Reason for Report: 1Q17earnings Update

Note: This report contains substantially new material. Subsequent reports will have changes highlighted.

Reason for Report:1Q17Earnings Update

Prev. Edition: 4Q16 and 2016 Earnings Update,Mar 31, 2017

Brokers’ Recommendations:Neutral: 66.7% (4 firms);Positive: 16.7% (1);Negative: 16.7% (1) Prev. Ed.: 4; 1; 1

Brokers’ Target Price: $14.20(↑$0.60from the last edition; 5 firms) Brokers’ Avg.Exp.Negative Return:2%

Note: A flash update on 1Q17 Earnings was done on Apr 20, 2017.

Portfolio Manager Executive Summary

Janus Capital Group Inc. is a publicly owned asset management holding company with assets under management (AUM) of approximately $201.4billion as of Mar 31, 2017.

Trend of Broker Opinions: Broker sentiment onthe stock remains skewed toward the neutral sidewith 66.7% of the firms in the Digest group rating the stock neutral and16.7% of the firms in the Digest group rating the stock positivewhile remaining16.7% rating itnegative. Target prices provided by the firms range from a low of $12.00 to a high of $16.00 per share. The average came in at $14.20, implying a negative expected return of 2%.

Chief Investment Considerations:

• Diversified global footprint
• Ability to return capital to shareholders
• Favorable organic and inorganic growth opportunities
• Intense competition
• Volatile equity and debt market
• Negative performance fees
• Elevated outflows

Neutral or equivalent – Four firms or 66.7%:According to these firms, the majority of Janus Capital’s total assets are in equities, making it vulnerable to volatilities of the equity market. Though equity markets have improved, the performance of fundamental and mathematical equity funds continues to be volatile due to sales fluctuations and redemptions. This signifies that investors favor passive managers over active managers at the current level and shifting of clients to fixed income business particularly in non-U.S. regions. Though the company has come up with a number of new products with lower betas and diversified portfolios, strong flows remain elusive. It is currently focused on expanding its fixed income business including trading and investment. The firms expect Janus Capital’s strategic efforts to drive strong outcomes in the fixed income business going forward.

Positive or equivalent – One firm or 16.7%:Janus Capital offers a solid mix of investment products suitable for clients during market volatility. According to the firm, management, with the help of a multi-boutique approach to provide style-specific expertise across its strategies, including growth, value and risk-managed equities, fixed income and alternatives, attempts diversification with new product innovation to improve investment performance. Benefits from its strategic relationship with Dai-Ichi are expected to act as a catalyst. These firms believe that the company’s expansion in Taiwan, Hong Kong, Europe and Nordics through new fixed income, global equity and liquid alternatives are helping it improve its performance.The positive firms believe that investors prefer Janus Capital for its distinctive investment verticals and retail distribution capabilities. Moreover, the firms believe the acquisitions of Velocity Shares and Kapstream will be driving factors in the long-term.Also, the recent Fed rate hike will be an advantage for the company’s business.

Negative or equivalent – One firm or 16.7%: Since a large part of Janus Capital’s total assets are concentrated in equities, this firm believes that the current volatility in global equity markets can affect the company’s performance in the near term. Moreover, the firm remains concerned as the company has been experiencing net long-term outflows over the last several quarters.

May 12, 2017

Overview

Founded in 1969,Denver, CO-based, Janus Capital Group Inc. and its subsidiaries provide investment management, administration, distribution and related services to financial advisors, individuals and institutional clients through mutual funds, other pooled investment vehicles, separate accounts and subadvised relationships in both domestic and international markets. Through its subsidiaries, it manages equity, fixed income, money market and balanced mutual funds for its clients, and invests in public equity and fixed income markets across the globe.

Janus Capital is a global asset management holding company offering strategies through three different types of investment advisory services – fundamental U.S. and global equities, mathematical equities fixed income and alternatives – through its 3 primary subsidiaries: Janus Capital Management LLC, INTECH Investment Management LLC and Perkins Investment Management LLC.

During 2016, Janus Capital reorganized its three distribution channels as follows:

• Intermediary Channel: This channel caters to U.S. financial advisors, variable insurance trusts,retirement platforms and ETFs. The channel also includes international mutual funds offering services through a Dublin domiciled mutual fund trust – Janus Capital Funds Plc. For 2016, assets in this channel totaled $76.5 billion, or 39% of total company AUM.

• Institutional Channel:This channel serves clients including U.S. corporations, endowments, foundations, Taft-Hartley funds and non U.S. separate accounts. It also concentrates on distribution directly to the plan sponsor and through consultantsas well. Though the current asset base in this channel primarily consists of INTECH's mathematical products, the company has gradually increased its fixed income penetration.For 2016, assets in this channel totaled $67.4 billion, or 34% of total company AUM.

• Self-Directed Channel: This channel caters to existing individual investors who invest in the company’s products through a mutual fund supermarket or directly with the company.The channel also includes Exchange-traded notes (ETNs) related to VelocityShares.For 2016, assets in this channel amounted to $52.9 billion, or 27% of the total company AUM.

