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Section 1: 8-K (8-K)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported)

March 22, 2018

 

 

 

 

Janus Henderson Group plc

 

(Exact name of registrant as specified in its charter)

 

 

   Jersey, Channel Islands   

 

      001-38103      

 

          98-1376360          

(State or other jurisdiction

 

(Commission file

 

(IRS Employer

of incorporation)

 

number)

 

Identification Number)

 

201 Bishopsgate

EC2M 3AE

United Kingdom

(Address of principal executive offices)  (Zip Code)

 

Registrant’s telephone number, including area code

+44 (0) 20 7818 1818

 

Not Applicable

(Former name or former address if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ]        Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]        Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]        Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]        Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

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

 



 

Item 7.01            Regulation FD Disclosure.

 

On March 22, 2018, Janus Henderson Group plc (the “Company”), a company incorporated and registered in Jersey, Channel Islands, made available to its shareholders its proxy statement in respect of its annual shareholders meeting and its annual report, and filed with the Australian Stock Exchange (“ASX”) its Disclosure regarding Corporate Governance Council Principles and Recommendations on an Appendix 4G, containing, among other things, the Company’s Corporate Governance Statement for the fiscal year ended December 31, 2017.

 

A copy of the Company’s annual report is furnished as Exhibit 99.1 hereto, a copy of the Company’s proxy statement is furnished hereto as Exhibit 99.2 hereto, and a copy of ASX Appendix 4G is furnished hereto as Exhibit 99.3 hereto. These exhibits are being furnished and shall not be deemed “filed” for any purpose, and shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, regardless of any general incorporation language in any such filing.

 

 

Item 9.01            Financial Statements and Exhibits.

 

(d)  Exhibits. The following exhibits are being furnished herewith.

 

 

Exhibit
Number

 

Description

 

 

 

99.1

 

Janus Henderson Group plc 2017 Annual Report

99.2

 

Janus Henderson Group plc 2018 Notice of Annual General Meeting

99.3

 

ASX Disclosure of Corporate Governance Council Principles and Recommendations

 



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Janus Henderson Group plc

 

 

Date: March 22, 2018

By:   /s/ ROGER THOMPSON

 

 

Roger Thompson

 

 

Chief Financial Officer

 

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Section 2: EX-99.1 (EX-99.1)

 

Exhibit 99.1

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

About Janus Henderson

 

Janus Henderson is a leading global active asset manager dedicated to helping investors achieve long-term financial goals through a broad range of investment solutions, including equities, fixed income, quantitative equities, multi-asset and alternative asset class strategies.

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business review

Business highlights

 

2017 was a landmark year in the history of our company, with the completion of the merger of equals to form Janus Henderson Group plc (‘the Group’).

 

The Group’s investment performance improved year-on-year and despite net outflows, we continue to see strong levels of engagement and support from clients globally. In 2017, we delivered revenue and profitability growth, and are pleased with the pace of progress towards our targeted cost synergies.

 

 

This report and additional information about the Group can be found online at janushenderson.com/ir

 

 

2     Group at a glance

4     Chairman and Deputy Chairman’s statement

6     Co-Chief Executive Officers’ statement

9     Launching Janus Henderson

10   Investment management overview

14   Client relationships and brand

 

Governance

 

18   Board of Directors

22   Governance overview

 

Form 10-K

 

26   Form 10-K

 

Other information

 

214 Shareholder information

216 Two year financial summary (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment outperformance1 (%)

 

Net new money growth2 (%)

 

 

Notes

 

Data for 2016 and 2017 periods present the results of JHG as if the merger had occurred at the beginning of the period shown. See pro forma adjusted financial measures reconciliation on Form 10-K pages 43 and 44 for additional information.

 

In accordance with the Australian Securities and Investment Commission Corporations Instrument 2016/91, amounts in this Annual Report have been rounded to the nearest US$0.1m, unless otherwise stated.

 

1.      Investment performance data represents percentage of AUM outperforming the relevant benchmark. Full performance disclosures detailed on page 216.

 

2.      Calculated as total flows divided by beginning of period AUM.

 

3.      2017 includes a hypothetical per share dividend for Janus Henderson Group plc for 1Q17. The amount is derived by taking the sum of the cash dividends each legacy firm paid to its respective shareholders (for legacy Janus that was US$20.3m and for legacy Henderson that was US$26.9m), divided by the number of shares outstanding as at 30 May 2017 (approximately 200.4m). USD/GBP 1.3017.

 

66%

 

(3%)

 

 

of AUM beating benchmark over three years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets under management (AUM) (US$)

 

Adjusted operating margin (%)

 

 

370.8bn

 

39.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted diluted earnings per share (US$)

 

Dividend per share3 (US$)

 

 

2.48

 

1.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 

 

 

 

 

 

 



 

 

 

 

 

 

 

2

 

BUSINESS REVIEW

 

 

 

 

 

Group at a glance

 

Janus Henderson is an independent global asset manager, specialising in active management. We offer a broad range of investment solutions across major asset classes to a client base around the world.

 

 

 

 

 

 

Our purpose:

 

At Janus Henderson:

 

 

 

We exist to help our clients achieve their long-term financial goals

 

 

We put our clients first

We succeed as a team

We act like an owner

 

 

 

We aim to:

 

 

 

 

 

Be a partner our clients can trust working to deliver excellence in both investment returns and service

Partner with each other on our responsibilities to our clients and create an environment where all our colleagues can thrive and successfully achieve their personal and professional goals

 

Be a responsible steward for our owners, pursuing efficiency and taking pride in delivering stable and consistent financial returns

 

 

 

 

Total assets under management (AUM)

(US$)

370.8bn

2016: 319.2bn

 

Investment performance by capability

 

 

 

Percentage of AUM outperforming benchmark

 

 

 

AUM
(US$bn)

1 year

3 years

5 years

 

Equities

189.7

 

 

Equities

(US$)

189.7bn

2016: 153.3bn

Diverse business encompassing a wide range of geographic and investment styles.

 

 

Quantitative Equities

(US$)

49.9bn

2016: 46.5bn

Our quantitative equity manager, Intech, applies advanced mathematical and systematic portfolio rebalancing intended to harness the volatility of stock price movements.

 

 

Alternatives

(US$)

19.5bn

2016: 17.7bn

Expertise in liquid alternatives and absolute return alongside traditional hedge funds.

 

 

 

Fixed Income

(US$)

80.1bn

2016: 73.7bn

Coverage across the asset class, with an increasingly global offering.

 

 

 

Multi-Asset

(US$)

31.6bn

2016: 28.0bn

Retail and institutional offering through a diversity of strategies including global asset allocation, traditional multi-manager and alternative asset class specialists.

 

Fixed Income

80.1

 

Quantitative Equities

49.9

 

Multi-Asset

31.6

 

Alternatives

19.5

 

Total Group

370.8

 

 

 

 

 

 

 

Note: Investment performance data represents percentage of AUM outperforming the relevant benchmark. Full performance disclosures detailed on page 216.

 

 For more information go to page 10

 

Strong client relationships

Our clients are financial professionals as well as private and institutional investors. We focus on excellent client service and on establishing long-term client relationships based on trust.

 

 For more information go to page 14

 

An award-winning brand proposition

We believe in the sharing of expert insight for better investment and business decisions. We call this ethos Knowledge. Shared. This award-winning brand proposition provides investment insight, thought leadership and transparency to our clients in a timely and cost-efficient way.

 

 For more information go to page 14

 

Note: All data as at 31 December 2017, unless stated otherwise.

 

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

Assets under management

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUM by client type (%)

 

 

 

AUM by capability (%)

 

 

 

AUM by client location (%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Our clients are financial professionals as well as private and institutional investors.

 

 

 

We manage assets diversified across five core investment capabilities: Equities, Fixed Income, Quantitative Equities, Multi-Asset and Alternatives.

 

 

 

We manage assets for clients based across the world.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Self-directed

US$62.0bn

 

 

 

 

 Equities

US$189.7bn

 

 

 

 

 Americas

US$192.8bn

 

 

 

 Intermediary

US$164.1bn

 

 

 

 

 Fixed Income

US$80.1bn

 

 

 

 

 EMEA

US$120.2bn

 

 

 

 Institutional

US$144.7bn

 

 

 

 

 Quantitative Equities

US$49.9bn

 

 

 

 

 Asia Pacific

US$57.8bn

 

 

 

 

 

 

 

 

 

 Multi-Asset

US$31.6bn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Alternatives

US$19.5bn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global geographic distribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

We have strong distribution platforms and deep client relationships in the US, UK, Continental Europe, Japan and Australia, and an evolving business in Latin America and the Middle East.

