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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number 001-15253

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

     Indicate by check mark whether the Company (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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ         No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    o

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

     The aggregate market value of the voting and non-voting common stock held by non-affiliates of the Company was $3,927,044,288 (based on the closing price of the common stock on New York Stock Exchange on June 30, 2003).

     The Company’s common stock is listed on the New York Stock Exchange under the symbol “JNS”. As of March 3, 2004, 239,509,116 shares of common stock were outstanding. On such date, the aggregate market value of the voting and non-voting common stock held by non-affiliates of the Company was $4,239,311,353 (based on the closing price of the common stock on New York Stock Exchange on March 3, 2004).

DOCUMENTS INCORPORATED BY REFERENCE:

     Portions of the following documents are incorporated herein by reference into Part of the Form 10-K as indicated:

JANUS CAPITAL GROUP INC.

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PART I

Forward-Looking Statements

      This Annual Report on Form 10-K 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 (including, without limit, in the Company’s 2003 Annual Report to Stockholders) that contain such statements. Forward-looking statements include statements as to industry trends and future expectations of the Company and other matters that do not relate strictly to historical facts and 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. These statements 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” and elsewhere in this report. Janus cautions readers to carefully consider such factors. Furthermore, 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.

Business and Distribution Strategy

      Janus Capital Group Inc. and its consolidated subsidiaries (collectively, “Janus” or the “Company”) sponsor, market and provide investment advisory, distribution and administrative services primarily to mutual funds in both domestic and international markets. The majority of Janus’ revenues are largely dependent on the total value and composition of assets under management, primarily consisting of domestic and international equity and debt securities. Accordingly, fluctuations in the financial markets, relative investment performance, net flows and changes in the composition of assets under management are all factors that have a direct effect on the Company’s operating results. As of December 31, 2003, the Company managed $151.5 billion in assets across multiple investment disciplines.

      Janus’ strategy is centered on developing “best of breed” investment management across multiple investment disciplines, developed internally and through acquisition. Janus has long been recognized for growth equity investing, beginning with the launch of the Janus Fund in 1969. Over the last few years, Janus began to expand its product offerings, adding risk-managed products with the acquisition of Enhanced Investment Technologies, LLC (“INTECH”), and value products through investments in Bay Isle Financial LLC (“Bay Isle”) and Perkins, Wolf, McDonnell and Company, LLC (“PWM”), and a strategic alliance with Vontobel Asset Management, Inc. (“Vontobel”).

      The diverse lineup of products in various investment disciplines offered by Janus includes growth, core/blend, international, value and risk-managed equity funds, as well as specialty fixed income and money market funds. This business model attempts to leverage a single Janus brand and global distribution network and, most importantly, bring greater diversity to Janus’ product offerings that may ultimately help to insulate the Company from market fluctuations as investment styles and disciplines shift in and out of favor.

      Each investment discipline is managed according to the style and strength of the respective money management firm. This strategy allows each affiliate to stay focused on its respective core competency or area of expertise, as follows:

	•	Janus Capital Management LLC (“JCM”) is one of the largest equity managers in the United States specializing primarily in growth, core/blend and international equity investing. For more than

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		three decades, JCM has employed a bottom-up, company-by-company investment approach based on the conviction that stock prices ultimately follow earnings growth.
	•	INTECH has been managing institutional assets since 1987 using mathematically driven equity investing strategies. INTECH’s unique investment process is based on a mathematical theory that attempts to capitalize on the random nature of stock price movements with the goal of outperforming a passive index while minimizing risk. From the date of acquisition (February 28, 2002) through the end of 2003, INTECH’s assets under management have increased 138% from $6.0 billion to $14.3 billion, respectively.
	•	PWM, with more than 22 years of industry experience, focuses on small- and mid-cap value investing through intensive research and careful consideration of risks.
	•	Bay Isle specializes in large- and small-cap value, and REIT equity investing. For more than 16 years, Bay Isle has employed a bottom-up analysis with an intense focus on quality companies that trade at discounts to their fair market value.
	•	Vontobel has been managing value-style equity portfolios for institutional clients since 1988. Vontobel’s concentrated approach to value investing is available in large-cap U.S. value and international equity disciplines.

      Janus employs a broad and open distribution strategy both domestically and abroad. Janus’ domestic distribution network includes its direct no-load business and its well-established third-party partnerships across the mutual fund supermarket, retirement plan, variable annuity and mutual fund wrap channels. Additionally, Janus packages products for distribution in the institutional separate account and subadvised channels both domestically and abroad. Janus’ expanding product offerings and its broad and open distribution strategy across several key channels is represented in the following charts at December 31, 2003:

Assets Under Management by Distribution Segment ($151.5 billion)		Assets Under Management by Discipline ($151.5 billion)

      Janus offers four distinct domestic mutual fund families: Janus Investment Fund (“JIF”), Janus Aspen Series (“JAS”), Janus Adviser Series (“JAD”) and Janus Adviser. Each is priced appropriately for its respective distribution channel. These fund families and the distribution channels they serve offer the complementary investment disciplines of JCM, INTECH, PWM, Vontobel and Bay Isle.

      Janus’ original fund family, JIF, primarily serves the investment needs of the direct and retail supermarket investors. Janus services approximately 4.5 million accounts in the traditional no-load channel.

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      The JAS fund family was launched in September 1993 exclusively for third-party distribution of variable annuities and certain qualified retirement plans. The JAS funds are sold primarily through insurance companies and broker dealers.

      The JAD fund family was introduced in August 2000 to meet the growing needs of Janus’ retirement plan and advisor-assisted businesses. JAD offers multiple share classes (currently I and C shares) and is sold exclusively through financial intermediaries and retirement plans.

      The Janus Adviser fund family was introduced in October 2003. The existing series of Janus Adviser funds were formed from the reorganization of Class A and Class C shares of Vontobel U.S. Value Fund and Vontobel International Equity Fund. Janus Adviser offers multiple share classes (currently A, I and C shares) and is sold primarily through financial intermediaries and retirement plans.

      Janus International, the Company’s offshore distribution channel, was launched in October 1998 to bring the Janus approach of investment management to institutional and retail investors outside the United States. Janus’ international product line is sold through a range of Dublin-based funds, including the Janus World Funds Plc (“JWF”) and separately managed accounts. Collectively, JIF, JAS, JAD, Janus Adviser and JWF are referred to herein as the “Janus Funds”.

