UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-15253

Janus Capital Group Inc.

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

Not applicable
(Former name, former address and former fiscal year, if changed since last report)

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 such filing requirements for the past 90 days. Yes [X]     No [   ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X]     No [   ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of July 21, 2004, there were 239,363,982 shares of the Company’s common stock, $.01 par value per share, issued and outstanding.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

JANUS CAPITAL GROUP INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in Millions)

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

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JANUS CAPITAL GROUP INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in Millions, Except Per Share Data)

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

2

JANUS CAPITAL GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in Millions)

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

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JANUS CAPITAL GROUP INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
(Amounts in Millions, Except Per Share)

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

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Janus Capital Group Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 - Basis of Presentation

In the opinion of Janus Capital Group Inc. (the “Company” or “Janus”) management, the accompanying unaudited interim consolidated financial statements contain all adjustments necessary to fairly present the financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Such interim financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

The accompanying consolidated financial statements have been prepared consistently with the accounting policies described in Note 2 to the consolidated financial statements that are presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. Certain prior year amounts have been reclassified to conform to the current year presentation.

Note 2 – Earnings Per Share

Basic earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share adjusts the weighted average shares outstanding by the dilutive impact of stock options, employee stock purchase plan shares (“ESPP”) and unvested restricted stock awards. The following is a summary of the earnings per share calculation (in millions, except per share data):

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The following securities have been excluded from the earnings per share computations as their inclusion would be antidilutive:

•		Stock options that have an exercise price greater than the average market price of Janus’ common stock (for the three-month periods ended June 30, 2004 and 2003, approximately 9.1 million and 4.6 million options, respectively, were excluded and for the six-month periods ended June 30, 2004 and 2003, approximately 4.3 million and 8.4 million options, respectively, were excluded ); and
•		6.6 million and 9.8 million unvested restricted stock awards at June 30, 2004 and 2003, respectively.

Note 3 — DST Systems, Inc.

On December 1, 2003, Janus exchanged 32.3 million common shares of DST Systems, Inc. (“DST”) for 100% of Capital Group Partners (“CGP”), a corporation which includes a printing and graphics design business (“Rapid Solutions Group” or “RSG”) with a value of $115 million and $999.3 million in cash. While there are no legal or third party restrictions on the use of the cash, the opinions received from Janus’ tax advisors as part of the transaction were based on certain representations made by Janus that the cash would not be distributed or loaned to Janus or any Janus affiliate and that any purchases of Janus debt or common stock would be subject to certain maximum limits. To the extent Janus fails to meet its representations, it could increase the possibility of the Internal Revenue Service successfully challenging the tax-free treatment of the transaction. As previously disclosed, possible uses of these funds include capital expenditures, working capital at RSG, investments and acquisitions. (See Liquidity and Capital Resources)

On June 16, 2004 Janus sold its remaining 7.4 million shares of DST common stock to an unrelated third party. The sale resulted in a gain of $228.0 million. The Company received cash proceeds of $336.2 million, or $208.0 million net of income taxes.

Note 4 – Goodwill and Intangible Assets

The following is a summary of changes in goodwill for the six-month period ended June 30, 2004 (in millions):

The following is a summary of identified intangible assets (in millions):

In conjunction with the DST exchange transaction, Janus acquired 100% of CGP on December 1, 2003. An adjustment to goodwill, tangible assets and intangible assets was recorded in 2004 reflecting the final purchase

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price allocation for the acquisition. CGP’s intangible assets are amortized over five years. Amortization expense in the first quarter 2004 includes the intangible asset amortization for CGP.

Amortization expense was $3.6 million and $1.8 million for the three-month periods ended June 30, 2004 and 2003, respectively, and $7.3 million and $3.5 million for the six-month periods ended June 30, 2004 and 2003, respectively. Total amortization expense is expected to be $17.1 million per year over the next five years.

Client relationships are amortized over their estimated lives of 5 to 25 years using the straight-line method. Within client relationships, Janus has subadvised contracts that have an allocated intangible value. To the extent a subadvised contract notifies Janus of its intent to terminate its contract, Janus will recognize an impairment charge equal to the unamortized value of the intangible asset recorded for such contract. In the first quarter 2004, a write-down of intangible assets totaling $14.2 million ($8.8 million after-tax), or $0.04 per diluted share, was recorded associated with the termination notices received in the first quarter 2004 from certain subadvised accounts. This impairment is included within restructuring and impairments on Janus’ statement of income.