 

 

 

For more information go to page 16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

 

 

Europe, Middle East and Africa (EMEA)

 

 

 

Asia Pacific

 

 

 

 

 

 

 

 

 

 

 

 

 

Total AUM

 

US$192.8bn

 

 

 

 

Total AUM

 

US$120.2bn

 

 

 

 

Total AUM

 

US$57.8bn

 

 

 

Investment professionals

 

281

 

 

 

 

Investment professionals

 

202

 

 

 

 

Investment professionals

 

43

 

 

 

Distribution professionals

 

280

 

 

 

 

Distribution professionals

 

231

 

 

 

 

Distribution professionals

 

91

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Established North American distribution network serving a diverse set of clients across financial intermediaries, institutions and self-directed channels. The organic build out of our Latin America business is gathering momentum.

 

 

 

Strong retail and institutional client base in the UK with an award-winning Investment Trust business. Strong relationships with global distributors in Continental Europe and growing institutional opportunities.

 

 

 

Strategic partnership with Dai-ichi Life and its partners supports the growth of our Japanese business. Australian distribution offers a suite of global and domestic capabilities. The wider Asian business continues to evolve, with growing brand presence.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment case

 

 

 

 

 

 

 

 

Janus Henderson has:

 

 

 

 

 

 

 

 

 

 

 

 

Depth, breadth and connectivity of investment teams focused on delivering better risk-adjusted outcomes for clients.

Distribution strength in largest five markets globally, to leverage the opportunity to deepen client relationships.

Compelling products and solutions to address a broad range of client needs.

Scale and capacity to innovate amid continuing regulatory change.

A robust balance sheet providing stability for the company to weather changes in market conditions.

 

 

 

 

 

 

 

 

 

 

 

Note: All data as at 31 December 2017, unless stated otherwise.

 

 

 

 

 

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 

 

 



 

 

 

 

 

 

 

 

 

4

BUSINESS REVIEW

 

 

 

 

 

 

 

Chairman and Deputy Chairman’s statement

 

This has been a significant year for Janus Henderson. We look forward to developing the opportunities before us for clients, shareholders and employees.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017 total dividend per share (US$)

1.20

2016: n/a

 

Launching Janus Henderson

 

It is with great pleasure that we introduce the inaugural Janus Henderson Group annual report. 2017 was a momentous year for the firm, with the completion of the merger of Janus Capital Group and Henderson Group. It marked a step change in the shape and footprint of our respective businesses.

 

We operate in a challenging landscape, with pressures from competitors, clients, regulators and technology, and we must evolve and innovate in order to remain relevant. Both Janus and Henderson were successful companies in their own right and it was with the most careful consideration by the respective Boards and Management teams that the transformational merger was recommended to shareholders.

 

As a merged group with US$371 billion assets managed for clients globally, Janus Henderson has distribution strength in the largest five markets in the world – the US, UK, Continental Europe, Japan and Australia. Together with our highly diversified product range and the scale to invest and innovate, we believe we have the foundations to be a leading, global, active asset manager.

 

The Group’s activities over the past year can be separated into two halves: merger completion and integration. The transatlantic merger was one of the largest executed in our industry. Multiple workstreams focused on the preparations ahead of the merger’s completion on 30 May 2017, involving hundreds of employees and multiple advisors. Our focus on delivering value to our clients, however, remained unwavering. It was critical that our investment teams were undisrupted through the merger. The achievement of this is evidenced in our improved long-term investment performance, with two thirds or more of AUM outperforming benchmarks over one, three and five-year periods as at 31 December 2017. We would particularly highlight the positive response from clients, derived from the complementary nature of the merger and transparent communication. Equally, we are pleased by the subsequent excellent progress made with integrating the firms, without adversely affecting outcomes for our clients. The timeline to complete integration will continue into 2018 and beyond, and we are encouraged by how well the business has come together in the last seven months.

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

Launching a new company with over 2,000 employees and with offices in 27 cities world-wide has required an extraordinary effort by our teams and partners in a very short time. We express our thanks to all Janus Henderson employees and our partners for their efforts and commitment to achieving our collective goal.

 

Leadership and governance

 

Establishing a common culture for Janus Henderson is one of the over-arching aims of the Board and Management. This has even greater relevance in a merger of equals, where it is imperative to bring the two cultures together in a truly collaborative way. The process has been helped by the strong focus the two firms had on pure-play, active asset management and client service.

 

The decision to appoint co-Chief Executive Officers (co-CEOs) has been important in enabling the merger and critical to the successful integration. We are pleased with the highly qualified team which the co-CEOs, Andrew Formica and Dick Weil, have now built around them to lead Janus Henderson forward. Andrew and Dick, together with their Executive Committee, have a strong sense of responsibility to our shareholders, recognise the importance of collaboration between employees, and have passionate belief in the value active management delivers for clients. It is this cultural fit and their leadership that has laid the best possible foundation for the new Group. In getting to this position, we acknowledge the contribution of a number of colleagues from the individual firms’ leaderships who have now left but who were critical to achieving the merger.

 

The new Board of Janus Henderson Group met formally throughout the second half of 2017. As a dual-listed company on the New York Stock Exchange (NYSE) and the Australian Securities Exchange (ASX) incorporated in Jersey, Janus Henderson has a unique corporate structure and regulatory obligations. The Group adopted a corporate governance policy in a form customary for NYSE-listed companies, adapted as necessary to reflect Janus Henderson’s dual-listed status in the US and Australia. We are pleased to say that the new Board has come together very well since the completion of the merger.

 

Later in this report we have included an overview of the governance structure and topics addressed by the Board in its first meetings.

 

Financial strength and capital management

 

This year’s financial results reflect the benefit of the Group’s increased scale, with total adjusted operating income of US$732 million and adjusted diluted earnings per share of US$2.48, compared to US$1.94 in 2016 on a pro forma basis1.

 

The Board takes an active, disciplined approach to the management of Janus Henderson’s cash and capital resources. It believes in balancing the capital needs and the investment opportunities of the business with shareholder interests, without emphasising the use of leverage. This approach has been demonstrated by the funding of a quarterly dividend which we expect will broadly grow in line with adjusted earnings growth. As integration efforts bed down and short-term needs for cash abate, and when capital generation outweighs opportunities to organically invest in the business, we will look to return excess capital to shareholders.

 

Dai-ichi Life Holdings Inc. and Janus Henderson: A strategic partnership

 

We would like to take the opportunity to express our thanks to our strategic partners at Dai-ichi Life. We thank them not only for their support in completing the merger but also for reaffirming their commitment as shareholders, their additional investment in Janus Henderson products, and their continued support to grow our Japanese business. We are grateful for their partnership and look forward to continuing to develop the relationship in the years to come.

 

In concluding, we would like to thank our fellow Board members for their care and commitment, and to all our colleagues at Janus Henderson for a successful year. We express our thanks also to our clients and shareholders for their continuing support.

 

2017 will be remembered as a significant year for Janus Henderson. Through the merger we have created a firm with a greater global footprint, product capabilities and scale with which to invest. We are just at the start of our path as a new firm but look forward with anticipation to developing together the opportunities ahead.

 

 

Richard Gillingwater

Chairman

 

 

Glenn Schafer

Deputy Chairman

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.      Data for the 2016 and 2017 periods present the results of JHG as if the merger had occurred at the beginning of the period shown. See pro forma adjusted financial measures reconciliation on Form 10-K pages 43 and 44 for additional information.

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

6

BUSINESS REVIEW

 

 

 

 

 

 

 

Co-Chief Executive Officers’ statement

 

Janus Henderson is a business of great opportunity and potential. 2017 was a year of integration and setting the foundations for growth.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017 adjusted diluted earnings per share (US$)1

2.48

2016: 1.94 (Pro forma)

 

2017 was a landmark year in the history of our company. Janus Henderson starts life with a rich opportunity set in front of us. We have a business underpinned with a broad array of clients who support and rely on us, great talent and a strong balance sheet enabling us to make the investments required to adapt efficiently to the ever-changing environment.

 

A year in review

 

Looking to the dynamics of the financial markets in which we operate, 2017 was a year in which markets experienced broad-based growth despite meaningful change in the macro environment. We began the year with concerns for the potential impact of global disruption: the effect of geopolitical change on policies, questions about how long the bull market – and central banks’ support – could continue, and whether the growth prospects for global economies would underperform. What followed was a year of impressive, synchronised global growth, with all 35 of the OECD countries2 recording positive growth. Market commentators were surprised that macro momentum did not drive inflation or have significant impacts on interest rates globally. This was good news for equities and fixed income asset prices generally. There were however big variations within markets, with growth stocks continuing to outperform in 2017.

 

It was against this backdrop that Janus Henderson saw continued improvement in the Group’s combined investment performance. Over one, three and five-year periods, 76%, 66% and 79% of assets outperformed their benchmarks respectively3, which compared favourably over the same time periods a year ago.

 

We are truly blessed with a broad and deep array of investment talent but a risk of any transformational transaction in our industry is that it disrupts the investment process. Pleasingly, the strength of our performance is evidence that Janus Henderson saw no such disruption, and is testament to the teams quickly embracing the value of the merger and their professionalism in appreciating that change can help build better outcomes for clients through the sharing of ideas.