Industry Segment Financial Information

      For purposes of segment reporting, Janus has three segments: Investment Management, representing businesses that derive the majority of their revenues from providing investment management services under investment advisory agreements; DST, composed of the Company’s equity investment in DST Systems, Inc. (“DST”); and Printing and Fulfillment, composed of the graphics design, commercial printing and fulfillment operations. The Investment Management segment generated approximately 94%, 93% and 98% of Janus’ revenue in 2003, 2002 and 2001, respectively.

      Janus reports geographic area information with respect to revenues and long-lived assets based on where services are performed. Primary locations are the United States and the United Kingdom. See additional information in Part II, Item 8, Financial Statements and Supplementary Data, Note 20 — Segment and Geographic Information, of this Form 10-K.

Competition

      The investment management industry is relatively mature and saturated with competitors that provide services similar to Janus and often have undifferentiated capabilities. As such, Janus generally encounters significant competition in most areas of its business. Janus competes with mutual fund advisors, brokerage and investment banking firms, insurance companies, banks and other financial institutions, many of which are larger, have proprietary access to distribution, have a broader range of product choices and investment capabilities and have greater capital resources. Janus’ ability to successfully compete in this market is based on its ability to achieve superior short- and long-term investment performance; to maintain its current distribution relationships and to continue to build new ones; to develop products with pricing that aligns well with its distribution channels and are attractive to underlying clients and investors; to offer multiple investment choices; to provide effective shareowner servicing; to retain and grow the confidence of its clients; and to develop and leverage its brand.

      Competition in the mutual fund industry continues to increase as a result of greater flexibility afforded to banks and other financial institutions to sponsor mutual funds and distribute mutual fund shares, and as a result of consolidation and acquisition activity within the industry. Furthermore, the marketplace for investment products is rapidly changing; investors are becoming more sophisticated, the demand for and access to investment advice and information are becoming more widespread, and more investors are demanding investment vehicles that are customized to their personal situations. The extent of any adverse impact on mutual fund demand due to the increasing availability of alternative product types, such as hedge funds, exchange traded funds and separate accounts, is uncertain.

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Regulation

      The investment management industry is subject to extensive federal and state laws and regulations intended to benefit or protect the shareholders of funds managed by Janus and advisory clients of Janus. These laws and regulations generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the conduct of Janus’ business for failure to comply with the laws and regulations. Possible consequences or sanctions for such failure to comply include, but are not limited to; voiding of investment advisory and subadvisory agreements; the suspension of individual employees; limitations on engaging in certain lines of business for specified periods of time; and/or revocation of registrations, censures and fines.

      The Securities and Exchange Commission (“SEC”) is the federal agency generally responsible for administering the federal securities laws. Certain subsidiaries of Janus are registered investment advisors under the Investment Advisors Act of 1940 (the “Investment Advisors Act”) and, as such, are supervised by the SEC. The Investment Advisors Act requires registered investment advisors to comply with numerous obligations, including record-keeping requirements, operational procedures and disclosure obligations. Certain subsidiaries of Janus are also registered with various states, and thus are subject to the oversight and regulation of such states’ regulatory agencies.

      Through its subsidiaries, Janus acts as advisor or subadvisor to both proprietary and non-proprietary mutual funds, which are registered with the SEC pursuant to the Investment Company 1940 Act, as amended (the “1940 Act”). Janus subsidiaries also serve as advisor or subadvisor to separately managed accounts and commingled accounts that are not required to register under the 1940 Act. Janus subsidiaries are governed by the Investment Advisors Act with respect to their advisory and subadvisory services. As an advisor or subadvisor to a registered investment company, Janus must comply with the requirements of the 1940 Act and related regulations. In addition, the advisor or subadvisor to a registered investment company generally has obligations with respect to the qualification of the registered investment company under the Internal Revenue Code of 1986, as amended (the “Code”).

      Janus’ broker-dealer subsidiary is registered with the SEC under the Securities Exchange Act of 1934 and is a member firm of the National Association of Securities Dealers (the “NASD”), the securities industry’s self-regulatory organization. The NASD has established conduct rules for all securities transactions among broker-dealers and private investors, trading rules for the over-the-counter markets and operational rules for its member firms. The NASD conducts examinations of member firms, investigates possible violations of the federal securities laws and its own rules, and conducts disciplinary proceedings involving member firms and associated individuals. The NASD administers qualification testing for all securities principals and registered representatives.

      Registered broker-dealers and members of the NASD are subject to net capital requirements, including those of various federal and state regulatory agencies. The net capital of Janus’ broker-dealer has consistently met or exceeded all minimum requirements. Many of the non-U.S. securities exchanges and regulatory authorities also have imposed rules (and others may impose rules) relating to capital requirements applicable to Janus’ foreign subsidiaries. These rules, which specify minimum capital requirements, are designed to measure general financial integrity and liquidity, and require that a minimum amount of assets be kept in relatively liquid form.

      Janus’ broker-dealer is also subject to regulation under state law in some states. The federal securities laws prohibit states from imposing substantive requirements on broker-dealers that exceed those under federal law. This does not preclude the states from imposing registration requirements on broker-dealers that operate within their jurisdiction or from sanctioning these broker-dealers and their employees for engaging in misconduct.

      Janus subsidiaries are also subject to the Employee Retirement Income Security Act of 1974 (“ERISA”) and related regulations to the extent they are considered “fiduciaries” under ERISA with respect to some of their clients. ERISA, related provisions of the Code and regulations issued by the Department of Labor impose duties on persons who are fiduciaries under ERISA, and prohibit some

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      Certain Janus subsidiaries are authorized to conduct investment business in the United Kingdom pursuant to the Financial Services and Markets Act 2000 (the “FSMA”). Their investment management advisory activities are regulated by the Financial Services Authority (“FSA”), which in addition to broad supervisory powers, may discipline the businesses it regulates. Disciplinary powers include the power to temporarily or permanently revoke the authorization to carry on regulated business following a breach of FSMA and/or regulatory rules, the suspension of registered employees, censures and fines for both regulated businesses and their registered employees.

Employees

      As of December 31, 2003, Janus had 1,048 full-time employees in the Investment Management segment and 443 full-time employees in the Printing and Fulfillment segment. No Janus employees are represented by a labor union.

Available Information

      Janus files reports with the SEC. Copies of Janus’ filings can be obtained from the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information can be obtained on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

      Janus files reports with the SEC electronically via the internet. The SEC 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 Capital Group 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.