Note 5 – Long-Term Debt

On April 26, 2004, Janus exchanged $465.1 million of senior notes (comprised of $286.9 million of the 7.000% senior notes due 2006 and $178.0 million of the 7.750% senior notes due 2009) for $527.4 million of 6.119% senior notes (“6.119% Notes”) due April 15, 2014. The 6.119% Notes pay interest semiannually on April 15 and October 15. On May 19, 2004, Janus’ wholly-owned subsidiary, CGP, exercised its right to repurchase $445.0 million aggregate principal amount of the 6.119% Notes. As a result of this transaction, Janus recorded a second quarter non-operating charge of $55.5 million ($33.3 million, net of tax), primarily related to the premium paid to exchange the old notes for the new notes given declines in interest rates.

On April 30, 2004, the holders of the Liquid Yield Option Notes (“LYONS”), under existing put rights, required Janus to repurchase all of the outstanding LYONS with an accreted value of $84.0 million.

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Note 6 – Stock Options

As permitted by Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock Based Compensation”, Janus accounts for stock options granted to employees and non-employee directors using the intrinsic value method in accordance with the provisions of Accounting Principles Board (“APB”) No. 25, “Accounting for Stock Issued to Employees”. Accordingly, the value of stock options is not reflected in Janus’ statement of income as all such instruments had an exercise price equal to the market value of the underlying common stock on the date of the grant. The following table illustrates the effect on net income and earnings per share if Janus had applied the fair value method of accounting to stock options (in millions, except per share data):

Note 7 — Mutual Fund Investigation

On April 27, 2004, Janus and state regulators announced agreements in principle with the Attorneys General of Colorado and New York and the Colorado Division of Securities setting forth financial agreements and certain corporate governance and compliance initiatives that will be required by such regulators to resolve their investigations concerning Janus. Janus also announced an agreement in principle with respect to monetary terms with the SEC staff, subject to the approval of the SEC Commissioners. Pursuant to such agreements, Janus would consent to the entry of a cease and desist order by the SEC, as well as consent orders or assurances of discontinuance by the New York and Colorado state authorities. Janus has agreed to pay $50.0 million in restoration to compensate investors for the adverse effects of frequent trading and $50.0 million in civil penalties. As part of the agreements in principle, Janus agreed to reduce its management fees from certain Janus funds, which went into effect July 1, 2004. As a result, the Company is estimating that management fee revenue will decline approximately $25.0 million over the next twelve months, assuming assets under management remain constant at approximately $135.0 billion. However, the total annual reduction will be greater if assets under management increase or less if assets under management decrease. Janus also agreed to pay $1.2 million to the Colorado Attorney General to be used for investor education and to reimburse that office for the costs of their investigation. See Part II, Item 1 for additional information.

The year to date charge for the mutual fund investigation of $65.0 million includes $55.7 million of previously unaccrued civil penalties and restoration costs and $9.3 million of legal and other administrative expenses related to the investigation. The second quarter charge of $6.0 million represents legal and other administrative costs associated with the matter.

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Note 8 – Segment Information

Reportable segments are identified by management based on Janus’ organizational structure and the business activities from which it earns revenue. Janus has determined that it has two primary lines of business; investment management and printing and fulfillment.

The investment management segment derives revenue and net income from providing investment management, administration, distribution and related services to individual and institutional investors primarily through the Janus series of mutual funds and other investment products. Revenue is largely dependent on the total value and composition of assets under management, which include domestic and international equity and debt securities. Accordingly, fluctuations in the financial markets and in the composition of assets under management impact revenue and operating results. The majority of this segment’s revenue is derived from contracts to manage mutual funds, which are subject to annual review and approval by each fund’s Board of Trustees and/or its shareholders.

The printing and fulfillment segment derives revenue from digital printing of marketing and compliance communication, fulfillment services (primarily to the financial services industry) and offset printing.

In addition, Janus’ equity investment in DST was considered a segment prior to December 1, 2003. The following is a summary of financial information concerning the segments (in millions):

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, Janus Capital Group Inc. (“Janus” or the “Company”) may make other written and oral communications from time to time that contain such statements. Forward-looking statements, including statements as to industry trends, future expectations of the Company and other matters that do not relate strictly to historical facts, are based on certain assumptions by management. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue” and similar expressions or variations, and are based on the beliefs and assumptions of the management of the Company based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, among others, the risks described in Part I, Item 1, Business, under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2003. Janus cautions readers to carefully consider such factors. Further, such forward-looking statements speak only as of the date on which such statements are made; Janus undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Available Information

Copies of Janus’ filings with the Securities and Exchange Commission (“SEC”) can be obtained from the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information can be obtained about the operation of the Public Reference Room by calling the SEC at 1-800-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.

Janus 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 Janus website (www.Janus.com) or by contacting Janus at 303-691-3905.

Janus’ Officer Code of Ethics for Principal Executive Officer and Senior Financial Officers (including its chief executive officer, chief financial officer and controller) (the “Officer Code”); Corporate Code of Business Conduct and Ethics for all employees; corporate governance guidelines; and the charters of key committees (including the audit, compensation and nominating committees) are available on its website (www.Janus.com), and printed copies are available to any shareholder upon request by calling Janus at 303-691-3905. Any future amendments to or waivers of the Officer Code will be posted to the Janus website.

