JNS Janus Capital Grp. Cmn Stk (delisted)

ITEM 1A.    RISK FACTORS

JCG faces numerous risks, uncertainties and other factors that are substantial and inherent to its business, including risks related to the merger with Henderson, market and investment performance risks, operational and technology risks, and legal and regulatory risks. The following are significant factors that could affect JCG's business.

Risks related to the merger with Henderson

The Merger Agreement may be terminated in accordance with its terms and the merger may not be completed.

The closing of the merger is subject to the satisfaction or waiver of a number of conditions. Those conditions include: (a) the approval of the shareholders of JCG of the merger; (b) the approval of the shareholders of Henderson of (i) the merger, (ii) the name change of Henderson, (iii) the amended and restated memorandum and articles of association of Henderson, (iv) the delisting of Henderson ordinary shares from the London Stock Exchange and (v) the payment of a dividend in respect to the second half of the 2016 fiscal year; (c) the receipt of the required regulatory approvals, including the approval of FINRA and the U.K. Financial Conduct Authority; (d) the approval by the board of trustees and shareholders for JCG-advised U.S. mutual funds of new investment advisory agreements with JCG to take effect at the closing of the merger representing at least 67.5% of the assets under management of those funds as of September 30, 2016; (e) the effectiveness of the registration statement relating to the issuance of Henderson ordinary shares in connection with the merger and absence of any stop order or proceedings by the SEC; (f) approval for listing on the NYSE of the Henderson ordinary shares; and (g) the absence of governmental restraints or prohibitions preventing the consummation of the merger. The obligation of each of JCG and Henderson to consummate the merger is also conditioned on, among other things, the truth and correctness of the representations and warranties made by the other party as of the closing date (subject to certain "materiality" and "material adverse effect" qualifiers). These conditions to the closing may not be fulfilled and, accordingly, the merger may not be completed.

If the merger is not completed by September 30, 2017, either JCG or Henderson may choose not to proceed with the merger. In addition, the parties can mutually decide to terminate the Merger Agreement at any time prior to consummation of the merger, before or after the required JCG and

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Henderson shareholder approvals. In addition, JCG or Henderson may elect to terminate the Merger Agreement in certain other circumstances.

If the Merger Agreement is terminated, JCG may incur substantial fees in connection with termination of the Merger Agreement and will not recognize the anticipated benefits of the merger.

Termination of the Merger Agreement could negatively impact JCG.

If the Merger Agreement is terminated and the merger is not consummated, JCG may be adversely affected. JCG may be adversely impacted by the failure to pursue other beneficial opportunities during the pendency of the merger, by the failure to obtain the anticipated benefits of completing the merger, by payment of certain costs relating to the merger, and by the focus of its management on the merger for an extended period of time rather than on normal business operations or opportunities or by the loss of certain senior managers as a consequence of the merger not completing. The market price of JCG common stock might decline as a result of any such failures to the extent that the current market price reflects a market assumption that the merger will be completed. Any of these factors, among others, could have a material impact on the business, prospects, financial condition and results of operations of JCG.

In addition, if the Merger Agreement is terminated under certain circumstances, JCG may be required to pay Henderson a termination fee of $34,000,000 in cash or to pay Henderson's expenses in the amount of up to $10,000,000 in cash, depending on the circumstances surrounding the termination (and in each case subject to certain adjustments that may be required in respect of applicable taxes).

JCG may also be negatively impacted if JCG becomes subject to litigation related to entering into or failing to consummate the merger, including direct actions by JCG stockholders against the directors and/or officers of JCG for breaches of fiduciary duty and derivative actions brought by JCG stockholders in the name of JCG.

JCG will be subject to business uncertainties while the merger is pending.

Uncertainty about the closing or effect of the merger may affect the relationship between JCG and its customers, including through reduced net flows during the pendency of the merger. This uncertainty may also affect the relationship between JCG and its business counterparties. Any such impact may have an adverse effect on JCG. These uncertainties may cause parties that deal with JCG to seek to change existing business relationships with it and to delay or defer decisions concerning JCG. Changes to existing business relationships, including termination or modification, could negatively affect JCG's assets under management, revenue, earnings and cash flow, as well as the market price of JCG's common stock.

JCG may face challenges in attracting and retaining key personnel during the pendency of the merger.