Risk Factors

      The SEC, the New York Attorney General, the Colorado Securities Commissioner, the Colorado Attorney General, the NASD, the West Virginia Attorney General, the Florida Department of Financial Services, and one or more U.S. Attorney offices and other regulators are investigating trading practices in the mutual fund industry including Janus, current and former Janus employees and the Janus Funds. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Significant Developments and Transactions”.

      As of the date of this filing, charges have not been filed against Janus in connection with market-timing activities in the mutual fund industry. In the event that charges are filed, Janus could face significant penalties, which could include the revocation or suspension of our qualification to act as an investment advisor or to be associated with an investment company. Such penalties or an enforcement action against the Company or an employee could have a material adverse effect on the Company’s future success. In addition, any resolution of these investigations could include, but may not be limited to,

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      The office of the New York Attorney General has sought reductions in management fees charged to mutual funds in connection with settlements with other mutual fund investment advisors. If Janus were required to reduce its advisory fees, revenues would decline. Any significant decline would have a material adverse effect on the Company’s liquidity, financial condition and results of operations.

      As a result of the increased scrutiny of the mutual fund industry resulting from the mutual fund trading investigations, the United States Congress, the SEC, other government authorities and the media are focusing intense scrutiny on the mutual fund industry.

      In addition to the investigations by the SEC and certain state Attorneys General, recent Congressional hearings have suggested proposed changes to the regulation of the mutual fund industry generally. One bill offered in the Senate proposed a Mutual Fund Oversight Board similar to the Public Company Accounting Oversight Board. The SEC has also proposed new regulations to require written codes of ethics for investment advisers and statements with extensive disclosures of cost schedules and compensation schemes, including commissions and related incentive structures. Compliance with these and other potential new reporting and operational requirements and regulations will likely increase the cost of operating mutual funds.

      As a result, the regulatory environment in which Janus operates has changed and may continue to change. Janus 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. In addition, this increased scrutiny and these investigations could adversely affect investor confidence in the mutual fund industry in general and/or Janus and the Janus Funds, which may lead to decreases in new investments or increases in redemptions, and thus a decrease in revenues.

      Janus, the Janus board of directors, certain of the Janus Funds, the Janus Fund trustees and certain officers of Janus have received complaints in more than 60 civil actions. These lawsuits, most of which are pleaded as class actions, seek unspecified compensatory and punitive damages. Each of these cases is in a preliminary stage, and as a result, Janus is unable to determine the total potential impact that they may have on the results of operations, financial position and cash flows, or to estimate the range of potential losses that the Company would incur if the plaintiffs in any of these actions were to prevail. Any settlement or judgment on the merits of these actions could be significant, and Janus may not have the financial resources necessary to satisfy any such settlement or judgment.

      Since the majority of Janus’ revenues relate directly to the value of the assets under management, any decrease in the value or amount of those assets would have an adverse effect on revenues. Assets under management may decline for various reasons, many of which are not under Janus’ control. For any period in which revenues decline, Janus’ profits and profit margins may decline by a greater proportion because certain expenses remain relatively fixed.

      Janus’ reputation could be damaged as a result of the issues related to the mutual fund trading investigations and litigation. The investment management business is highly dependent on the trust and confidence of investors, and any damage to that trust and confidence could cause investors to not invest new assets or withdraw existing assets and result in a decrease in assets under management. Subsequent to

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      Other factors that could decrease assets under management (and therefore revenues) include the following:

	Declines in the market value of the assets in the funds and accounts managed. Declines could be caused by price declines in the securities markets generally, by price declines in the market segments in which those assets are concentrated or by firm-specific events that may significantly affect the valuation of individual security holdings held by Janus portfolios and client accounts. Janus’ assets under management are concentrated in the U.S. equity markets, and to a lesser extent, in the international equity markets. The effect of market price declines will be compounded if the funds and accounts managed underperform the applicable market or segment. In the case of money market funds, which invest exclusively in high-quality, short-term money market instruments, as well as other funds that invest in fixed income securities, the value of the assets in such funds may decline as a result of changes in interest rates, an issuer’s actual or perceived creditworthiness or an issuer’s ability to meet its obligations.
	Redemptions and other withdrawals from the funds and accounts managed. Investors (in response to adverse market conditions, the present investigations and lawsuits, the pursuit of other investment opportunities or otherwise) may reduce their investments in mutual funds in general, their investments in specific Janus Funds or in the market segments in which Janus portfolios and client accounts are concentrated. In addition, investors may move their funds to other investment managers due to poor investment performance of the funds and accounts managed by Janus or other portfolio risk characteristics.

      Most of Janus’ revenues are derived pursuant to investment advisory agreements with mutual funds and other separate and private accounts. The termination of, or failure to renew, a significant number of these agreements or the reduction of the fee rates applicable to such agreements, could have a material adverse impact on revenues and profits. With respect to investment advisory 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 Investment Company Act of 1940, as amended), and must be approved and renewed annually by the disinterested members of each fund’s board of directors or trustees, or its shareowners, as required by law. In addition, the board of trustees or directors of certain funds and separate and private accounts of Janus generally may terminate these investment advisory agreements upon written notice for any reason.

      Janus’ ability to market our mutual funds, subadvisory services and investment services is partly dependent on access to the client base of insurance companies, defined contribution plan administrators, securities firms, brokers, banks and other intermediaries. These intermediaries generally offer their clients various investment products in addition to, and in competition with, Janus. Further, the private account business uses referrals from financial planners, professional investment advisors and other professionals. Janus cannot be certain that it will continue to have access to these third-party distribution channels. The inability to access clients through third-party distribution channels could have a material adverse effect on Janus’ financial condition, results of operations and business prospects.

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      On December 1, 2003, Janus exchanged 32.3 million common shares of DST for 100% of the shares of Capital Group Partners, Inc. (“CGP”) (the “DST exchange transaction”). The transaction was implemented in reliance on opinions from Janus’ tax advisors that, although the matter is not free from doubt, the transaction should qualify as a tax-free exchange under Section 355 of the Code. See Management’s Discussion and Analysis of Financial Condition and Results of Operations, Long-Term Liquidity and Capital Requirements — Other Sources of Liquidity.