Results of Operations

Overview

Janus’ principal business is to provide investment advisory, distribution and administrative services to individual and institutional investors, primarily through mutual funds in both domestic and international markets. Revenues are largely derived pursuant to investment advisory agreements with mutual funds and other separate and private accounts, and are dependent on the total value and composition of assets under management. Accordingly, fluctuations in the financial markets and in the composition of assets under management directly affect revenue and operating results. Assets under management are affected by new money investments or redemptions and by market appreciation or depreciation. Factors that impact the level of net fund sales or redemptions include

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competitive fund performance, marketing efforts, reputation, and introduction and market reception of new products.

Net income totaled $130.2 million, or $0.56 per diluted share, in the second quarter 2004 compared to net income of $47.5 million, or $0.21 per diluted share, in the second quarter 2003. Total revenue for the investment management segment (Janus’ primary business) decreased 4.2% from the second quarter of 2003, due to lower average assets under management caused by net outflows in Janus’ mutual fund products and institutional accounts. Although Janus does not always know the reasons behind each individual investor and institutional account’s decision to redeem their money out of a Janus product, the Company believes that some of the recent outflows might have been influenced by the mutual fund investigation. From January 1 to August 31 of 2003, Janus’ net outflows from long-term (non-money market) assets totaled $3.0 billion. Since the announcement of the mutual fund investigation in September 2003, Janus’ net outflows through June 30, 2004 from long-term assets totaled $27.0 billion.

In July 2004, Janus was informed that a client intends to redeem assets totaling approximately $5 billion by year-end, subject to approval by its board of directors in early August.

The current quarter results were also impacted by the following items:

•		A gain of $228.0 million ($140.5 million after-tax), or $0.60 per diluted share on the sale of Janus’ remaining 9% investment in DST;
•		Charges relating to the debt restructuring of $55.5 million ($33.3 million after-tax), or $0.14 per diluted share;
•		Legal and administrative costs associated with the mutual fund investigation of $6.0 million ($3.8 million after-tax), or $0.01 per diluted share;
•		Severance charges of $21.6 million ($13.7 million after-tax), or $0.06 per diluted share;
•		The addition of the printing and fulfillment operations in 2004, which generated an operating loss of $3.6 million ($2.2 million after-tax), or $0.01 per diluted share; and
•		The loss of equity earnings from DST Systems, Inc. (“DST”). Janus no longer records equity earnings from DST as of December 1, 2003, the date the exchange transaction closed.

With respect to Janus’ financial position, two significant transactions were completed during the current quarter. Janus sold its remaining 9% ownership of DST, which generated $208.0 million in after-tax cash proceeds, and the debt restructuring was completed, which reduced Janus’ total debt from $852.6 million at December 31, 2003 to $378.2 million at June 30, 2004.

Significant Developments and Transactions

DST Systems, Inc. On June 16, 2004 Janus sold its remaining 7.4 million shares of DST common stock to an unrelated third party. The sale resulted in a gain of $228.0 million. The Company received cash proceeds of $336.2 million, or $208.0 million net of income taxes.

Debt Restructuring. On April 26, 2004, Janus completed the exchange of $286.9 million 7.00% senior notes, previously maturing in 2006, and $178.0 million 7.75% senior notes, previously maturing in 2009, for $527.4 million of 6.119% senior notes due 2014. During May 2004, Janus’ wholly-owned subsidiary, Capital Group Partners, Inc. (“CGP”), exercised its right to repurchased $445.0 million of the 2014 senior notes. This, combined with the April 30, 2004 repurchase of $84.0 million of LYONS, reduced Janus’ consolidated debt to approximately $378.2 million, and is expected to reduce annual interest expense by approximately $30.0 million.

As a result of the debt extinguishment, Janus incurred a second quarter non-operating charge of $55.5 million ($33.3 million after-tax), or $0.14 per diluted share, primarily related to the premium paid to exchange the old notes for new notes given declines in interest rates.

Mutual Fund Investigation. On April 27, 2004, Janus and state regulators announced agreements in principle with the Attorneys General of Colorado and New York and the Colorado Division of Securities setting forth financial agreements and certain corporate governance and compliance initiatives that will be required by such regulators to resolve their investigations concerning Janus. Janus also announced an agreement in principle with respect to monetary terms with the SEC staff, subject to the approval of the SEC Commissioners. Pursuant to such

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agreements, Janus would consent to the entry of a cease and desist order by the SEC, as well as consent orders or assurances of discontinuance by the New York and Colorado state authorities. Janus has agreed to pay $50.0 million in restoration to compensate investors for the adverse effects of frequent trading and $50.0 million in civil penalties. As part of the agreements in principle, Janus agreed to reduce its management fees from certain Janus funds, which went into effect July 1, 2004. As a result, the Company is estimating that management fee revenue will decline approximately $25.0 million over the next twelve months, assuming assets under management remain constant at approximately $135.0 billion. However, the total annual reduction will be greater if assets under management increase or less if assets under management decrease. Janus also agreed to pay $1.2 million to the Colorado Attorney General to be used for investor education and to reimburse that office for the costs of their investigation. See Part II, Item 1 for additional information.