 

At the core of Janus Henderson is the belief in the role active management has to play in helping our clients achieve their long-term financial goals, and we are very pleased with investment performance achieved in 2017.

 

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

7

 

 

 

Janus Henderson starts life with a rich opportunity set in front of us.”

Dick Weil

Co-Chief Executive Officer

 

At our core is the belief in the role that active management has to play in helping our clients achieve their long-term financial goals.”

Andrew Formica

Co-Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At the end of 2017, Janus Henderson managed US$371 billion for clients, an increase of 16%, with growth during the year1 driven by positive markets and currency movements. The Group saw net outflows for the year, totalling US$10.2 billion. US$7.6 billion of the net outflows were derived from our Quantitative Equities business, primarily in the first quarter, as a result of poor performance in the second half of 2016. Despite these headwinds, we have been encouraged by feedback from our clients.

 

Our Equities capability saw net outflows of US$1.3 billion for the year, with flows into our Intermediary and Institutional channels impacted by headwinds in the Self-directed business. Geographically, Intermediary flows in our European business were weak but notably in the US Intermediary channel, we gained share in the equity market during 2017, with our Equity mutual fund business outpacing the industry’s organic growth rate by 180 basis points. Fixed Income net flows were flat for the year. Outflows from the Janus Henderson European Corporate Bond Fund were offset by strong inflows into our Absolute Return fund run out of Australia by our fully owned subsidiary, Kapstream, and encouraging interest in the Janus Henderson Global Unconstrained Bond Fund. Our Multi-Asset business experienced an improvement in net outflows during the year and we were pleased by the improvement in investment performance in Janus Henderson Balanced, this capability’s single largest strategy. Absolute Return products continued to attract strong inflows in our Alternatives capability throughout 2017. These were offset by a combination of Institutional mandate losses and modest outflows attributed to the UK Property PAIF, albeit reduced from levels seen in 2016.

 

Our Institutional offering saw good traction globally across a diverse breadth of strategies. The ten largest Institutional net inflows for the year were sourced from nine different strategies. With improved investment performance and consultants beginning to take Janus Henderson off post-merger ‘watch’ lists, we are excited by the opportunities for new business.

 

Later in this report, Janus Henderson’s Chief Investment Officer, Enrique Chang, and our Global Head of Distribution, Phil Wagstaff, provide further detail into our diverse investment capabilities and increased distribution strength.

 

Our business results translated into strong financial results, providing evidence of the improved operating leverage in the business following the merger.

 

§     Adjusted revenue of US$1,848 million (2016: US$1,669 million)1

 

§     Adjusted operating income of US$732 million (2016: US$565 million)1

 

§     Adjusted diluted earnings per share increased to US$2.48 (2016: US$1.94)1

 

As reflected in the results above, the combined business has greater financial scale which provides enhanced flexibility to invest in our business as well as the ability to adapt more efficiently to regulatory change and evolving governance expectations. In recent years, we have seen a wealth of regulatory change globally. 2017 saw no let-up in that pace, as rules were implemented to protect clients and help them better understand the products in which their money is invested. As a firm, we continue to ready the business. Whatever the outcome of global regulatory or political change, we are confident Janus Henderson will be able to continue to deliver services in the interests of clients.

 

One of the significant regulatory changes that we prepared for through 2017 was MiFID II and in the second half of 2017 we saw a rapid development in the process by which investment managers were planning to pay for third-party research in compliance with this new EU regulation. Driven by client demand and changing industry dynamics, there was a marked shift in the way costs for this research would be passed on to clients. Janus Henderson confirmed it will pay directly for third-party investment research for its European fund products and segregated clients of its European business. Excellence in research is fundamental to Janus Henderson’s investment processes. Our decision reflects our commitment to working on behalf of our clients to provide the best solution to meet their needs.

 

Building a leading global active asset manager

 

Janus Henderson is a client-centric organisation, where investment excellence and client experience are paramount. We have an enviable market position in the largest markets in the world and aspire to be trusted by our clients and a destination employer. To achieve this, our culture needs to support and encourage our objectives.

 

In the months leading up to the merger, there was an extraordinary amount of work carried out to launch the brand of Janus Henderson effectively across a huge range of communications and provide clients with a seamless ‘Janus Henderson’ experience from Day One. Seven months in, integration efforts across the business have been successful and are progressing ahead of schedule. The business continues to come together and through the integration period employees around the world are embodying our brand proposition of Knowledge. Shared.

 

In November we announced an expansion of our long-standing strategic partnership with BNP Paribas whereby they will take over responsibility for the majority of our US back and middle office fund administration, fund accounting and custody functions. The enhanced partnership with BNP, coupled with the pace of integration across the firm, enabled us to increase our target for cost synergies that we expect to realise as a result of the merger within three years from completion. We remain well on track for our target of at least US$125 million in run rate net cost synergies and believe we will achieve US$90 million by the end of year one.

 

 

 

 

 

 

 

 

1.         Data for the 2016 and 2017 periods present the results of JHG as if the merger had occurred at the beginning of the period shown. See pro forma adjusted financial measures reconciliation on Form 10-K pages 43 and 44 for additional information.

 

2.         The Organisation for Economic Co-operation and Development.

 

3.         Investment performance data represents percentage of AUM outperforming the relevant benchmark. Full performance disclosures detailed on page 216.

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

8

BUSINESS REVIEW

 

 

 

 

 

 

 

Co-Chief Executive Officers’ statement continued

 

 

 

 

 

 

 

 

 

 

Revenue growth opportunities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dai-ichi strategic partnership

§  US$500 million funding into Global Growth, European Corporate Bond and European Secured Loan funds

§  Potential for distribution of additional products through Asset Management One

§  Broader global product offering for the Japanese market

 

Cross-sell opportunities

§  Increasing penetration of existing products e.g. Global Equity Income and Emerging Markets in the US, and Unconstrained Bond and Intech in Europe

§  Launching existing products in alternative vehicles to broaden distribution

 

New product development

§  Leveraging existing regional capabilities to create global products e.g. Global Small Cap

§  Enhancing Intech’s capabilities to create new products

§  Expanding Multi-Asset and Alternatives capabilities

§  Partnering with our clients to develop innovative solutions

 

 

 

 

 

 

 

 

 

 

 

Looking forward

 

During the year, we have spoken often about the revenue synergies we believe we can deliver through our new combination. We think of these opportunities in three stages. Firstly, our strategic partner Dai-ichi completed the US$500 million investment into former-Henderson products it committed to at the time we announced the merger. Dai-ichi continues to be a great partner to Janus Henderson and we are excited about the future prospects with them and their affiliate, Asset Management One. Stage two leverages opportunities to cross-sell products to clients globally. Enhanced distribution strength was at the heart of the merger and with more than 600 distribution employees worldwide, we can advance opportunities which did not exist to us as individual companies. New product development completes the set of revenue synergies. We would expect the third stage to take the most amount of time to realise its potential as it involves the expansion of capabilities or partnering with our clients to develop innovative solutions. All of these opportunities are expected to materialise over multiple years however we are very pleased with the exceptional client response since we closed the merger and are encouraged with the progress we have seen to date.

 

Priorities and outlook

 

What has been achieved in 2017 is remarkable and we are more convinced than ever of the merit of the merger. Janus Henderson is a business of great opportunity and potential. We have a broad, global footprint, with greater depth in each market and enhanced diversity of product. 2017 was a year of integration, in which a major part of our activity was largely internal as we set the foundations for growth. With the groundwork in place, we can turn our effort more external – focusing on achieving positive organic growth by being a trusted partner to our clients, delivering market-leading investment returns, insights and client experiences.

 

We finish by paying tribute to all of our colleagues at Janus Henderson for their hard work over the past year. None of what we accomplished this year would have been possible without your dedication and collaboration. It is a privilege to lead Janus Henderson and we very much look forward to seeing its potential realised.

 

Andrew Formica and Dick Weil

Co-Chief Executive Officers

 

 

 

 

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

9

 

 

 

 

Launching Janus Henderson

 

In the months leading up to the merger, an extraordinary amount of work was carried out to launch the Janus Henderson brand and provide clients with a seamless experience from Day One.

 

 

 

 

Rebranded

 

10,000

70

27

 

items of literature

websites

offices in a
single weekend

 

 

4,000

330+

 

 

fund factsheets

institutional client reports

 

 

 

Accounting platforms merged

Shareholders

 

2

45,000

 

 

 

transitioned in a single weekend

 

 

Fund holdings

Offices consolidated

US Mutual funds

 

100,000

7

78

 

merged into a single system

and 3 closed

merged or approved
new advisory agreements

 

 

 

 

 

 

 

 

 

 

 

Market capitalisation (US$)

 

Dual-listed

 

 

7.7bn

 

NYSE & ASX

 

Employees worldwide

Offices
worldwide

Fund manager average
years’ financial
industry experience

Employee
ownership

 

+2,000

27

20

7%

 

 

in 14 countries

 

 

 

 

2017 adjusted revenue
(US$)1

2017 adjusted operating
income
(US$)1

2017 adjusted diluted
EPS
(US$)1

 

1,848m

732m

2.48

 

Note: All data as at 31 December 2017.