      The tax opinions received by Janus are not in any manner binding upon the IRS. In early 2003, representatives of Janus and DST engaged in preliminary discussions with representatives of the IRS National Office with respect to whether the IRS believed it would be likely to issue a private letter ruling on the DST exchange transaction if a request for such a private letter ruling were to be filed. Such discussions with the IRS included the initial information about the transaction with a limited set of facts. The representatives of the IRS indicated that it would be unlikely that the IRS would issue a private letter ruling on a transaction involving the exchange of a company having cash assets that represented such a high percentage of total asset value, as was the case with respect to CGP. Following such preliminary discussions, neither DST nor Janus proceeded with a submission of a request for a private letter ruling or a submission of the information regarding the DST exchange transaction that ordinarily would be submitted with such a request. Instead, Janus and DST proceeded with the DST exchange transaction relying on the tax opinions of their respective tax advisors.

      If the IRS were to successfully challenge the tax-free treatment of the DST exchange transaction, Janus would be deemed to have a taxable gain of up to $1.1 billion as of December 1, 2003, the effective date of the DST exchange transaction, resulting in an additional tax liability of up to $430 million for 2003. Janus would also be required to pay interest on such tax liability through the date of payment of the tax and accrued interest. If Janus were to incur such a tax liability in the future, the Company may not have readily available resources to pay such liability at that time. Such payment would have a material adverse effect on liquidity, results of operations and financial condition.

      Two nationally recognized credit rating agencies lowered Janus’ long-term debt rating during 2002, reflecting the relatively high leverage (compared to industry peers) and concentrated asset mix that led to substantial declines in earnings and cash flows. In 2003, the rating agencies indicated that they are likely to lower the long-term debt rating again in the near future if Janus does not reduce its leverage and experience improved asset growth. Further reductions of such ratings could negatively impact Janus’ ability to obtain future financing, increase the cost of any new borrowing arrangements and potentially impact Janus’ ability to retain and attract clients.

      Janus’ business is similar to other investment management businesses in that it is dependent on the ability to attract, retain and motivate highly skilled, and often highly specialized, technical, executive and management personnel.

      The market for investment managers is extremely competitive and is increasingly characterized by the frequent movement of investment managers among different firms. In addition, since individual investment managers often maintain a strong, personal relationship with their clients that is based on their clients’ trust in the manager, the departure of a manager could cause the loss of client accounts, which could have a material adverse effect on Janus’ liquidity, results of operations and financial condition.

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      In 2003, Janus experienced a greater than usual turnover of executive and management personnel. If such turnover continues and Janus is unable to replace key personnel with highly qualified individuals, it could have a material adverse effect on Janus’ liquidity, results of operations and financial condition.

      The ability to consistently and reliably obtain securities pricing information, process shareowner transactions and provide reports and other customer service to the shareowners of funds managed by Janus is essential to our operations. Any delays or inaccuracies in obtaining pricing information, processing shareowner transactions or providing reports, and any inadequacies in other customer service, could alienate customers and potentially give rise to claims against Janus. Janus’ customer service capabilities, as well as Janus’ ability to obtain prompt and accurate securities pricing information and to process shareowner transactions and reports, is highly dependent on communications and information systems and on third-party vendors.

      These systems could suffer failures or interruptions due to various natural or man-made causes, and the back-up procedures and capabilities may not be adequate to avoid extended interruptions in operations. Additionally, in the past few years Janus has placed greater reliance on its automated customer service systems, thereby increasing the related risks if such systems were to fail.

      Provisions of Janus’ certificate of incorporation, bylaws and shareholders’ rights plan might have the effect of discouraging or delaying certain transactions involving an actual or potential change in control of Janus. For example, Janus’ certificate of incorporation and bylaws authorize blank series preferred stock, require a supermajority stockholder vote for approval of certain types of business combinations, establish a staggered board of directors and impose certain procedural and other requirements for some corporate actions. The shareholders’ rights plan could significantly dilute the interest in Janus of persons seeking to acquire control without prior approval of Janus’ Board of Directors.

      Janus’ headquarters are located in Denver, Colorado. Janus’ Investment Management segment leases office space from non-affiliated companies for administrative, investment and shareowner servicing operations in Denver, Colorado; Westport, Connecticut; Oakland, California; Princeton, New Jersey; Palm Beach Gardens, Florida; the United Kingdom; and Hong Kong.

      The Printing and Distribution segment leases office space and equipment from non-affiliated companies for administrative, warehousing and production operations in Melville, New York; Kansas City, Missouri; New York, New York; Chicago, Illinois; and Sacramento, California.

      In the opinion of management, the space and equipment owned or leased by the Company are adequate for existing operating needs.

      The information set forth in response to Item 103 of Regulation S-K under “Legal Proceedings” is incorporated by reference from Part II, Item 8, Financial Statements and Supplemental Data, Note 17 — Mutual Fund Investigation, of this Annual Report on Form 10-K.

      No matters were submitted to a vote of security holders during the three-month period ended December 31, 2003.

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PART II

      Janus’ common stock is traded on the NYSE (symbol: JNS). The following table sets forth the high and low sale and closing prices as reported on the NYSE composite tape for each completed quarter since January 1, 2002.

      On March 3, 2004, there were approximately 4,330 holders of record of Janus’ outstanding common stock.

      Janus declared an annual $0.04 per share dividend in the second quarter of 2003 and 2002. Janus anticipates paying an annual $0.04 per share dividend in 2004.

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      The selected financial data below should be read in conjunction with Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation, of this Form 10-K and the consolidated financial statements and the related notes thereto, and the Reports of Independent Accountants thereon, included under Part II, Item 8, Financial Statements and Supplementary Data, of this Form 10-K, and such data is qualified by reference thereto.

General

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

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      Operating Expenses. Janus’ operating expense structure is composed of variable costs, which tend to fluctuate directly with average assets under management, and fixed costs, which generally do not vary with assets. Examples of variable costs include incentive compensation for portfolio management and sales personnel, the companywide bonus plans and third-party distribution costs. Fixed expenses are composed primarily of base salaries, restricted stock amortization, depreciation, and general and administrative costs. As average assets under management in 2003 declined approximately 32% from the levels experienced in 2001, variable expenses decreased 36% (consistent with average assets), but fixed expenses decreased only 17%. As a result, operating margins decreased from 34.8% in 2001 to 24.5% in 2003.

Overview of Operating Results

      Janus had net income of $949.9 million, or $4.14 per diluted share, in 2003 compared to $84.7 million, or $0.38 per diluted share, in 2002. The 2003 results include the financial impact of the DST exchange transaction of $807.7 million, or $3.51 per diluted share; a charge of $71.8 million, or $0.21 per diluted share, for costs associated with the mutual fund investigation; restructuring and impairments of $11.9 million, or $0.04 per diluted share; and a loss from the disposal of Nelson Money Managers Plc (“Nelson”) (reported as a discontinued operation) of $5.9 million, or $0.03 per diluted share. The 2002 results include a DST-related tax charge of $107.8 million, or $0.48 per diluted share, and restructuring and impairments of $59.4 million, or $0.17 per diluted share.