The year to date charge for the mutual fund investigation of $65.0 million includes $55.7 million of previously unaccrued civil penalties and restoration costs and $9.3 million of legal and other administrative expenses related to the investigation. Approximately $36.0 million of the civil penalty and restoration charge is not tax deductible, which increased Janus’ effective tax rate in the first six months of 2004. The second quarter charge of $6.0 million represents legal and other administrative costs associated with the matter.

Write-down of Intangible Assets. In the first quarter 2004, a write-down of intangible assets totaling $14.2 million was recorded associated with the termination notices received in the first quarter 2004 from certain subadvised accounts. This impairment is included within restructuring and impairments on Janus’ statement of income.

Personnel Changes. As previously disclosed in the second quarter 2004, Janus’ former CEO resigned, and Jason Yee replaced Laurence Chang as portfolio manager of the Janus Worldwide Fund. The estimated payments and benefits provided to both individuals resulted in a current quarter charge of $21.6 million.

In the first quarter 2004, Janus recorded a $7.6 million charge ($4.6 million after-tax), or $0.02 per diluted share, to reflect retirement-related costs for Janus’ General Counsel. Of this total charge, $4.0 million was paid in cash and is reflected in employee compensation and benefits. The remaining charge of $3.6 million represents acceleration of unvested stock and is reflected in restricted stock compensation.

As previously disclosed, in April 2004, Lars O. Soderberg, who had served as the Company’s Executive Vice President, Institutional Services, agreed to take a leave of absence. Subsequent to his taking a leave of absence, Mr. Soderberg entered into an agreement with the Company (attached as Exhibit 10.4) pursuant to which he has resigned from the Company.

Results of Operations by Segment

For purposes of segment reporting, Janus has the following segments: Investment Management, representing businesses that derive the majority of their revenues from providing investment management services under investment advisory agreements; and Printing and Fulfillment, composed of the graphics design, commercial printing and fulfillment operations (acquired December 1, 2003).

Prior to December 1, 2003, Janus’ equity investment in DST was also considered a segment. As a result of the December 1, 2003, exchange transaction with DST, the company no longer records equity earnings from DST. In the first six months of 2003 Janus recorded $35.2 million ($21.8 million after-taxes) in equity earnings from its equity method investment in DST.

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INVESTMENT MANAGEMENT SEGMENT

Results of Operations

Three Months Ended June 30, 2004, Compared with the Three Months Ended June 30, 2003

Assets Under Management/Revenue. Assets under management totaled $135.4 billion at June 30, 2004, a $14.4 billion decrease from assets of $149.8 billion at June 30, 2003, caused by market appreciation of $23.1 billion offset by net outflows of $36.0 billion and asset dispositions of approximately $1.5 billion.

Average assets under management in the second quarter 2004 decreased 3.1% to $138.6 billion from $143.1 billion in the second quarter 2003, due primarily to outflows in Janus’ mutual fund products and institutional accounts.

Investment management fees are generally based upon a percentage of the market value of assets under management and are calculated under contractual agreements with the Company’s mutual funds, subadvised relationships and separate accounts. Investment management revenue decreased 3.1% to $187.9 million from $194.0 million in the second quarter 2003, consistent with the decrease in average assets under management.

Shareowner servicing fees are based on a percentage of average assets under management in Janus’ primary fund group, the Janus Investment Fund (“JIF”). Such fees declined $4.2 million to $47.3 million, largely driven by the decrease in average assets under management in the JIF series of mutual funds.

Expenses. Employee compensation and benefits increased $11.0 million, or 18.4%, as a result of severance charges and increased incentive compensation. In the second quarter 2004 Janus recorded $18.2 million of severance

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expense related to the resignation of Janus’ former CEO and the replacement of a portfolio manager (see personnel changes above). During the second quarter 2003, Janus paid $6.8 million of retention bonuses and severance charges related to the January 1, 2003 reorganization between Janus and Stilwell Financial Inc.

Investment personnel are generally compensated based on the level of assets they manage combined with their relative fund performance. As a result of improved relative investment performance, contractually-based incentive compensation increased $4.7 million in comparison to the same period last year. This increase in performance-based compensation was offset by a $3.4 million decline in other asset-based incentive compensation, including sales commissions and the companywide annual bonus.