 

1.      Data for the 2017 period presents the results of JHG as if the merger had occurred at the beginning of the period shown. See pro forma adjusted financial measures reconciliation on Form 10-K pages 43 and 44 for additional information.

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

10

BUSINESS REVIEW

 

 

 

 

 

 

 

Investment management overview

 

We firmly believe in the role of active management and amongst the activity of the merger, our focus has remained on adding value for clients.

 

 

 

 

 

Our primary goal is to help clients meet their investment objectives. In order to accomplish this, it is important that we have the correct products, management structure, investment experts and supporting teams. 2017 was a busy year in which the merger was accomplished with a view to minimising any disruption to clients. It is testament to the hard work of our operational, technology and client service teams that our investment experts were able to focus their energies on managing client portfolios. In aggregate, we were able to deliver solid investment performance for clients as demonstrated on page 11.

 

Building a global investment management team

 

While minimal, the merger engendered some reshaping of senior investment management as we sought to reflect the realities of the enlarged global business. As Global Chief Investment Officer of the combined group, I am pleased with the strength of the senior team around me and I believe we are in a strong position to drive the business forward. Fixed Income was further strengthened with the recruitment of Jim Cielinski as Global Head of Fixed Income. The Global Head of Equities role was made a joint role given the demands of multiple strategies; the depth of experience meant we were able to promote from within the organisation, with George Maris, based in Denver, covering North America and Alex Crooke, based in London, covering the rest of the world.

A great strength of our business is that we are able to accommodate teams with distinct investment processes and did not stifle creativity as a result of the merger. Janus Henderson firmly believes in active management, so it was important to sustain this pursuit of adding value for clients within a risk-controlled environment. We continued, therefore, to encourage teams to follow existing successful models but also invested further in our risk management and compliance functions.

 

Throughout 2017 we fostered an environment where research was exchanged and ideas debated globally and this took on increased prominence with the merger. We seamlessly melded our corporate credit research teams in Denver and London, with a transatlantic analyst exchange programme deepening the interaction. The network of investment professionals in different locations directly feeding into individual mandates continued to expand, and encompasses strategies as diverse as absolute return fixed income, Asian equities and sustainable investment. With regards to our investment responsibilities to the environment, we signed a new initiative – Climate Action 100. Participants aim to engage with the top 100+ companies that contribute the most to global emissions, seeking action to reduce emissions and calling for enhanced corporate disclosure.

The merger did not prevent us from launching new funds to address client demand. This included an AlphaGen hedge fund, which targets mispricings in derivative contracts, driven by a supply-demand imbalance originating in the market for structured products, and a Euro Secured Loans fund, which is primarily tailored to institutional investors seeking an attractive return in a low risk environment. In Japan, we launched the Janus Henderson Mid-Cap Growth fund in October for retail investors, which attracted more than US$400 million in a few short months.

 

Investment performance through active management

 

Evidence of synchronised global growth, US tax reform, and the resurgence in commodity prices spurred many equity markets to new highs. Within our Equities capability, both our technology franchises performed well and attracted net flows as investors sought access to a sector that is transforming the global economy through disruptive innovation. Other distinct specialist propositions, including life sciences, saw similar success and natural resources also performed well. Our emerging market equity franchise continues to gain clients across geographies, attracted to the team’s disciplined investment process.

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In terms of style, growth outperformed value in most markets. Small and mid-cap strategies were typically strong performers, with our mid-cap growth fund Janus Henderson Enterprise bringing in net inflows of more than US$1.8 billion and Janus Henderson Triton also seeing net inflows. Despite the strength in growth stocks, a majority of our Perkins value strategies performed well and battled against the investor style rotation. There were mixed results from European equities, however, with disappointing performance in some of the growth strategies leading to outflows. Income remained a requirement for many investors, helping to maintain strong flows into the global equity income strategy.

 

Buoyed by ongoing central bank purchases, relatively restrained inflation, and an ongoing search for yield, fixed income markets generally experienced further yield and spread compression, which lifted bond prices. Towards the end of the year, however, there was firmer evidence of central banks looking to wind back loose monetary policy and yields began to climb. There was clear investor appetite for strategies that were unconstrained and are intended to offer more in the way of protection against the prospect of rising interest rates, with some investors rotating out of more core strategies. Australia remained a key source of growth for our fixed income capability with good performance and flows across both our domestic and global capabilities, with the Kapstream subsidiary being named KangaNews Australian Credit Fund Manager of the Year 2017.

 

Intech, our Quantitative Equity manager, performed well in 2017, with relative risk strategies performing particularly strongly and absolute risk, low volatility strategies in line with expectations. However, flows reflected ongoing industry trends towards passive management in US equities, as well as investor response to underperformance in 2016, and total net outflows from Intech were US$7.6 billion. This was primarily reflected in the US-focused strategies, as Intech’s global capabilities attracted more than US$1 billion in net inflows. In 2017 Intech marked the 30th anniversary of its founding with a major refresh of its brand and the launch of a new website. Other key developments included enhanced capability in creating customised portfolios for clients, allowing for greater client reach, and the launch of a new absolute return capability.

Investment performance by capability

 

 

 

Percentage of AUM outperforming benchmark

 

 

 

AUM

 

 

 

 

(US$bn)

1 year

3 years

5 years

Equities

189.7

Fixed Income

80.1

Quantitative Equities

49.9

Multi-Asset

31.6

Alternatives

19.5

Total Group

370.8

 

 

 

 

 

Note: Investment performance data represents percentage of AUM outperforming the relevant benchmark. Full performance disclosures detailed on page 216.

 

 

 

 

 

 

 

 

 

 

Multi-Asset in the US is dominated by our Balanced strategy. Net flows for the year were down despite strong performance and broadly reflected retail investors seeking more aggressive strategies given the momentum in equity markets. Within Europe, there was a recovery in performance of the retail funds and the diversified growth strategy and efforts were focused on strengthening distribution partners.

 

Investors looking for sources of uncorrelated return spurred interest in many of our alternative strategies, including diversified risk premia and UK absolute return, with the latter bringing in an additional US$1.7 billion of net flows. The UK commercial property fund performed well in 2017 after the Brexit-related challenges of 2016 and flows, albeit negative for the year as a whole, recovered as the year progressed, with investors regaining their trust in ‘bricks and mortar’ as a source of income.

 

Taken together, the strong aggregate performance is encouraging since we are ultimately judged on our capacity to meet client’s return objectives. With the key merger milestones successfully passed, 2018 offers a year in which our depth of investment talent and breadth of strategies create a firm platform from which to retain and attract investors.

 

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

12

BUSINESS REVIEW

 

 

 

 

 

 

 

 

 

Investment management overview continued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

We offer expertise across major asset classes, with investment teams situated around the world.

 

Equities

 

We offer clients 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 – US, Europe, Asia and Australia – and those invested in specialist sectors.

 

Fixed Income

 

Our 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 teams with more focused mandates – based in the US, 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.

 

 

 

 

 

 

 

 

 

 

 

 

Equities AUM (US$bn)

 

Fixed Income AUM (US$bn)

 

 

 

 

 

 

 

 

 

189.7bn

 

80.1bn

 

 

 

 

 

 

 

Investment outperformance

 

Investment outperformance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 year

3 years

5 years

 

 

1 year

3 years

5 years

 

 

Equities

 

Fixed Income

 

 

 

 

 

 

 

Largest pooled funds

 

Largest pooled funds

 

 

 

AUM

 

 

AUM

 

 

 

31 Dec 2017

 

 

31 Dec 2017

 

 

Funds

(US$bn)

 

Funds

(US$bn)

 

 

JnsHnd Enterprise

16.1

 

JnsHnd Flexible Bond

8.6

 

 

JnsHnd Research

13.5

 

JnsHnd Absolute Return

4.9

 

 

JnsHnd Forty

11.6

 

JnsHnd Strategic Bond

2.7

 

 

JnsHnd Triton

9.6

 

JnsHnd Hzn European

Corporate Bond

2.2

 

 

JnsHnd Global Equity Income

5.6

 

 

 

 

 

 

JnsHnd Global

Unconstrained Bond

2.2

 

 

 

Note: Investment performance data represents percentage of AUM outperforming the relevant benchmark. Full performance disclosures detailed on page 216.

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quantitative Equities

 

Our Quantitative Equities business, known under the brand ‘Intech’, 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.

 

Multi-Asset

 

Janus Henderson Multi-Asset includes teams in the US and UK. In the US, the team manages Global Asset Allocation strategies. In the UK, we have traditional multi-manager investors, asset allocation specialists and those focused on alternative asset classes.

 

Alternatives

 

The Janus Henderson Alternatives grouping 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, Absolute Return, Agriculture and Global Commodities/Managed Futures. Finally, the investment management of our direct UK commercial property offering is sub-advised to TH Real Estate.