JCG is dependent on the experience and industry knowledge of its officers, key management personnel and other key employees to operate and execute its business plans. Such dependency is heightened as a result of the Merger Agreement. Current and prospective employees of JCG may experience uncertainty about their role within the combined company during and following the merger, which may have an adverse effect on the ability of JCG to attract or retain key management personnel and other key employees. If key employees depart because of issues related to the uncertainty and difficulty of integration or a desire not to remain with JCG, JCG could be negatively impacted. Accordingly, no assurance can be given that JCG will be able to attract or retain key management personnel and other key employees of JCG to the same extent that JCG has previously been able to attract or retain its employees. Adverse effects arising from the pendency of

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the merger could be exacerbated by any delays in consummation of the merger or termination of the Merger Agreement.

JCG will be subject to certain contractual restrictions while the merger is pending.

The Merger Agreement restricts JCG from making certain acquisitions and divestitures, entering into certain contracts, incurring certain indebtedness and expenditures, repurchasing or issuing securities outside of existing equity awards, and taking other specified actions without the consent of Henderson until the earlier of the closing of the merger or the termination of the Merger Agreement. These restrictions may prevent JCG from pursuing attractive business opportunities that may arise prior to the closing of the merger and could have the effect of delaying or preventing other strategic transactions. Adverse effects arising from the pendency of the merger could be exacerbated by any delays in consummation of the merger or termination of the Merger Agreement.

Third parties may terminate or alter existing contracts or relationships with JCG.

JCG has contracts with customers, vendors, distributors, affiliates, landlords, licensors, and other business partners which may require JCG to obtain consent from these other parties in connection with the merger. If these consents cannot be obtained, the counterparties to these contracts and other third parties with which JCG currently has relationships may have the ability to terminate, reduce the scope of or otherwise materially adversely alter their relationships with JCG in anticipation of the merger. The pursuit of such rights may result in JCG suffering a loss of potential future revenue or incurring liabilities in connection with a breach of such agreements and losing rights that are material to its business. Such disruptions could also result from a delay in the closing of the merger.

JCG will incur significant transaction costs in connection with the merger.

JCG has incurred and expects to incur significant non-recurring costs associated with the merger. These costs and expenses include financial advisory, legal, accounting, consulting and other advisory fees and expenses, reorganization and restructuring costs, severance/employee benefit related expenses, public company filing fees and other regulatory expenses, printing expenses and other related charges. Some of these costs are payable by JCG regardless of whether the merger is completed.

The Merger Agreement contains provisions that may discourage other companies from trying to enter into a strategic transaction with JCG for greater consideration.

Notwithstanding that such provisions are to be disregarded in respect of both parties to the extent that the U.K. Panel on Takeovers and Mergers determines that they are prohibited by Rule 21.2 of the City Code, certain provisions of the Merger Agreement may discourage third parties from submitting business combination proposals to JCG during the pendency of the Merger Agreement that might have otherwise resulted in greater value to JCG stockholders than the merger. These provisions include a general prohibition on JCG, its controlled affiliates, directors, officer employees and representatives, from soliciting, initiating or knowingly encouraging, or, subject to certain exceptions, entering into discussions with any third party regarding any alternative transactions, subject to limited exceptions. In addition, Dai-ichi Life Holdings Inc. ("Dai-ichi Life"), JCG's largest shareholder, has committed to vote its shares of JCG's common stock in favor of the merger. This may discourage a third-party from pursuing a strategic transaction with JCG.

If, in certain permitted circumstances, the JCG board (i) withdraws, qualifies or modifies, or proposes publicly to withdraw, qualify or modify, or fails to make, in each case in any manner adverse to Henderson, its approval or recommendation of the merger or (ii) approves or recommends, or

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proposes publicly to approve or recommend, any alternative transaction, JCG will still be required to submit the merger to a vote of its stockholders at the special meeting unless the Merger Agreement is earlier terminated by the other party in accordance with its terms.

The Merger Agreement provides that, upon termination of the Merger Agreement under specified circumstances, including (i) a change in the recommendation of the Board of Directors of JCG, (ii) a failure to obtain the requisite approvals of the stockholders of JCG, (iii) a material breach by JCG or (iv) because the merger is not consummated by the September 30, 2017 (the "Outside Date"), and in the cases set forth in clauses (ii), (iii) and (iv) above, at a time when there was an offer or proposal for an alternative transaction with respect to JCG and JCG enters into or consummates an alternative transaction, in the case of clause (ii) or (iii), within 12 months following such date of termination or in the case of clause (iv), within 12 months from the Outside Date, JCG will pay to the other party a termination fee equal to $34,000,000 in cash.