Restricted stock compensation declined $1.7 million from $20.5 million to $18.8 million, caused by a $5.1 million decline in the overall amortization rate from former employees’ forfeitures of unvested restricted stock awards, offset by a $3.4 million accelerated vesting charge related to the resignation of Janus’ former CEO (see personnel changes above).

Marketing and fulfillment increased $2.3 million due to Janus’ new print and television advertising campaign that began in April 2004, which increased expenses by $4.5 million. This increase was offset by $2.2 million of lower institutional marketing and fulfillment charges in the current quarter.

Distribution expense decreased 12.5%, or $4.5 million, as a result of a decline in average assets under management distributed through the third-party or adviser-assisted segment. Distribution fees are based on a contractual percentage of the market value of assets under management distributed through the third-party or adviser-assisted segment.

Depreciation and amortization decreased as a result of past significant technology-related capital assets becoming fully depreciated during the second half of 2003.

General, administrative and occupancy expenses increased $6.2 million. Approximately $2.0 million of the increase was due to cash payments for certain third-party products and services previously acquired with soft dollars. The majority of the remaining difference relates to increased occupancy-related costs from the Company’s new headquarters in Denver and the closure of a satellite office in Westport, Connecticut.

Six Months Ended June 30, 2004, Compared with the Six Months Ended June 30, 2003

Assets Under Management/Revenue. Average assets under management for the first six months of 2004 increased 3.2% to $143.5 billion from $139.0 billion in the comparable period in 2003. Investment management revenue increased 3.2% to $387.1 million from $375.1 million for the first six months of 2003, consistent with the increase in average assets under management.

Shareowner servicing fees and other revenue declined $3.6 million to $98.0 million, due primarily to a decrease in money market administration fees. Money market administration fees, which are calculated based on average assets under management in Janus’ money market funds, declined $4.7 million, or 33.7%, as a direct result of a similar decline in average money market assets under management.

Expenses. Employee compensation and benefits increased $13.6 million, or 11.6%, as a result of severance charges and increased incentive compensation. In the first six months of 2004, Janus recorded $22.2 million related to the resignations of Janus’ former CEO and General Counsel, and the replacement of a portfolio manager (see personnel changes above). In the comparable 2003 period, Janus paid $6.8 million of retention bonuses and severance charges related to the January 1, 2003 reorganization between Janus and Stilwell Financial Inc.

Investment personnel are generally compensated based on the level of assets they manage combined with their relative fund performance. As a result of improved relative investment performance, contractually-based incentive compensation increased $7.4 million in comparison to the same period last year. This increase in performance-based compensation was offset by a decline in the annual companywide bonus.

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Restricted stock compensation declined $1.7 million from $42.0 million to $40.3 million, caused by a $8.7 million decline in the overall amortization rate from former employees’ forfeitures of unvested restricted stock awards, offset by a $7.0 million accelerated vesting charge related to the resignation of Janus’ CEO and General Counsel (see personnel changes above).

Distribution expense decreased 7.1%, or $5.1 million, as a result of a decline in assets under management distributed through the third-party or adviser-assisted segment. Distribution fees are based on a contractual percentage of the market value of assets under management distributed through the third-party or adviser-assisted segment.

General, administrative and occupancy expenses increased $10.1 million. Approximately $4.0 million of the increase was due to cash payments for certain third-party products and services previously acquired with soft dollars. The majority of the remaining increase is due to occupancy-related costs from the company’s new headquarters in Denver and the closure of a satellite office in Westport, Connecticut.

PRINTING AND FULFILLMENT SEGMENT

Business Overview

Rapid Solutions Group (“RSG”), the operating business of CGP, a wholly-owned subsidiary of Janus, provides clients with digital marketing and compliance communication solutions that support institutional and direct-to-consumer marketing channels. RSG has more than 480 employees in five facilities strategically located across the United States. Operating income for RSG is principally derived from digital printing and fulfillment operations, and offset printing.

Digital Printing / Fulfillment Operations. The digital operation focuses its business strategy on providing clients with communication solutions using leading-edge print-on-demand technology and software applications that support the process of improving the effectiveness of customer communication through personalization and customization, while decreasing material obsolescence. Approximately 75% of RSG’s revenue is derived from these operations, which include:

•		Customized print-on-demand of personalized marketing material, portfolio reports and other investor communication materials;
•		Printing and delivery of electronic and paper trade confirmations for brokerage firms;
•		Print and delivery of semiannual reports, annual reports and prospectus compliance documents for the securities industry;
•		Individualized print-on-demand of four-color customer welcome and enrollment kits and portfolio statements; and
•		Self-service web portals offering complete online document ordering, dynamic kit building and inventory and fulfillment management.

Offset Printing. The offset printing operations provide customers with full-service graphic and design solutions through prepress services and high-speed, high-quality offset printing for a wide variety of work, including direct marketing packages, brochures, preprinted base stock and collateral pieces.