 

 

 

 

 

 

 

Quantitative Equities AUM (US$bn)

 

Multi-Asset AUM (US$bn)

 

Alternatives AUM (US$bn)

 

 

 

 

 

 

 

 

 

 

49.9bn

 

31.6bn

 

19.5bn

 

 

 

 

 

 

 

Investment outperformance

 

Investment outperformance

 

Investment outperformance

 

 

1 year

3 years

5 years

 

 

1 year

3 years

5 years

 

 

1 year

3 years

5 years

 

Quantitative Equities

 

Multi-Asset

 

Alternatives

 

 

 

 

 

 

 

Five investment platforms

 

Largest pooled funds

 

Largest pooled funds

 

 

All strategies subscribe to an investment idea used across five investment platforms: equity price volatility is enduring and a reliable source of both excess return and a key to risk control.

 

 

Funds

AUM
31 Dec 2017
(US$bn)

 

Funds

AUM
31 Dec 2017
(US$bn)

 

 

 

JnsHnd Balanced

14.0

 

JnsHnd UK Absolute

6.0

 

Enhanced Equity

 

 

Active Core Equity

 

 

Adaptive Volatility Equity

 

 

Low Volatility Equity

 

 

Absolute Return

 

Low Tracking Error Relative Return Objective

 

 

Low Standard  Deviation Absolute Return Objective

 

JnsHnd Cautious Managed

3.0

 

Return (SICAV)

 

JnsHnd Multi-Manager

0.6

JnsHnd UK Property

4.1

Managed

 

 

PAIF/PAIF Feeder

 

 

 

 

JnsHnd UK Absolute

3.5

 

 

 

Return (OEIC)

 

JnsHnd Horizon Pan
European Alpha

1.2

JnsHnd Multi-Asset
Absolute Return

0.2

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

 

14

 

BUSINESS REVIEW

 

 

 

 

 

 

 

Client relationships
and brand

 

In a year that saw developments in the political, economic, and our own corporate landscape, we focused on putting clients first and aligning around common goals.

 

 

 

One of the best pieces of advice I was given and now share with new starters in the industry is to embrace change. I think this applies to many aspects of life but is especially true within the asset management industry. Resistance to change is, in my view, energy wasted; the world is continuously changing and it is far better to respond with openness and flexibility.

 

Change is the essence of what we do – it is the reason clients turn to us for long-term solutions, the subject of our investment teams’ analysis and the object of their portfolio positioning. It is, therefore, our ability as a business to recognise the drivers with the most meaningful potential to create change and our ability to adapt on behalf of our clients that will determine our success.

 

2017 was a year of significant change. At a macro level, it combined new, uncharted political developments with the impact of moves by central banks away from many years of emergency economic stimulus. It saw regulators impose new requirements on the industry and saw the merits of active and passive investment again in the spotlight. And, of course, for us at a corporate level, it saw the creation of Janus Henderson.

 

Janus Henderson merger

 

As one of the largest cross-border mergers ever seen in the industry, there was high potential for disruption to those people that matter the most to us: our clients. It was therefore imperative to me that the integration be managed smoothly and at no point come at a cost to our day-to-day relationships with clients. There were notable changes to communicate, a global rebrand to implement and product ranges to bring together, but the aim was to keep disruption to clients to a minimum.

 

Looking back, I am pleased with what we achieved. There were bumps along the road, but feedback from clients and peers has been overwhelmingly positive. Our investment capabilities have been broadened, our distribution teams were strengthened, and enhancements were made to the back office systems that allow us to best service our clients. Our distribution footprint is now truly global and this opens up the potential to build new and stronger relationships with global distributors and key institutional clients, something that has already proved beneficial since the merger completed. With experienced and talented distribution teams covering all major markets worldwide, we are able to understand the variety of challenges facing our clients and seek to deliver solutions accordingly.

Clients are already benefiting from the wider product range we offer, with notable examples of US investors exploring opportunities with our UK-based Global Equity Income, Strategic Fixed Income and Global Emerging Markets teams, while European and Asia Pacific clients have access to highly experienced US-based fixed income teams and our equities franchise.

 

Knowledge. Shared

 

A key aspect of our approach is sharing expert insight for better investment and business decisions. We call this ethos Knowledge. Shared. It is reflected both in how our investment teams interact and in our commitment to empowering clients in their decision-making.

 

Central to this approach is making the intellectual capital of our investment teams and subject matter experts readily available. 2017 provided many opportunities, with market-moving events leading clients to naturally seek the views of experts. For some of our US clients, Knowledge. Shared would have been a new concept, so it was pleasing to see strong interaction with our US blog and websites. This was alongside the excellent Janus Henderson Labs, a series of high-value consultancy and training programmes that have been popular with US professional clients for a number of years, and which we are now in the process of adapting for use globally where appropriate.

 

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

We also continued to publish our quarterly study of the dividends paid by leading global companies and our well-regarded Market GPS outlook. This mix of forward-looking insight led to strong pick-up in the media globally and onward distribution of articles and videos by third parties and clients.

 

In addition, we also offered clients the chance to hear from our managers first-hand at a series of Knowledge Exchange events. These included panel discussions with experts, both from within Janus Henderson and externally, and interactive sessions at which clients were able to set the agenda. These events ran across the US, Europe, Asia and Australia, and were complemented in the US by the extensive programme of Labs development and training sessions.

 

Feedback from clients on Knowledge. Shared has been extremely positive and it has also been pleasing to receive external validation with a number of high-profile industry awards. These included: a Content Marketing Strategy award from the Gramercy Institute; the Advisor Services and Advisor Special Communications large asset level awards at the Mutual Fund Education Alliance STAR Awards; Most Accessible Fund Managers at Citywire Selector’s Pan-European Awards; the Judges Award for Knowledge. Shared at Investment Week’s Investment Marketing and Innovation Awards; and winner of the ‘Best Digital Marketing’ and ‘Best International’ categories at the 2017 Financial Services Forum’s Awards for Marketing Effectiveness.

Where next?

 

From a distribution perspective, this year has been about bringing together the various teams from our legacy businesses, improving systems and processes to enhance client experiences and exploring the opportunities presented by our wider investment management capabilities. The foundations for all of these are now in place and we look forward to our clients benefiting from the new structure in the years ahead.

 

With our own integration progressing well, it is important to maintain our focus on the wider industry. As explained in further detail on the right, currently we see four powerful themes likely to impact the landscape from a distribution standpoint.

 

With our enhanced global presence, we believe Janus Henderson is well placed for each theme and hope to be among the best at adapting and delivering client solutions. By combining a sharp focus on client needs, generating investment excellence and utilising our distribution strength we will continue to embrace rather than resist change as we seek to benefit our investors globally.

 

 

Four key themes impacting the Distribution landscape

 

 

 

A buyers’ market

 

Financial markets are becoming increasingly transparent, which we welcome, and regulators are applying additional requirements. Having the scale and experience to respond to these will be critical. Millennials are also likely to seek new ways to engage with traditional wealth management and it is important that we adapt to their shifting appetites.

 

 

Digital technologies

 

Technology giants are likely to enter our sector as gatekeepers and it will be important to work with them as a new breed of distributors. Digital also means client engagement has the potential to be taken to new levels through interaction and the use of big data.

 

 

Funding the future

 

Asset and wealth managers are likely to fill the funding gaps that have arisen since banks took a step back as capital providers following the 2008 financial crisis. Governments have also taken a step back and it is to companies such as Janus Henderson that individuals are turning.

 

 

Outcomes matter

 

Clients increasingly tell us that outcome-oriented solutions matter. In helping achieve these outcomes, be it by combining different asset classes, for example within fixed income or via multi-asset approaches, it is important to be able to harness a wide variety of capabilities. We also see increased interest in strategies that deliver certain outcomes by investing within an Environmental, Social and Governance (ESG) framework.

 

 

 

 

 

 

 

 

 

 

‘Best Digital Marketing Award’ and

‘Best International Award’ 2017

for Knowledge. Shared

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

 

16

 

BUSINESS REVIEW

 

 

 

 

 

 

 

 

 

Client relationships
and brand
continued

 

 

 

 

 

 

 

 

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 


 


 

 

 

 

 

 

 

 

 

18

 

GOVERNANCE

 

 

 

 

 

 

 

 

 

 

Board of Directors

 

The Board comprises a Non-Executive Chairman, two Executive Directors and nine other Non-Executive Directors.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Richard

Gillingwater

 

Chairman; Nominating & Corporate Governance Committee Chair

 

Richard Gillingwater has been a Non-Executive Director and Chairman of Janus Henderson since May 2017. He was a Non-Executive Director of the Henderson Group Board from February 2013 to May 2017, taking the position of Chairman in May 2013. He is currently the Chair of the Nominating and Governance Committee and a member of the Compensation Committee.