      Janus finished 2003 with assets under management of $151.5 billion, a $13.1 billion increase since the beginning of the year. Strong equity market returns in 2003 resulted in market appreciation of $30.8 billion, which was partially offset by net outflows of $16.2 billion, primarily concentrated in the growth equity discipline, and a reduction of $1.5 billion related to the disposition of Nelson. After the announcement of the mutual fund investigation in September 2003, Janus experienced an increase in

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      At the beginning of 2003, Janus eliminated the holding company structure that it had operated under since becoming a public company in 2000. The new management team set and accomplished a number of goals in 2003:

	•	In early 2003, the Company transitioned from a holding company structure to an integrated operating company, which eliminated significant overlapping levels of management and competing subsidiaries, and generated cost savings of approximately $10.0 million per quarter, relative to the third quarter 2002 expense base.
	•	In March, Janus converted all outstanding employee-held shares of JCM into shares of public company stock, eliminating private ownership and clearly aligning the interests of public stockholders and employees.
	•	Janus’ diversified its traditional growth-oriented offerings with the introduction of several new Janus-branded funds, including:

	–	INTECH risk-managed;
	–	Vontobel large-cap value;
	–	PWM small- and mid-cap value; and
	–	Bay Isle small-cap value and U.S. REITs.

	•	Janus made significant progress in disposing of non-strategic assets and strengthening its balance sheet, as evidenced by the sale of Nelson, a U.K.-based investment management company, and the exchange of 32.3 million common shares of DST for stock in a corporation holding a printing and graphics design business and cash.

Significant Developments and Transactions — 2003

      DST Exchange Transaction. On December 1, 2003, Janus exchanged 32.3 million common shares of DST for 100% of the stock of CGP, a corporation that includes a printing and graphics design business with a value of $115.0 million, and $999.3 million in cash. The cash was contributed by DST into CGP prior to effecting the DST exchange transaction for the purpose of equalizing the value of the CGP stock with the value of the shares of DST common stock exchanged. The share disposition resulted in a $631.3 million gain and the reversal of previously recorded deferred income taxes of $176.4 million, as the transaction was implemented in reliance on opinions from Janus’ tax advisors that, although the matter is not free from doubt, the transaction should qualify as a tax-free exchange under Section 355 of the Code. No advance ruling on the transaction was obtained from the IRS. After the transaction, Janus owns 7.4 million shares of DST, or approximately 9%, and no longer accounts for DST as an equity method investment. See Management’s Discussion and Analysis of Financial Condition and Results of Operations, Long-Term Liquidity and Capital Requirements — Other Sources of Liquidity.

      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 alleges that this practice is in contradiction to policies stated in the prospectuses for certain Janus Funds.

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      Janus or one or more of its subsidiaries has received subpoenas and formal or informal document requests from a number of legal and regulatory agencies  — including the NYAG, the SEC, the National Association of Securities Dealers, Inc., the Colorado Securities Commissioner, the Colorado Attorney General, the West Virginia Attorney General, the Florida Department of Financial Services, and one or more U.S. Attorney offices. The documentation and information sought by these agencies relate to a variety of matters, including but not limited to: late trading, market timing, improper disclosure of portfolio holdings, trading by executives in fund shares, certain revenue sharing arrangements, information related to cash and non-cash compensation paid to brokers, trading by Janus investment personnel in portfolio securities owned by Janus Funds, information provided to certain Janus fund trustees in connection with the review and approval of management contracts related to Janus Funds, information related to certain types of distribution and sales arrangements with brokers and other distributors of mutual fund products, and other topics related to the foregoing. Janus has also been subpoenaed in two grand jury proceedings as a witness. Janus’ only role in these grand jury proceedings has been to provide background information and trading records related to the grand juries’ investigations of other parties. In addition, the United Kingdom’s Financial Services Authority (“FSA”) announced at the end of 2003 that it was conducting an industry-wide review related to the market timing practices of UK investment management firms. In connection with such review, the FSA requested documentation from Janus’ UK subsidiary, Janus International Limited, related to market timing, late trading, disclosure of non-public information about portfolio holdings and related topics. Janus either has complied or intends to comply with these subpoenas and other document and information requests.

      As of March 9, 2004, none of the legal or regulatory agencies conducting investigations into market timing, late trading and other trading practices in the mutual fund industry have brought an enforcement action or commenced other legal proceedings against Janus, Janus employees or any of the Janus Funds. Janus has been and will continue cooperating with the federal and state legal and regulatory authorities that are conducting investigations related to trading practices in the mutual fund industry. While Janus has had discussions with government authorities to resolve the pending investigations, the outcome and timing of those discussions will be determined in large part by the government agencies. As in any investigation, the various regulators are assessing conduct by Janus and by its current and former employees. An enforcement action against the Company or an employee could have a material adverse effect on the Company’s future success. Any resolution of these investigations could include, but may not be limited to, sanctions, penalties, payments to fund shareholders, personnel changes and structural changes in the governance of Janus’ mutual fund business. In addition, the NYAG’s office has sought reductions in management fees charged to mutual funds in connection with settlements with other mutual fund investment advisors. It is possible that Janus could be required to reduce its management fees in connection with a settlement with the NYAG or other regulators.

      Janus has been conducting an internal review of market timing and other trading practices at Janus which, as of the date of this annual report, indicates that there were approximately twelve discretionary frequent trading arrangements across Janus’ U.S.-based mutual fund business, and that significant discretionary frequent trading appears to have occurred with respect to four of those arrangements. All of these arrangements have been terminated. It also appears that redemption fees payable on certain transactions may have been waived. As previously disclosed, Janus also believes that there were several discretionary frequent trading arrangements in Janus’ offshore mutual fund business, and these arrangements have also been terminated. In the case of its main offshore fund family, Janus World Funds Plc (“JWF”), Janus International Limited engaged outside counsel to advise it on whether issues raised by the NYAG’s investigation have had any impact on JWF and its fund shareholders. Counsel concluded that there had been no wrongdoing in relation to frequent trading at JWF and reported its findings to the U.K. regulators. Similar investigations are ongoing in relation to other Janus offshore funds. In addition, given that most offshore jurisdictions have their own unique set of business and product structures as well as rules and regulations, Janus is working with its foreign legal counsel and its offshore distributors to develop appropriate guidelines for defining existing and future business practices.