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Janus’ cash flow from operations historically has been positive and sufficient to fund ordinary operations and capital expenditures. Janus generated $123.3 million of cash flows from operations in the first six months of 2004 compared to $58.6 million in the comparable 2003 period, an increase of $64.7 million. This increase is attributable primarily to changes in working capital items, including the increase in the mutual fund investigation liability of $50.0 million. The first six months of 2003 included payments of $33.8 million for previously accrued restructuring and severance payments.

Cash provided by investing activities over the first six months of 2004 of $294.7 million was primarily generated by the cash proceeds of $336.2 million received from the sale of 7.4 million shares of DST, offset by capital expenditures and other investments. Cash used for investing activities of $140.8 million in the six-month period ended June 30, 2003 related to investments in advised funds, the acquisition of the Berger minority interest, the exercise of a call option to purchase an additional 27.5% of Enhanced Investment Technologies, LLC (“INTECH”) from the minority owners and the acquisition of a 30% ownership interest in Perkins, Wolf, McDonnell and Company, LLC (“PWM”).

Cash used for financing activities for the six-month period ended June 30, 2004 includes the repurchase of $529.0 million of long-term debt (see Significant Developments and Transactions above).

Future Capital Requirements

Short-Term Capital Requirements. Janus believes current cash and cash equivalents plus expected cash flows from operations in 2004 should be sufficient to satisfy its short-term capital requirements. Expected short-term uses of cash include the payment of restoration and civil penalties relating to the mutual fund investigation of $101.2 million, ongoing legal and other administrative costs associated with the mutual fund investigation, income taxes of $128.0 million from the June 2004 sale of DST stock, the annual $0.04 per share dividend declared in the second quarter of $9.6 million, interest payments on outstanding debt, deferred commission payments and $20.0 million of estimated capital expenditures through the end of the year.

Capital Group Partners. On December 1, 2003, Janus exchanged 32.3 million common shares of DST Systems, Inc. (“DST”) for 100% of CGP, a corporation which includes a printing and graphics design business with a value of $115 million and $999.3 million in cash. While there are no legal or third party restrictions on the use of the cash, the opinions received from Janus’ tax advisors as part of the transaction were based on certain representations made by Janus that the cash would not be distributed or loaned to Janus or any Janus affiliate and that any purchases of Janus debt or common stock would be subject to certain maximum limits. To the extent Janus fails to meet its representations, it could increase the possibility of the Internal Revenue Service successfully challenging the tax-free treatment of the transaction.

At June 30, 2004, $554.4 million of Janus’ consolidated cash and cash equivalents is recorded at CGP. Based on the representations made to its tax advisors, Janus may use the cash as follows:

•		up to $300.0 million to purchase Janus common stock in open market transactions over the next three years;
•		$15.0 million or more for capital expenditures in CGP’s business operations;
•		approximately $20.0 to $50.0 million for working capital at RSG; and
•		the remaining cash may be invested in publicly traded debt and equity securities pending its use by CGP in making acquisitions of operating businesses and as operating capital and working capital in its existing and acquired business operations.

2002 and 2001 Restructurings. During 2002 and 2001 Janus completed two restructurings that included the reduction of headcount and closure of facilities. All liabilities associated with these restructurings were paid by the second quarter 2003. The closure of facilities, for which Janus has long-term leases, is the only remaining liability associated with the 2002 and 2001 restructurings. Net of sublease payments, Janus expects to pay $1.9 million during 2004 and $7.8 million thereafter to complete its obligation related to such facilities.

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Stock Repurchase Plan. Janus’ existing stock repurchase authorization expired on July 25, 2004. On July 20, 2004, Janus’ Board of Directors agreed to a new authorization of up to $500 million to repurchase shares of Janus common stock. This new authorization will expire on December 31, 2006.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company has had no significant changes in its exposure to market risks from that previously reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

Item 4. Controls and Procedures

As of June 30, 2004, Janus evaluated the effectiveness of the design and operation of its disclosure controls and procedures. Disclosure controls and procedures are the controls and other procedures that the Company designed to ensure that it records, processes, summarizes and reports in a timely manner the information it must disclose in reports that it files with or submits to the SEC. Steve Scheid, Chief Executive Officer, and Loren Starr, Chief Financial Officer, reviewed and participated in this evaluation. Based on this evaluation, Messrs. Scheid and Starr concluded that, as of the date of their evaluation, Janus’ disclosure controls and procedures were effective.