 

Mr Gillingwater started his career in investment banking in 1980 at Kleinwort Benson, where he spent ten years. After this he moved to BZW and, in due course, became joint Head of Corporate Finance. BZW was taken over by Credit Suisse First Boston and he ultimately became Chairman of European Investment Banking at Credit Suisse First Boston. In 2003, he was asked by the UK Government to found and become the Chief Executive and later, Chairman of the Shareholder Executive. In 2007, he became Dean of Cass Business School which role he held until 2012. In his Non-Executive career, Mr Gillingwater has been Chairman of CDC Group plc and has also been a Non-Executive Director of P&O, Debenhams, Tomkins, Qinetiq Group, Kidde, Hiscox Ltd and Wm Morrison Supermarkets plc. Mr Gillingwater is Chairman of SSE plc and Non-Executive Director of Helical plc. Mr Gillingwater holds an MA in Law, St Edmund Hall, Oxford University and a MBA from the International Institute for Management Development (IMD) in Lausanne. Mr Gillingwater is a qualified solicitor.

 

Glenn

Schafer

 

Deputy Chairman

 

Glenn Schafer has been a Non-Executive Director and Deputy Chairman of Janus Henderson since May 2017. He was a Director of Janus Capital Group from December 2007 to May 2017, taking the position of Chairman in April 2012. He is a member of the Compensation Committee and the Nominating and Governance Committee.

 

Mr Schafer serves as a Director of GeoOptics LLC, a weather satellite manufacturer. Mr Schafer served as a Director of the Michigan State University Foundation from 2004 to 2014. He was Vice Chairman of Pacific Life Insurance Company (Pacific Life) from April 2005 until his retirement in December 2005; a member of Pacific Life’s Board of Directors and President of Pacific Life from 1995 to 2005; and Executive Vice President and Chief Financial Officer of Pacific Life from 1991 to 1995. From 2006 to 2007, he served on the Board of Directors for Scottish Re Group. Between 2006 and 2017 Mr Schafer was a Director of Genesis Healthcare, Inc., the successor company resulting from the merger with Skilled Healthcare Group, Inc. of which Mr Schafer was a director. Mr Schafer also served as a Director of Mercury General Corporation, an insurance holding company, between 2015 up until his resignation in February 2018. Mr Schafer has a BS from Michigan State University and an MBA from the University of Detroit.

 

Andrew

Formica

 

Co-Chief Executive Officer and Executive Director

 

Andrew Formica is Co-Chief Executive Officer of Janus Henderson and has been an Executive Director since May 2017. Mr Formica was Chief Executive and an Executive Director of Henderson Group from November 2008 to May 2017.

 

Mr Formica has been with Henderson since 1998 and in the fund management industry since 1993. He has held various senior roles with Henderson and he has been a member of the executive committee since 2004. Prior to being appointed Chief Executive, he served as Joint Managing Director of the Listed Assets business (from September 2006) and as Head of Equities (from September 2004). In the early part of his career, he was an equity manager and analyst for Henderson. Mr Formica was a director of TIAA Henderson Real Estate Limited from April 2014 to July 2015. Mr Formica is the senior independent director of the board of The Investment Association and has served as a non-executive director of Hammerson plc since November 2015. Mr Formica received a B Econ and MA in Economics from Macquarie University and a MBA from London Business School. He is a Fellow of the Institute of Actuaries in both the UK and Australia.

 

 

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

 

 

 

19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dick

Weil

 

Co-Chief Executive Officer and Executive Director

 

Dick Weil is Co-Chief Executive Officer of Janus Henderson and has been an Executive Director since May 2017. Mr Weil was Chief Executive Officer of Janus Capital Group from February 2010 to May 2017.

 

Mr Weil has 24 years of financial industry experience. Prior to joining Janus as Chief Executive Officer in 2010, Mr Weil spent 15 years with PIMCO where most recently he served as the global head of PIMCO Advisory, a member of PIMCO’s executive committee, and a member of the board of trustees of the PIMCO Funds. Previous to his appointment as global head of PIMCO Advisory, he served as chief operating officer of PIMCO, a position he held for ten years, in which time he successfully led the development of PIMCO’s global business and founded their German operations. Mr Weil also previously served as PIMCO Advisors LP’s general counsel. Prior to joining PIMCO in 1996, Mr Weil was with Bankers Trust Global Asset Management and Simpson Thacher & Bartlett LLP in New York. Mr Weil earned his bachelor of arts degree in economics from Duke University and his juris doctorate from the University of Chicago Law School.

 

Sarah

Arkle

 

Independent Non-Executive Director; Risk Committee Chair

 

Sarah Arkle has been a Non-Executive Director of Janus Henderson since May 2017. Ms Arkle was a Non-Executive Director of Henderson Group from September 2012 to May 2017 and is currently the Chair of the Risk Committee and member of the Audit Committee and Nominating and Governance Committee.

 

Ms Arkle has been in the financial industry for over 34 years. She joined Allied Dunbar Asset Management in 1983 which became Threadneedle in 1994. She was Vice Chairman of Threadneedle until the end of July 2012 and was Chief Investment Officer until December 2010, a role she held for ten years. Previously, Ms Arkle worked at the Far Eastern stockbroker WI Carr (Overseas) Limited and was an advisor to the South Yorkshire Pension Fund. Ms Arkle is currently a Non-Executive Director of Foreign & Colonial Investment Trust plc and Chair of J.P. Morgan Emerging Markets Investment Trust plc. Ms Arkle has also been a member of the Royal Commission of the Great Exhibition of 1851 Finance Committee since January 2017. Ms Arkle holds an MA in Management Studies from Cambridge University and is an associate of the Institute of Chartered Secretaries and Administrators.

 

Kalpana

Desai

 

Independent Non-Executive Director

 

Kalpana Desai has been a Non-Executive Director of Janus Henderson since May 2017. Ms Desai was a Non-Executive Director of Henderson Group from October 2015 to May 2017 and is currently a member of the Audit Committee and Nominating and Governance Committee.

 

Ms Desai has over 30 years of international advisory and investment banking experience, primarily gained in the Asia-Pacific region. Until 2013, Ms Desai was Head of Macquarie Capital Asia, the investment banking division of Macquarie Group Limited, headquartered in Australia. Prior to this, she was Head of the Asia-Pacific Mergers & Acquisitions Group and a Managing Director from 2001 in the investment banking division of Bank of America Merrill Lynch based in Hong Kong. Earlier, Ms Desai worked in the corporate finance divisions of Barclays de Zoete Wedd in London and Hong Kong and at J. Henry Schroder Wagg in London, having started her career in the financial services division of Coopers & Lybrand Consulting in London. She was a member of the Takeovers and Mergers Panel of the Securities and Futures Commission in Hong Kong from 2007 to 2014. She is currently a Non-Executive Director of Canaccord Genuity Group Inc., headquartered in Canada. Ms Desai has a BSc in Economics from the London School of Economics and Political Science and qualified as a Chartered Accountant with PricewaterhouseCoopers in London in 1991.

 

 

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

20

 

GOVERNANCE

 

 

 

 

 

 

 

 

 

 

Board of Directors

continued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jeffrey

Diermeier

 

Independent Non-Executive Director; Audit Committee Chair

 

Jeffrey Diermeier has been a Non-Executive Director of Janus Henderson since May 2017. Mr Diermeier was an Independent Director of Janus Capital Group from March 2008 to May 2017 and is currently the Chair of the Board Audit Committee and member of the Nominating and Governance Committee and the Risk Committee.

 

Mr Diermeier is a Director of the University of Wisconsin Foundation, a non-profit fundraising and endowment management organisation, and former Chairman of its Investment Committee. In January 2011, Mr Diermeier became a Director of Adams Street Partners, a private equity firm located in Chicago. Between 2010 and 2017 he was a co-owner and Chairman of L.B. White Company, a heating equipment manufacturer. He is also a minority owner of Stairway Partners, LLC, a registered investment adviser located in Chicago, and was an advisory board member from 2005 to December 2012. He was a Trustee of the Board of the Financial Accounting Foundation, which oversees the Financial Accounting Standards Board and the Government Accounting Standards Board, from January 2009 to December 2015 and Chairman of the Trustees from November 2012 to December 2015. From 2005 until January 2009, he served as President and Chief Executive Officer of the CFA Institute, a non-profit educational organization for investment professionals in Charlottesville, Virginia, and previously in a number of capacities in the global asset management division of UBS and predecessor organisations, primarily Brinson Partners, Inc., beginning as an Equity Analyst and culminating as its Global Chief Investment Officer from 2000 to 2004. Mr Diermeier holds the Chartered Financial Analyst designation.

 

Kevin

Dolan

 

Independent Non-Executive Director

 

Kevin Dolan has been a Non-Executive Director of Janus Henderson since May 2017. Mr Dolan was a Non-Executive Director of Henderson Group from September 2011 to May 2017 and is currently a member of the Nominating and Governance Committee and Risk Committee.