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      Legal counsel to the Independent Trustees of certain Janus Funds hired Ernst & Young LLP (“EY”) to independently evaluate whether there was any monetary impact to any Janus Funds in which discretionary market timing occurred. Following completion of that evaluation in December 2003, Janus and the Independent Trustees of certain U.S.-based Janus Funds announced that Janus intends to restore $31.5 million to the funds and/or the fund investors. The $31.5 million figure includes: (1) net gains of approximately $22.8 million realized by the discretionary frequent traders, (2) approximately $2.7 million representing the opportunity cost of those gains had they been available to the funds, (3) management fees of approximately $1.0 million received by Janus related to discretionary trading accounts and (4) waived redemption fees of approximately $5.0 million. The restoration amount was calculated by EY and does not include any fines and penalties that may be sought by regulators. It is important to note that neither the methodology underlying the determination of such $31.5 million amount, nor the mechanics by which the payment might be made to funds or fund shareholders, has been approved by or agreed to by regulators having authority over Janus or the Janus Funds.

      In addition to such $31.5 million restoration, Janus has accrued $40.3 million for other expenses directly related to the regulatory investigations through December 31, 2003, which include legal fees, shareholder communication costs, and the current estimate of the costs of the regulatory investigations. Since Janus has not yet resolved the regulatory investigations, Janus cannot state that these charges will be sufficient to cover the ultimate cost of such regulatory investigations. In contrast to the regulatory investigations, Janus has not recorded any liability for the related civil lawsuits described below because an estimate of this potential liability cannot be determined at this time. The potential liabilities for additional costs related to the regulatory investigations and the related civil lawsuits may be material, but at this time Janus is unable to determine the total potential impact that these contingencies may have on Janus’ results of operations, financial position and cash flows. Certain expenses related to these issues may be recoverable from Janus’ insurance carriers, but Janus is unable to assess any possible insurance reimbursements at this time.

      As noted above, the pending investigations by the NYAG and other agencies also seek to determine whether late trading occurred in mutual funds managed by Janus. The term “late trading” generally refers to the practice of permitting or processing a fund purchase or redemption in a manner that improperly allows the current day’s fund share price to be used for an order that was placed or improperly processed at a time following the deadline (normally 4:00 p.m. (EST)) for obtaining that day’s share price. Because many mutual fund transactions are cleared and settled through financial intermediaries, Janus cannot exclude the possibility that one or more intermediaries may have submitted improper or unauthorized late trade transactions to Janus in violation of Janus’ agreements with those intermediaries. In addition, Janus has been advised by certain financial intermediaries that, as a result of systems errors, such intermediaries may have permitted a small number of trades to be submitted late.

      Subsequent to the initiation of the investigations by the NYAG and the SEC, a number of civil lawsuits have been brought, in various federal and state courts, against Janus, the Janus Funds, and related entities and individuals on behalf of fund shareholders and shareholders of Janus Capital Group Inc. The factual allegations made in these actions are generally based on the NYAG complaint against Canary Capital and in general allege that Janus allowed certain hedge funds and other investors to engage in “market timing” trades in Janus Funds. Such lawsuits allege a variety of theories for recovery including, but not limited to: (i) violation of various provisions of the federal securities laws; (ii) breach of fiduciary duties, as established by state common law or federal law, to the funds and/or individual investors; (iii) breach of contract; (iv) unjust enrichment; (v) violations of section 1962 of the Racketeering, Influenced and Corrupt Organizations Act; and (vi) failure to adequately implement fair value pricing for portfolio securities in Janus Funds.

      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”

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      These lawsuits are pending in a number of state and federal jurisdictions. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred a number of these actions to the District of Maryland for coordinated proceedings. Janus has notified the Panel that the remaining federal actions are related to those actions already transferred, and has requested that those actions be transferred as well. One action (alleging failure to adequately implement fair value pricing) has been remanded to state court in Madison County, Illinois, and is not subject to the federal transfer procedures, although Janus has requested the federal court to stay discovery in that action. A motion to remand is pending in another action that has not yet been transferred.

      Net Redemptions of Janus Products. Subsequent to the announcement of the investigation, Janus experienced an increase in the net redemptions of long-term assets (non-money market funds). In the first nine months of 2003, Janus experienced average net outflows of long-term assets of $2.2 billion per quarter compared to $7.9 billion during the fourth quarter of 2003. In the first two months of 2004, net outflows of
long-term assets totaled $5.0 billion. As of March 12, 2004, assets under management totaled $144.3 billion.

      In addition, the Company expects additional withdrawals of approximately $4.5 billion between March and May of 2004 based on notifications received from certain institutional clients through the end of February 2004. At the end of the year, institutional clients generally perform evaluations of investment managers. To the extent an institutional client decides to close their account with Janus as a result of the year-end evaluation process, there is a lag between the notification of an intent to withdraw assets and the actual outflow. As a result of the expected redemptions, Janus will record a write-down of intangible assets totaling approximately $14.0 million.

      Partially offsetting these prospective outflows are approximately $1.7 billion of estimated inflows (mandated but not yet funded) into INTECH products.

      JCM Restricted Stock Awards. On March 12, 2003, JCM became a wholly-owned subsidiary through the conversion of all outstanding employee-held shares of JCM into shares of Janus common stock. The conversion was completed to simplify Janus’ corporate structure and more closely align interests of employees with those of shareholders.

      A special committee of independent members of Janus’ Board of Directors approved a conversion ratio of 20.1 shares of Janus common stock for each JCM share. The conversion ratio was based on the fair market value of each equity instrument at the date of conversion. The conversion resulted in the issuance of approximately 15.6 million shares of Janus common stock. Of the 15.6 million shares, 3.7 million shares were vested prior to conversion and 1.8 million shares were vested on March 31, 2003. The conversion did not modify any of the terms of the awards.

      Company Reorganization. The Company reorganized its operations in early 2003 with the goal of eliminating redundant management teams, investment capabilities and infrastructure (referred to herein as the “Reorganization”). The Reorganization was accomplished by merging JCC into the Company, and changing the name of the Company from Stilwell Financial Inc. (“Stilwell”) to Janus Capital Group Inc. Janus’ headquarters were moved from Kansas City, Missouri, to the existing JCM offices in Denver, Colorado. As a result of moving corporate headquarters to Denver, Colorado and merging Berger Financial Group LLC (“Berger”) growth funds into similar Janus funds, Janus closed the Stilwell facilities located in Kansas City, Missouri; closed the Berger facilities located in Denver, Colorado; and eliminated a majority of the work force (approximately 140) at Stilwell and Berger.