There has been no change in Janus’ internal controls over financial reporting during the second quarter 2004 that has materially affected, or is reasonably likely to materially affect, Janus’ internal controls over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Mutual Fund Investigation

In September 2003, the Securities and Exchange Commission (“SEC”) and the Office of the New York State Attorney General (“NYAG”) publicly announced that they were investigating trading practices in the mutual fund industry. The investigations were prompted by the NYAG’s settlement with a hedge fund, Canary Capital, which allegedly engaged in irregular trading practices with certain mutual fund companies. While Janus was not named as a defendant in the NYAG complaint against the hedge fund, Janus was mentioned in the complaint as having allowed Canary Capital to “market time” certain Janus funds. Market timing is an investment technique involving frequent short-term trading of mutual fund shares that is designed to exploit market movements or inefficiencies in the way mutual fund companies price their shares. The NYAG complaint against Canary Capital alleged that this practice is in contradiction to policies stated in the prospectuses for certain Janus funds.

On April 27, 2004, Janus and state regulators announced agreements in principle with the Attorneys General of Colorado and New York and the Colorado Division of Securities setting forth financial agreements and certain corporate governance and compliance initiatives that will be required by such regulators to resolve their investigations concerning Janus. Janus also announced an agreement in principle with respect to monetary terms with the SEC staff, subject to the approval of the SEC Commissioners. Pursuant to such agreements, Janus would consent to the entry of a cease and desist order by the SEC, as well as consent orders or assurances of discontinuance by the New York and Colorado state authorities. Janus has agreed to pay $50.0 million in restoration to compensate investors for the adverse effects of frequent trading and $50.0 million in civil penalties. As part of the agreements in principle, Janus agreed to reduce its management fees from certain Janus funds, which went into effect July 1, 2004. As a result, the Company is estimating that management fee revenue will decline approximately $25.0 million over the next twelve months, assuming assets under management remain constant at approximately $135.0 billion. However, the total annual reduction will be greater if assets under management increase or less if assets under management decrease. Janus also agreed to pay $1.2 million to the Colorado Attorney General to be used for investor education and to reimburse that office for the costs of their investigation. As part of its agreement, Janus has agreed that it will not seek insurance reimbursement for the $100.0 million payment. Certain costs and expenses related to the mutual fund investigation may be recoverable, but Janus is unable to assess any possible insurance reimbursements at this time.

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As a part of the agreement, Janus has also agreed to adopt more stringent policies, procedures and governance measures similar to those agreed to by other mutual fund companies that have reached settlements with regulatory agencies. The measures include, among others:

•		that Janus Funds’ boards continue to have an independent chairman,
•		refined policies and procedures to detect and deter market timing activities,
•		enhanced compliance and ethics controls,
•		new requirements for disclosure to investors of expenses and fees, and
•		a commitment to hire a senior officer or independent consultant reporting to the fund trustees to assist in the review of fees charged by the funds to investors.

The other legal and regulatory agencies that are investigating trading practices at Janus, including the West Virginia Attorney General, the Florida Department of Financial Services and the Vermont Securities Division, are not bound by Janus’ agreements with the SEC and the New York and Colorado agencies. In addition, the SEC has an ongoing compliance examination concerning other subjects, such as the terms of agreements between Janus and brokerage firms that sell Janus funds to the public, which is not resolved in the agreement in principle. Janus has been and intends to continue cooperating with these agencies.

Civil Lawsuits

Subsequent to the initiation of the investigations by the NYAG and the SEC, more than 60 civil lawsuits were filed in various state and federal courts against Janus, and related entities and individuals, based on allegations similar to those contained in the NYAG complaint against Canary Capital. In general, these lawsuits allege that Janus allowed certain hedge funds and other investors to engage in “market timing” trades in Janus Funds. Such lawsuits assert a variety of theories for recovery including, but not limited to, the federal securities laws, other federal statutes (including ERISA and RICO), and various common law doctrines.

These civil lawsuits include actions purportedly on behalf of a class of Janus fund investors, cases allegedly brought on behalf of the funds themselves, a case asserting claims both on behalf of an investor class and derivatively on behalf of the funds, cases brought on behalf of shareholders of Janus Capital Group Inc. on a derivative basis against the Board of Directors of Janus Capital Group Inc., purported ERISA actions against the managers of the Janus 401(k) plan, and a non-class “representative action” purportedly brought on behalf of the general public. The complaints also name various defendants. One or more of the Janus entities (Janus Capital Group Inc., Janus Capital Management LLC, or Janus Capital Corporation) are named in every action. In addition, actions have been brought against Janus Investment Fund and/or one or more of the individual Janus Funds, the Janus Fund Trustees, officers of the Janus Funds, officers of Janus Capital Group Inc. and directors of Janus Capital Group Inc.

All but one of the “market timing” lawsuits filed against Janus that were filed in, or removed to, federal court have been finally or conditionally transferred to the Federal District Court in Baltimore, Maryland for coordinated proceedings. Consolidated amended complaints are due in that court on September 29, 2004.