More information is available at the company’s website:

The firms identified the following factors for evaluating the investment merits of JNS:

• Poised to hold market share with top-tier investment performance, rising global distribution penetration and scale

• Diversified portfolio of AUM
• Capital level continues to grow
• Repatriation movement and more aggressive use of capital are expected to be accretive going forward
• Strong franchise, fund performance and distribution capabilities are expected to increase shareholders’ value over time

• Product range currently implies diluted growth
• Decelerating equity flows

• Competitive operating environment
• Competitive market for making acquisitions
• Volatility of the capital and credit markets

Note: The company’s fiscal year coincides with the calendar year.

May 12, 2017

Long-Term Growth

Janus Capital has organic growth prospects in several areas. The firms believe the company’s relatively complete portfolio of investment products provides it an edge over its competitors,when it comes to meeting diverse needs of potential clients. They also recognize Janus Capital’s relatively strong distribution platform, which provides it with a better scope to derive the most from its businesses.Further, the company, aiming to expand its international footprint, opened the Global Unconstrained Bond Fund, which is managed by the legendary investment manager Bill Gross.

The firms believe that JanusCapital is capable of gaining market share in this difficult environment, owing to itsimproving relative performance and an expanding global platform.The company has taken several initiatives to strengthen its businesses. The strategic alliance with Dai-ichi in Aug 2012, the third largest life insurer in Japan, forms a major part of the company’s policy to develop internationally and grow globally in terms of reputation and building relationships as well as distribution,which is crucial for competition in the asset management space.

In Jul 2015, Janus Capital acquired 51% stake in Australia-based global unconstrained fixed income asset manager, Kapstream Capital PtyLimited, thereby strengthening its fixed income assets. The company has an option to purchase the remaining 49% interest from Kapstream management on the third and fourth anniversaries of the acquisition.Prior to that, the company acquired VS Holdings Inc. in Dec 2014 to tap opportunities in the growing exchange-traded funds (ETF) market. The deal was also consistent with the company’s strategy of “intelligent diversification”.

In addition to targetinginorganic growth, Janus Capital is focusing on reducing expenses to improve operating leverage. While 2015 witnessed increased investment spending, currently the company is focused on delivering strong long-term investment performance by controlling expenses and continuing to invest in the business for long-term growth. Janus Capital’s strategy of achieving growth with operating leverage to enhance both top and bottom-line results and provide greater foundation for its operations in the future will be beneficial for its shareholders in the long run.

Notably, over the last few years, the industry has typically returned in a range of 70.0% to 80.0% of annual cash flow from operations to its shareholders in the form of regular dividends, stock buybacks and special dividends. Management intends to achieve the industry payout levels in the longrun with the help of improving fundamentals and continuation of a strong balance sheet.

May 12, 2017

Target Price/Valuation

Provided below is a summary of valuations and ratings as compiled by Zacks Research Digest:

Rating Distribution

Risks to the target price include a sharp fall in global asset values, slowdown in the U.S. and global economic activity, changes in the U.S. and foreign laws and regulations, deteriorating investment performance, feeble fund flows and a protracted downturn in equity markets.

Recent Events

On Apr 25, 2017, Janus Capital’s shareholders approved the merger agreement with London-based Henderson Group plc at the special shareholders’ meeting. The participating shareholders have cast 86.2% of outstanding common shares of the company in favor of the merger deal.

Separately, Henderson Group also declared the approval by its shareholders in a special meeting held on Apr 26. Per the company, 98.87% of the shareholder’s votes were in favor of the deal.

On Apr 20, 2017, Janus Capital Group Inc. declared its 1Q17 earnings results. The company recorded a positive earnings surprise of 9.5% in 1Q17. The company reported adjusted earnings per share of $0.23, beating the Zacks Consensus Estimate of $0.21. In addition, results came above the prior-year quarter figure of $0.19.

Better-than-expected results reflect increase in revenues. Moreover, increase in AUM was another optimistic point. However, rise in operating expenses was a concern.

Including one-time items, net income came in at $30.9 million, or $0.17 per share compared with net income of $35.1 million, or $0.19 in the prior-year quarter.

Revenue

The company reported total revenue of $257.6 million in 1Q17, up3.7% y/y, reflectinghigher investment management fees and shareowner servicing fees. However, the rise was partially offset by higher negative performance fee income.

Investment management fees were $229.8 million, up9.3% y/y.

Performance fees were negative $13.7 million compared with negative $2.4 million in 1Q16.

Shareowner servicing fees and otherrevenue came in at $41.5 million, up2.2% y/y.

Outlook

Management expects performance fees to be positive during 2017.

Margins

In 1Q17,operating expenseswere$202.3 million, up8.8% y/y, resulting from an increase in employee compensation expenses, marketing and advertising expenses, distribution expenses along with general, administrative and occupancy expenses,partially offset by decreasing long term incentive compensation expenses and depreciation and amortization expenses.

Operating income was $55.3million, down11.7% y/y.

Outlook

Going forward, management estimates general and administrative (G&A) expenses to be roughly around $30 million.