 

Mr Dolan has been in the financial services industry for 36 years, many of them as head of significant investment management organisations and has extensive experience in M&A transactions, both in Europe and the US. He spent ten years with the AXA Group where he was Chief Executive Officer of AXA Investment Managers Paris, and Global Deputy Chief Executive Officer of AXA Investment Managers. Mr Dolan has held other executive positions, including as Chief Executive of the Asset Management Division of Bank of Ireland Group, Chief Executive of Edmond de Rothschild Asset Management and Chief Executive of their Private Equity arm, Edmond de Rothschild Capital Partners. He was Chief Executive of La Fayette Investment Management in London from 2006 to 2009 and was a Director of Meeschaert Gestion Privée in Paris until 2015. He is the founding partner of Anafin LLC, and a senior advisor to London based Private Equity firm One Peak Partners. Mr Dolan has a BS in Business Administration from Georgetown University.

 

Eugene

Flood Jr.

 

Independent Non-Executive Director

 

Eugene Flood Jr. has been a Non-Executive Director of Janus Henderson since May 2017. Mr Flood was a Non-Executive Director of Janus Capital Group from January 2014 to May 2017 and is currently a member of the Audit Committee, Nominating and Governance Committee and Risk Committee.

 

Currently, Mr Flood also serves as Chairman of the advisory board for the Institute for Global Health and Infectious Diseases at the University of North Carolina Chapel Hill; is a member of the Steering Board of the Eshelman Institute at the University of North Carolina Eshelman School of Pharmacy; is a Trustee of the Financial Accounting Foundation; and, has been a Director of the Research Corporation for Science Advancement since 2015. Previously, Mr Flood served as a Director of The Foundation for the Carolinas from 2012 to 2015. He was Executive Vice President of TIAA-CREF from 2011 until his retirement in 2012, serving on the CREF Board of Trustees and the TIAA-CREF Mutual Fund Board of Trustees for seven years, and chairing the Investment Committee. Prior to joining TIAA-CREF as an executive in 2011, Mr Flood spent 12 years with Smith Breeden Associates, a North Carolina-based fixed income asset manager, as President and Chief Executive Officer. Mr Flood also served with Morgan Stanley in a range of trading and investment positions from 1987 to 1999 and was an Assistant Professor of Finance at Stanford Business School from 1982 to 1987. Mr Flood earned a Bachelor of Arts degree in economics from Harvard University and a PhD in economics from the Massachusetts Institute of Technology.

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

 

 

 

21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lawrence

Kochard

 

Independent Non-Executive Director; Compensation Committee Chair

 

Lawrence Kochard has been a Non-Executive Director of Janus Henderson since May 2017. Mr Kochard was an Independent Director of Janus Capital Group from March 2008 to May 2017 and is currently the Chair of the Compensation Committee and a member of the Nominating and Governance Committee.

 

Mr Kochard is Chief Investment Officer at Makena Capital Management. Until January 2018, he was the Chief Executive Officer and Chief Investment Officer of the University of Virginia Investment Management Company. Mr Kochard has served as a Director of the Virginia Commonwealth University Investment Management Company since 2015, as a Director and the Chair of the Investment Committee for the Virginia Environmental Endowment since 2013 and a Member of the Investment Advisory Committee of the Virginia Retirement System since March 2011, serving as Chair since 2017. He previously served as the Chairman of the College of William & Mary Investment Committee from 2005 to October 2011. From 2004 to 2010, he was the Chief Investment Officer for Georgetown University, and from 2001 to 2004 was Managing Director of Equity and Hedge Fund Investments for the Virginia Retirement System. Mr Kochard worked as an Assistant Professor of Finance at the McIntire School of Commerce at the University of Virginia from 1999 to 2001. He started his career in financial analysis and planning, corporate finance and capital markets for E.I. DuPont de Nemours and Company, Fannie Mae and The Goldman Sachs Group, Inc. Mr Kochard holds the Chartered Financial Analyst designation and a Ph.D. in economics from the University of Virginia.

 

Angela

Seymour-Jackson

 

Independent Non-Executive Director

 

Angela Seymour-Jackson has been a Non-Executive Director of Janus Henderson since May 2017. Ms Seymour-Jackson was a Non-Executive Director of Henderson Group from January 2014 to May 2017 and is currently a member of the Compensation Committee and the Nominating and Governance Committee. She also chairs Henderson Global Holdings Asset Management Limited (a holding company of the legacy-Henderson Group).

 

Ms Seymour-Jackson has over 20 years’ experience in retail financial services. She has held various senior marketing and distribution roles in Norwich Union Insurance, General Accident Insurance, CGU plc and Aviva. She was Chief Executive Officer of RAC Motoring Services Limited from 2010 until 2012. She joined Aegon UK in May 2012 and was appointed Managing Director of the Workplace Solutions Division in December 2012. Ms Seymour-Jackson was a Senior Advisor to Lloyds Banking Group (insurance) until October 2017. She is a Non-Executive Director of Rentokil Initial plc, Page Group plc and esure Group plc and is also Deputy Chair and Senior Independent Director at Gocompare.com Group plc. Ms Seymour-Jackson has a BA (Hons) in French and European Studies from the University of East Anglia, a diploma from the Chartered Institute of Marketing and an MSc in Marketing.

 

Tatsusaburo

Yamamoto

 

Independent Non-Executive Director

 

Tatsusaburo Yamamoto has been a Non-Executive Director of Janus Henderson since May 2017. Mr Yamamoto was an Independent Director of Janus Capital Group from July 2015 to May 2017 and is currently a member of the Nominating and Governance Committee.

 

Mr Yamamoto is currently Managing Executive Officer, Corporate Planning Unit, of The Dai-ichi Life Holdings, Inc. (Dai-ichi Life) and has worked in many different capacities for Dai-ichi Life over his 29-year career with the firm. Prior to his current role, Mr Yamamoto served as Executive Officer at Asset Management Business Unit of Dai-ichi Life and Investment Planning Department of Dai-ichi Life Insurance Company, Limited. Mr Yamamoto was appointed to the Janus Capital Group Board after being designated by Dai-ichi Life as its representative for appointment to the Board. This right was granted to Dai-ichi Life as a result of the Investment and Strategic Co-operation Agreement (the “Agreement”) between Dai-ichi Life and Janus Capital Group. In connection with the Agreement, Mr Yamamoto works with Janus Henderson’s senior management to further the goals of the strategic alliance between the two firms and to enhance product distribution opportunities. Mr Yamamoto has a Bachelor of Arts in Economics from WASEDA University.

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

 

22

 

GOVERNANCE

 

 

 

 

 

 

 

 

 

 

Governance overview

 

An overview of governance structure, Board business and skills.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Janus Henderson views good corporate governance as essential to achieving the goals of the organisation. The Janus Henderson Group Board comprises a Non-Executive Chairman, a Non-Executive Deputy Chairman, two Executive Directors and eight other Non-Executive Directors who meet in London and Denver. The Board has delegated specific responsibilities to four standing Committees of the Board. A copy of the matters reserved to the Board is available on our website at janushenderson.com/ir.

 

Board business

 

The Board met throughout the course of the second half of 2017 after its first formal meeting in July. An overview of the topics addressed by the Board since its formation is provided in the summary overleaf.

 

A typical Board agenda is ordered so that the strategic items and projects are considered first. Depending on the importance of the items, either regulatory or finance, capital and budget items are considered next, followed by other business matters. The items that do not require detailed consideration or discussion are set out at the end of the agenda. Where possible, items

 

are grouped together to ensure that the items flow according to topic and that management’s time is used effectively when presenting. Sessions are usually provided which include training or presentations from the business during days on which Board meetings are held.

 

Committees

 

Janus Henderson has four standing committees of the Group Board: Audit, Compensation, Nominating and Corporate Governance, and Risk.

 

Audit

 

The Audit Committee is responsible for monitoring the reliability and appropriateness of the Group’s financial reporting, reviewing the qualifications, performance and independence of the independent auditors (as well as being responsible for recommending their appointment, reappointment and removal), assessing the effectiveness of the Internal Audit function, and reviewing the Group’s compliance with legal and regulatory requirements. Ultimate responsibility for reviewing and approving the Group’s financial reporting and other public reports, declarations and statements remains with the Board. The Committee is chaired by Jeffrey Diermeier.

 

Compensation

 

The Compensation Committee is responsible for determining the remuneration of the Co-CEOs, certain other executive officers, and the Group’s independent directors. The Committee is chaired by Lawrence Kochard.

 

Nominating and Corporate Governance

 

The Nominating and Corporate Governance Committee has responsibility for considering the size, composition, expertise and balance of the Board as well as succession planning. The Committee is also responsible for recommending the applicable Corporate Governance Guidelines to the Board and oversees the Board’s annual evaluation. The Committee is chaired by Richard Gillingwater.

 

Risk

 

The purpose of the Risk Committee is to assist the Board in the oversight of risk. The Committee also looks to identify any forward-looking and emerging risks that relate to the industry or Janus Henderson specifically, and will refresh and monitor these risks and look at mitigating actions on an ongoing basis. The Committee is chaired by Sarah Arkle.