One “market timing” lawsuit, based on allegations that Janus failed adequately to implement fair value pricing, was remanded to the Illinois state circuit court for Madison County, Illinois, where it is now pending. Janus has appealed the order of remand to the federal court of appeals.

In addition to the “market timing” lawsuits, three lawsuits were filed in April 2004 against Janus and related entities challenging the investment advisory fees charged by Janus to certain funds managed by Janus. These actions were filed in federal courts in the Western District of Missouri and the Southern District of Illinois, and in state court in Madison County, Illinois by fund investors. They assert claims under Section 36(b) of the Investment Company Act and for breach of contract. The plaintiffs in these cases do not seek a specified amount of damages or other relief. At this early stage of the litigation, it is not possible to estimate the expense or

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exposure, if any, that they may represent. The one action filed in Madison County, Illinois has been voluntarily dismissed by the plaintiff.

Management believes that the claims made in each of these lawsuits are without merit and intends to defend against them.

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Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

On July 20, 2004, the Janus Board of Directors authorized the expenditure of up to $500 million to repurchase shares of Janus common stock from the open market. The new stock repurchase authorization expires on December 31, 2006. The previous authorization, which provided for the repurchase of up to 17.8 million shares, expired on July 25, 2004. No repurchases of common shares were made under the previous authorization in the six months ended June 30, 2004.

As a part of a share withholding program (established under Rule 10b5-1 of the Securities Exchange Act of 1934), Janus repurchased the following shares to satisfy employees’ income tax liabilities attributable to the vesting of restricted stock awards. These repurchases were made directly from Janus employees.

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Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of Stockholders of Janus Capital Group Inc. was held in Denver, Colorado, on May 13, 2004. At that meeting, the stockholders considered and acted upon the following proposals:

The Election of Directors. By the vote reflected below, the stockholders elected the following individuals to serve as directors until the 2007 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified:

Proposal 2. The stockholders voted to approve the Ratification of the Appointment of Independent Accountants Deloitte & Touche LLP.

This proposal is fully described in the Proxy Statement. Voting was as follows:

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Item 6. Exhibits and Reports on Form 8-K

a)

Exhibits

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b)

Reports on Form 8-K

On April 5, 2004, the Company filed a Current Report on Form 8-K, dated April 5, 2004, under Item 5 that furnished a statement announcing that Janus’ Executive Vice President, Institutional Services, Lars O. Soderberg, who also served on the Company’s Management Committee, has agreed to take a leave of absence

On April 6, 2004, the Company filed a Current Report on Form 8-K, dated April 6, 2004, under Items 5 and 7 that furnished a press release announcing that $465.1 million of Janus’ notes were tendered as of April 5, 2004 meeting the minimum satisfaction of the tender offer.

On April 13, 2004, the Company filed a Current Report on Form 8-K, dated April 12, 2004, under Item 5 that furnished a press release announcing the anticipated pricing for its current offers to exchange its 7.00% senior notes due 2006 and its 7.75% Notes due 2009.

On April 15, 2004, the Company filed a Current Report on Form 8-K, dated April 15, 2004, under Items 5 and 7 that furnished a press release announcing pricing and extension of its exchange offers.

On April 20, 2004, the Company filed a Current Report on Form 8-K, dated April 20, 2004, under Items 5 and 7 that furnished a press release announcing that CEO Mark Whiston, 42, has decided to step down from his positions within the company, its affiliates and as a member of Janus’ Board. Whiston will be succeeded as CEO by Steve Scheid, who will continue to serve as chairman of the company’s Board. The Company also furnished a press release announcing the grant of withdrawal rights in connection with its pending exchange offers with respect to all of its outstanding 7.00% senior notes due 2006 and all of its 7.75% Notes due 2009.

On April 28, 2004, the Company filed a Current Report on Form 8-K, dated April 27, 2004, under Item 12 that furnished a press release reporting its financial results for the first quarter 2004 and announcing that Janus has reached agreements in principle with regulators.

On April 28, 2004, the Company filed a Current Report on Form 8-K, dated April 26, 2004, under Items 5 and 7 that furnished a press release announcing the completion of its pending exchange offers.

On May 7, 2004, the Company filed a Current Report on Form 8-K, dated May 7, 2004, under Item 9 that furnished a statement announcing that two Janus executives will speak at the UBS Global Financial Services Conference in New York.

On June 16, 2004, the Company filed a Current Report on Form 8-K, dated June 16, 2004, under Item 5 that furnished a statement announcing that Janus Capital Group Inc. sold its remaining 7.4 million shares of common stock of DST Systems, Inc. Janus received proceeds of $336 million on a pretax basis ($208 million after taxes). The transaction will result in a second quarter gain of $228 million, or $100 million after taxes.

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SIGNATURES

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 thereunto duly authorized.

Date: July 29, 2004

Janus Capital Group Inc.

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JANUS CAPITAL GROUP INC.