In addition, the Merger Agreement provides that if JCG or Henderson terminates the Merger Agreement because of a failure of the stockholders of JCG to approve the merger at the JCG stockholder meeting, JCG will reimburse Henderson for its actual out-of-pocket fees and expenses up to an aggregate amount equal to $10,000,000 in cash.

If the Merger Agreement is terminated and JCG determines to seek another strategic transaction, JCG may not be able to negotiate a transaction on terms comparable to, or more favorable than, the terms of the Merger Agreement.

Market and investment performance risks

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

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

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

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

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

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Redemptions and other withdrawals.   Investors may reduce their investments in specific JCG investment products or in the markets in which JCG's investment products are concentrated in response to adverse market conditions, inconsistent investment performance, the pursuit of other investment opportunities (including passive investment strategies) or other factors.

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

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may lack established regulations and may experience significantly more volatility than established markets.

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Relative investment performance.   JCG's investment products are often judged on their performance as compared to benchmark indices or peer groups, or on an absolute return basis. Any period of underperformance of investment products may result in the loss of existing assets and affect JCG's ability to attract new assets. In addition, approximately 34% of the Company's assets under management at December 31, 2016, are subject to performance fees. Performance fees are based on each product's investment performance as compared to an established benchmark index over a specified period of time. If investment products subject to performance fees underperform their respective benchmark index for a defined period, JCG's revenues and thus results of operations may be adversely affected. In addition, performance fees subject JCG's revenues to increased volatility.

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

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

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

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

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

Goodwill and intangible assets totaled $1.9 billion at December 31, 2016. The value of these assets may not be realized for a variety of reasons, including, but not limited to, significant redemptions, loss of clients, damage to brand name and unfavorable economic conditions. JCG has recorded goodwill and intangible asset impairments in the past and could incur similar charges in the future. JCG reviews the carrying value of goodwill and intangible assets not subject to amortization on an annual basis, or more frequently if indications exist, suggesting that the fair value of its intangible assets may be below their carrying value. JCG evaluates the value of intangible assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Should such reviews indicate impairment, a reduction of the carrying value of goodwill or intangible assets could occur, resulting in a charge that may, in turn, adversely affect JCG's assets under management, results of operations and financial condition.

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Operational and technology risks

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

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

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

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

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

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

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

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

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

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

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

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

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

JCG derives revenue from investment management agreements with mutual funds and other investment products. With respect to investment management agreements with mutual funds, these agreements may be terminated by either party with notice, or terminated in the event of an "assignment" (as defined in the 1940 Act), and must be approved and renewed annually by the independent members of each fund's board of directors, its trustees, or its shareowners, as required by law. In addition, the board of directors or trustees of certain funds generally may terminate these investment management agreements upon written notice for any reason and without penalty. The termination of or failure to renew one or more of these agreements or the reduction of the fee rates applicable to such agreements could have a material adverse effect on JCG's assets under management, results of operations and financial condition.

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

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

Acquisitions expose JCG to risks inherent in acquiring a company.

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

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

As discussed above in Risks related to the merger with Henderson , the Merger Agreement restricts JCG from making certain acquisitions without the consent of Henderson.

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

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

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

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

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JCG may be unable to develop new products, and the development of new products may expose JCG to additional costs or operational risks.

JCG's success is partially dependent on its ability to develop, launch, market and manage new investment products. New investment products require an initial cash investment, innovation, time and the appropriate resources as well as ongoing support. The initial cash investment or "seeding" utilizes capital and liquidity that would otherwise be available for other corporate purposes. JCG may also be required to provide additional support to seeded investment products after the initial cash investment. Numerous risks and uncertainties are associated with all stages of the seeded investment product life cycle, including shifting client or market preferences, the introduction of competing products and compliance with regulatory requirements. A failure to successfully manage these risks or to innovate and introduce new seeded investment products may adversely affect JCG's business prospects, assets under management, results of operations and financial condition.

Legal and regulatory risks

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

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

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

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