ 610.3  

Available-for-sale

  22.0   24.2   19.8  

Total investment securities

  $ 700.1   $ 770.1   $ 630.1