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

 

 

 

23

 

 

 

 

 

 

 

 

 

 

2017 Director attendance at Board and Committee meetings

 

Five meetings were held by the Janus Henderson Group plc Board during 2017, on: 25 July, 7 August, 24 October, 8 November, and 12 December.

 

Board and Committee meetings attended

 

 

 

 

 

 

 

 

Board and Committee meetings attended

 

 

 

 

 

Nominating

 

 

Date

 

 

 

and

 

 

appointed

 

Board

Audit

Compensation

Governance

Risk

Richard Gillingwater

30 May ’17

5/5

n/a

4/4

2/2

n/a

Glenn Schafer

30 May ’17

5/5

3/4

4/4

2/2

n/a

Andrew Formica

30 May ’17

5/5

n/a

n/a

n/a

n/a

Dick Weil

30 May ’17

5/5

n/a

n/a

n/a

n/a

Sarah Arkle

30 May ’17

5/5

4/4

n/a

2/2

2/2

Kalpana Desai

30 May ’17

5/5

4/4

n/a

2/2

n/a

Jeffrey Diermeier

30 May ’17

5/5

4/4

n/a

2/2

2/2

Kevin Dolan

30 May ’17

5/5

n/a

n/a

2/2

2/2

Eugene Flood Jr.

30 May ’17

5/5

1/4

n/a

2/2

2/2

Lawrence Kochard

30 May ’17

5/5

n/a

4/4

2/2

n/a

Angela Seymour-Jackson

30 May ’17

5/5

n/a

4/4

2/2

n/a

Tatsusaburo Yamamoto1

30 May ’17

4/5

n/a

n/a

1/2

n/a

 

Notes

 

§      All Directors attended 100% of Board and Committee meetings of which they were members, with the exception of Tatsusaburo Yamamoto who was not present at one Board and one Nomination and Corporate Governance Committee meeting.

 

§      Glenn Shafer stepped down from the Audit Committee on 8 November 2017; Eugene Flood Jr. was appointed to the Audit Committee on 8 November 2017.

 

1. As Dai-ichi prepared to issue their 10b5-1 stock purchase programme authority of Janus Henderson shares, Mr Yamamoto did not attend one Board and one Nomination and Corporate Governance Committee meeting in order to comply with regulatory procedures.

 

An overview of the topics addressed by the Board in 2017

 

July

§      Janus Henderson’s strategy

§      Update on integration (including an update on BNP outsourcing)

§      Capital management and dividend policy

§      Update on regulatory matters

§      Update on Brexit

August

§      Second quarter results

§      Capital position and dividend for 2Q17

October

§      3Q17 financial update

§      Update on integration

§      Janus Henderson’s strategy

§      Modern Slavery policy

§      BNP outsourcing

§      Update on regulatory matters

§      Update on Brexit

November

December

 

§      Third quarter results

§      2018 Budget

 

§      Capital position and dividend for 3Q17

§      Janus Henderson’s strategy

 

 

§      US tax reform

 

 

 

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

24

 

GOVERNANCE

 

 

 

 

 

 

 

 

 

 

Governance overview

continued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Training

 

To ensure that the Directors continually update their skills and knowledge, all Directors receive regular presentations on different aspects of the Group’s business and on financial, legal and regulatory matters affecting our sector. During 2017 all former-Janus and former-Henderson Directors received training upon being appointed to the Janus Henderson Group Board and they independently met with senior people within the business.

 

The Board also received presentations on: US Regulation and Australian Stock Exchange (ASX) disclosure and Corporate Governance; Brexit; key regulatory risks and issues for Janus Henderson; key compliance policies for Janus Henderson; the Markets in Financial Instruments Directive II (MiFID II); General Data Protection Regulation; Senior Managers & Certification Regime; and Executive compensation disclosures required by the US Securities and Exchange Commission (SEC).

 

 

Relations with shareholders

 

Janus Henderson conducts an active Investor Relations programme, engaging with shareholders across the Group’s two listings.

 

In 2017, Management and IR conducted over 230 individual meetings with existing and potential shareholders in London, Sydney, Melbourne, New York, Boston and Denver. This included three roadshows to Australia and two to the US to engage with shareholders following results announcements and in advance of, and following, the merger of Janus Capital and Henderson Group. The Chairman also met with shareholders in London.

 

The Board regularly receives feedback on shareholder sentiment and sell-side analysts’ view of the Group and the wider industry. Board members welcome the opportunity to learn more about shareholders’ interests in Janus Henderson. Equally, Management receive weekly updates on shareholder engagement, topics raised and key discussion points.

 

In the course of a year, Janus Henderson gives four scheduled updates to the market in addition to our Annual General Meeting. The Investor Relations team and Management have frequent contact with the 16 sell-side analysts who follow Janus Henderson.

 

 

 

Board skills

 

 

 

 

 

 

 

 

 

Asset

 

 

 

 

 

 

Management

 

International

Finance

Risk

Client Focus

Acquisitions

Richard Gillingwater

P

PP

PP

P

PP

PP

Glenn Schafer

PP

P

PP

PP

P

PP

Andrew Formica

PP

PP

P

P

PP

PP

Dick Weil

PP

PP

P

P

PP

PP

Sarah Arkle

PP

P

P

PP

PP

P

Kalpana Desai

P

PP

PP

P

P

PP

Jeffrey Diermeier

PP

P

PP

PP

P

P

Kevin Dolan

PP

PP

P

P

P

PP

Eugene Flood Jr.

PP

P

PP

PP

P

P

Lawrence Kochard

PP

P

PP

PP

P

P

Angela Seymour-Jackson

P

P

P

PP

PP

PP

Tatsusaburo Yamamoto

PP

PP

P

P

P

PP

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

 

 

 

25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Directors’ Report

 

Further disclosures, where applicable to the Company, are contained in the sections of this Annual Report and Accounts identified below and form part of the Directors’ report for the period:

 

§     Pages 31 to 56, Item 7 on Form 10-K – Management’s Discussion and Analysis

 

§     Pages 125 to 135, Item 10 on Form 10-K – Directors, Executive Officers and Corporate Governance

 

§     Pages 135 to 159, Item 11 on Form 10-K – Executive Compensation

 

ASX Corporate Governance Principles and Recommendations

 

Details of Janus Henderson’s compliance with the ASX Corporate Governance Principles and Recommendations during the reporting period are available on the Company’s website at janushenderson.com/ir.

 

Diversity

 

Janus Henderson fosters and maintains an environment that values the unique talents and contributions of every individual. We know that having a diverse and inclusive workplace will support our strategic vision.

 

We invite you to review our Commitment to Diversity and recent initiatives on our website at janushenderson.com/diversity.

 

Financial reporting

 

The Directors are required to prepare and approve the financial statements for the Group and Company in accordance with Jersey law for each financial year which show a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period in accordance with generally accepted accounting principles. The Directors have elected to prepare the Group and Company financial statements in accordance with US generally accepted accounting principles (US GAAP).

 

The Directors confirm that to the best of their knowledge:

 

§     the financial records of the Group and Company have been properly maintained

 

§     the financial statements of the Group and Company comply with US GAAP and give a true and fair view of the financial position and performance of the Group and Company, and

 

§     this opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

 

Supplementary note to Item 11 on SEC Form 10-K

 

The “Total compensation table” on page 137 of the Company’s Annual Report on SEC Form 10-K is revised as follows:

 

§     by replacing the figure of $484,910 shown in the “Other” column for Richard M. Weil with $610,952, and

 

§     by replacing footnote (7) to the table with the following text:

 

“Amounts shown in ‘Other’ include dividends on ESOP and unvested shares. Mr. Weil’s amount includes $172,240 in such dividends, $312,670 in relocation benefits and $126,042 in housing benefits per Company policy as a result of his 2017 move to the UK from the US.”

 

Signed in accordance with a resolution of the Directors:

 

 

Andrew Formica

Co-Chief Executive Officer

27 February 2018

 

 

Richard Weil

Co-Chief Executive Officer

27 February 2018

 

 

Roger Thompson

Chief Financial Officer

27 February 2018

 

 

 

 

 

 

 

 

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

 

 

 

 

 

 

 

26

 

FORM 10-K

 

 

 

 

 

Form 10-K

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Janus Henderson Group plc Annual Report 2017

 



 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

x                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

 

 

Janus Henderson Group plc

 

(Exact name of registrant as specified in its charter)

 

Jersey, Channel Islands

 

98-1376360

(State or other jurisdiction of

 

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

 

201 Bishopsgate EC2M 3AE

 

N/A

United Kingdom

 

(Zip Code)

(Address of principal executive offices)

 

 

 

+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 £  No S

 

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 £  No S

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  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 x

Smaller reporting company o

 

 

(Do not check if a smaller

Emerging growth company o

 

 

reporting company)

 

 

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. £

 

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

 

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

 

 

 



 

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.

 

5



 

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

 

6



 

(“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

 

7



 

“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

 

8



 

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

 

11



 

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 re