      In the third quarter 2002, when the Reorganization was announced, Janus recorded a charge of $39.4 million for severance expenses and $6.7 million for facility closing costs and fixed asset impairments. The third quarter 2002 charge also included $13.3 million in investment impairments related to certain

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Significant Developments and Transactions — 2002

      Enhanced Investment Technologies, LLC Acquisition. On February 28, 2002, Janus acquired a majority ownership interest of INTECH for approximately $93.4 million. INTECH, which had approximately $6.0 billion in assets under management at acquisition, uses a proprietary mathematical investment process to manage equity securities for institutional and private clients. The acquisition of INTECH expanded the product offerings available to Janus clients.

      In April 2003, Janus exercised its call option to purchase an additional 27.5% of INTECH, increasing Janus’ ownership of INTECH to 78%. The call option was accounted for as a financing arrangement, and therefore, the consolidated financial statements of Janus have included INTECH as a 78% majority owned subsidiary since the initial acquisition in February 2002. No additional goodwill or intangibles were recorded as a result of the exercise of the option.

      JCM Restricted Stock Awards. On April 1, 2002, in conjunction with forming a limited liability company, Janus transferred the business and operations of JCC to JCM. Concurrent with the conversion to JCM, approximately 6.2% of the shares of JCM were issued to key JCM employees through two grants.

      The first grant was a one-time share grant equivalent to $235.0 million, or 5% of JCM, all of which was originally scheduled to vest at the end of seven years, but included the opportunity for accelerated vesting (either 20% or 33% annually) when defined investment performance targets were achieved. The second grant totaled $69.0 million, or 1.2% of JCM, and represented the annual long-term incentive component of the employees’ compensation package for 2001 and was scheduled to vest at the end of five years, with opportunities for acceleration similar to the shares for the one-time grant.

      In connection with the Reorganization, the Company changed the vesting for these two grants and all previous JCM equity grants to a pro rata five-year schedule. The change in vesting resulted in the recognition of additional restricted stock compensation of approximately $26.0 million in 2002, which under the original vesting schedule would have been recognized in future years. The first grant has an annual vesting date of March 31 and the second grant has an annual vesting date of December 31. On March 12, 2003, JCM became a wholly-owned subsidiary through the conversion of all outstanding employee-held shares of JCM into shares of Janus common stock.

      Debt Repurchase and Offerings. On April 30, 2002, pursuant to the terms of the zero-coupon convertible senior notes due April 30, 2031 (“Convertible Notes”), holders of the notes required Janus to repurchase $820.7 million of the Convertible Notes (approximately $614.5 million of accreted value). To partially fund the payment of the Convertible Notes, Janus issued Senior Notes in April and July of 2002 totaling $358.1 million.

Results of Operations — 2003 Compared to 2002

      Revenue. Investment management and shareowner servicing fees decreased 12.1% to $987.5 million from $1,123.2 million in 2002, reflecting the decline in average assets under management. Average assets under management in 2003 declined 11.5% to $144.1 billion from $162.8 billion in 2002. Investment management and shareowner servicing fees are generally based upon a percentage of the market value of assets under management and are calculated under contractual agreements with Janus’ mutual funds, subadvised relationships and separate accounts.

      Expenses. Employee compensation and benefits decreased $14.3 million, or 5.9%. Because of the Reorganization and other employee reductions, which reduced average headcount by approximately 300

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      Portfolio managers earn incentive compensation based on the revenue generated from assets managed combined with their one- and three-year relative fund performance. The Company is expecting the funds’ three-year relative performance numbers to improve during 2004, as weak performing time periods begin to roll out of the calculation. As such, incentive compensation may increase during 2004, even if average assets under management remain consistent.

      Restricted stock compensation decreased $20.5 million, or 20.7%, to $78.7 million due to a $26.0 million third quarter 2002 charge related to the change in vesting schedule for restricted stock awards to a five-year pro rata schedule. This charge was partially offset by 12 months of amortization in 2003 related to the one-time April 1, 2002 grant compared to nine months in 2002.

      Marketing and distribution expense fell 23.8%, or $51.5 million, as a result of a decline in assets under management distributed through the third-party or adviser-assisted segment, and reduced discretionary advertising. Distribution fees, which constitute the majority of the marketing and distribution expenses, are based on a contractual percentage of the market value of assets under management distributed through the third-party or adviser-assisted segment. Advertising declined $8.5 million, approximately $2.6 million of which was due to the closure of Berger as a part of the Reorganization.

      General, administrative and occupancy expenses declined $5.2 million, or 4.1%, due to the reduction in headcount and facility closures, offset by increases in corporate insurance rates.

      As a result of Janus agreeing to eliminate soft dollar payments for certain third-party products and services and expected increases in regulatory expenses caused by expected reforms in the industry, management expects that certain general and administrative expenses will increase in 2004.

      Janus’ effective tax rate of -7.3% in 2003 was a direct result of the DST exchange transaction, in which Janus recorded a $631.3 million gain and reversed previously recorded deferred income taxes of $176.4 million. Additional deferred taxes were not provided for the exchange transaction as the Company believes it will ultimately realize its investment in CGP in a tax-free manner.

Results of Operations — 2002 Compared to 2001

      Net Income. Janus had net income of $84.7 million, or $0.38 per diluted share, in 2002 compared to $302.3 million, or $1.31 per diluted share, in 2001. The 2002 results were negatively impacted by the continued decline in the equity markets combined with significant charges recorded during 2002, including: $46.1 million for severance expenses and facility closing costs resulting from the Reorganization; $13.3 million of investment and goodwill impairments; and a $107.8 million income tax charge (non-cash) resulting from the change in the Company’s assessment of its strategy to ultimately realize its equity investment in DST.

      Revenue. For the year ended December 31, 2002, investment management and shareowner servicing fees decreased 27% from $1,536.8 million to $1,123.2 million, primarily reflecting the decline in average assets under management and changes in product mix from equity funds to lower fee fixed income and money market funds. Average assets under management in 2002 declined 23% to $162.8 billion from $212.7 billion in 2001. Investment management and shareowner servicing 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. Changes in product mix and the market value of assets under management impact the amount of revenues earned.