Further, compensation-to-revenue ratio is expected in the mid-40s for 2017 on anticipation of flat market conditions.

Earnings per Share

Adjusted net incomeattributable to JCG common shareholderswas $29.7million or $0.17 per share in 1Q17, compared with $33.8million or $0.19 per share in 1Q16.

Outlook

Some firms raised their 2017 EPS estimates and kept 2018 EPS estimatesstable on account ofhigher-than-expected AUM and more conservative assumptions for fund flows.

Balance Sheet/Capital Structure/Others

Balance Sheet

As of Mar 31, 2017, Janus Capital had stockholders’ equity of $1.66 billion, cash and investments of $655.8 million and outstanding debt of $407.4million compared with stockholders’ equity of $1.69billion, cash and investments of $608.4 million and outstanding debt of $403.3million at the end of 1Q16.

Cash flow from operations during the reported quarter wasnegative $50.1 million compared with negative $44 million in 1Q16.

Asset under Management

As of Mar 31, 2017, Janus Capital reported total AUM of $204.7billion, up from $191.3 billion as of Mar 31, 2016. Theincrease was primarily the result of net market appreciation of $12.1 billion, partially offset by long-term net outflows of $4.7 billion.

Investment Performance

• As of Mar 31, 2017, 56% of complex-wide mutual funds had a 4 or 5-star Overall Morningstar Rating.

• As ofMar 31, 2017,62%, 94% and 66% of fundamental equity mutual fund assets ranked in the top half of Morningstar quartiles on a one-, three- and five-year basis, respectively.

• As of Mar 31, 2017,1%, 16% and 100% of fixed income mutual fund assets ranked in the top half Morningstar quartiles on a one-, three- and five-year total returnbasis, respectively.

• As of Mar 31, 2017, 0%, 0% and 17% of mathematical equity relative return strategies surpassed their respective benchmarks, net of fees, over the one-, three- and five-year periods, respectively.

Capital Deployment Activities

On Apr 18, 2017, Janus Capital’s board of directors declared a quarterly cash dividend of $0.11 per share. The dividend will be paid on May 19 to shareholders of record as of May 5.

On Feb17, 2017, Janus Capital paid a quarterly cash dividend of $0.11 per share to shareholders on record as of Feb 6.

Outlook

The company has suspended its repurchase program and will not be repurchasing shares through the closing of the Henderson mergerwhich is expected by end of May 2017.

Merger

On Apr 25, 2017, Janus Capital’s shareholders approved the merger agreement with London-based Henderson Group plc at the special shareholders’ meeting. The participating shareholders have cast 86.2% of outstanding common shares of the company in favor of the merger deal.

Separately, Henderson Group declared the approval by its shareholders in a special meeting held in Apr 2017. Per the company, 98.87% of the shareholder’s votes were in favor of the deal.

The “all-stock merger” deal was announced last year in Oct and was approved by the board of directors of both the companies. Further, the deal is likely to close on May 30.

Per the Chief Executive Officer of Janus Capital, the combined entity will prove beneficial in terms of achieving strategic objectives for growth, a diversified product profile along with becoming an active global investment manager. He stated, “We are excited by the possibilities and look forward to what our united organizations will achieve together.”

The firms anticipate this transaction to result in “significant cost savings and revenue growth opportunities.” They also stated that the increased economies of scale may improve profitability and greater efficiency.

Per the deal, a newly formed subsidiary of Henderson will merge with Janus Capital, with Janus as the “surviving corporation” and a subsidiary of Henderson. Each share of Janus Capital common stock will be exchanged for 4.7190 new shares in Henderson following a consolidation of one for 10 existing Henderson shares before the completion of merger.

With a combined market value of about $6 billion, the new entity called “Janus Henderson” will be listed on New York Stock Exchange with the new ticker symbol “JHG”.

The combined firm will have over $325 billion of AUM and will be a top 50 global asset manager, a top 20 mutual fund firm in the U.S., a top 10 largest retail manager in the UK. Janus Henderson will have $15 billion of AUM in Japan and $24 billion of AUM in Australia.

Additionally, the firms are targeting annual run rate net cost synergies of at least $110 million, to be weighted toward the first full year and anticipated to be fully realized three years post closure. The companies also project one-time costs to be incurred in the range of $165–185 million, in order to achieve the recurring cost synergies target.

Excluding one-off costs, synergies from the merger are likely to result in double-digit accretion to the earnings per share of both the companies in the first 12 months. The firms also believe that following this integration, the combined company will generate around 2–3% additional net new money.

The new entity is expected to maintain a progressive dividend policy, with a payout ratio consistent with the current practice of Henderson.

The board of directors of Janus Henderson Global Investors will comprise an equal numbers of directors from Henderson and Janus Capital. Henderson Chairman, Richard Gillingwater will become Chair of the combined board, while Glenn Schafer of Janus Capital will be Deputy Chair. The new entity will run under the leadership of Co-CEOs Andrew Formica (CEO of Henderson) and Dick Weil.

May 12, 2017

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