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      Expenses. Employee compensation and benefits decreased $40.8 million, or 14%, in 2002 compared to 2001 reflecting lower cash incentive compensation (paid to portfolio management professionals) as well as a decline in the companywide annual cash incentive bonus (paid to non-investment personnel). Portfolio management incentive compensation decreased primarily due to a combination of lower management fee revenue and fewer fund performance targets achieved as compared to the prior year. The subjective component of the Company’s annual incentive bonus declined due to management’s assessment of the overall market conditions and the Company’s financial performance in 2002.

      Restricted stock compensation increased $60.8 million to $99.2 million in 2002, reflecting the equity granted to JCM employees in April 2002 (6.2% of JCM) and the change to a five-year pro-rata vesting schedule for all outstanding equity grants. This change in vesting resulted in the recognition of additional restricted stock compensation of approximately $26 million.

      Marketing and distribution declined $102.5 million in 2002 due to decreased assets under management distributed through the third-party or advisor-assisted segment, combined with lower overall marketing and promotion expenditures. Average assets under management subject to reimbursements/concessions decreased 30% in 2002. Marketing, promotion and advertising continued to decline in 2002, resulting from reduced spending on Janus retail products in television, print and other media advertising.

      Depreciation and amortization decreased $56.7 million, or 44%, in 2002 compared to 2001 resulting from lower amortization associated with goodwill and indefinite-life intangible assets, which ceased being subject to amortization as of January 1, 2002, pursuant to the new accounting guidelines set forth in Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Intangible Assets.”

      The increase in interest expense in 2002 of $23.0 million was due to a higher average outstanding debt balance in 2002 as compared to 2001. The Convertible Notes (issued in April 2001) were replaced in 2002 by two issuances of Senior Notes bearing higher interest rates. In addition, $400 million of Senior Notes were issued in November of 2001, on which two months of interest expense was incurred in 2001 compared to a full year in 2002.

      The provision for income taxes increased significantly due to Janus’ investment in DST and the JCM equity grants made in April 2002. In the third quarter 2002, Janus began to investigate alternative transactions related to the disposition of its DST investment, including transactions that would be taxable at the full federal and applicable state income tax rates. Accordingly, a non-cash charge of $107.8 million was recorded to accrue additional deferred income taxes, resulting in taxes being provided on Janus’ share of DST earnings since 1995 at full statutory rates. Previous to this change, Janus had provided deferred income taxes on the unremitted earnings of DST net of the 80% dividends received deduction provided for under current tax law.

      The impact of the JCM share grants made in April 2002 also contributed to a higher effective tax rate in 2002. Since the JCM shares represented profits interests (which are considered to have no value for tax purposes), a tax deduction was not available to the Company with respect to this compensation expense. On March 12, 2003, Janus converted all outstanding employee-held shares of JCM into shares of Janus common stock and now receives a tax deduction based on the fair market value of the awards on each annual vesting date. Due to the decline in the value of the awards since their grant date, a portion of the compensation expense (which is based on the value of the stock at the date of grant) was not deductible.

      Minority interest declined significantly from 2001 due to Janus’ purchase of 16% of the outstanding shares of JCM during 2001.

      DST Systems, Inc. Janus’ equity earnings from DST in 2002 decreased to $69.1 million from $75.4 million recorded in 2001. DST’s consolidated net income decreased $19.2 million to $209.0 million in 2002 from $228.2 million in 2001. The decline in earnings is due primarily to gains of $27.0 million (after tax) realized in 2001 and certain charges of $6.8 million (after tax) in 2002. Operating income of DST’s financial services segment, which provided 83% of 2002 consolidated operating income, increased to

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Liquidity and Capital Resources

      Summary of cash flow data for the years ended December 31, is as follows (in millions):

      Cash Flows — 2003. Janus’ cash flow from operations historically has been positive and sufficient to fund ordinary operations and capital expenditures. Janus generated $260.2 million of cash flows from operations in 2003 compared to $280.7 million in 2002, a decline of $20.5 million, attributable to the decrease in operating income, partially offset by changes in working capital items, which vary from year to year based on the timing of payments.

      Net cash provided by investing activities totaled $837.1 million in 2003 compared to net cash used for investing activities of $71.2 million in 2002. In 2003, Janus received proceeds, net of transaction costs, of $990.2 million from the disposition of 32.3 million DST common shares. Other significant investing activities in 2003 consisted of the acquisition of the Berger minority interest, the exercise of a call option to purchase an additional 27.5% of INTECH from the minority owners and the acquisition of a 30% ownership interest in PWM. Capital expenditures in 2003 increased to $23.9 million from $16.0 million in 2002 primarily related to the planned relocation of the Company’s headquarters in Denver, Colorado in 2004.

      Cash used in financing activities totaled $27.0 million in 2003 compared to $287.2 million in 2002. The decline is related to the net retirement in 2002 of $258.8 million of long-term debt through the repayment of the convertible notes and the issuance of Senior Notes.

      Cash Flows — 2002. Janus generated $280.7 million of cash flows from operations in 2002 compared to $503.4 million in 2001, a decline of $222.7 million that was primarily attributable to lower operating income in 2002.

      Net cash expended in investing activities decreased to $71.2 million in 2002 from $1,615.3 million in 2001, attributable to the additional investment in JCM made in 2001. Significant investing activities in 2002 consisted of the acquisition of INTECH. Capital expenditures declined in 2002 to $16.0 million from $33.3 million in 2001, reflecting a lower level of infrastructure and project spending.

      Cash used in financing activities totaled $287.2 million in 2002 compared with cash provided by financing activities of $983.8 million in 2001. During 2002, Janus used cash flow from operations to repay a net $258.8 million of debt, primarily resulting from the requirement to purchase the Convertible Notes in April 2002, which was only partially financed with new borrowings. In 2001, Janus borrowed $1,089.5 million under the Convertible Notes and Senior Notes to fund the additional investment in JCM.

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      Janus believes cash from operations should be sufficient to satisfy its short-term operating and capital requirements. Expected short-term uses of cash include a possible debt repurchase transaction, interest payments on outstanding debt, contingencies related to the mutual fund trading investigation, payment of deferred commissions and capital expenditures.

      The accrued liability of $56.9 million related to the mutual fund investigation will most likely be paid during 2004. This accrual includes $31.5 million of restitution to the Janus Funds, a current estimate of the costs of the regulatory investigation and other accrued expenses. During 2004, Janus will likely incur additional costs related to regulatory issues, legal fees, shareholder communications and the ongoing civil litigation.

      Management also expects that the holders of the zero-coupon convertible Senior Notes issued on April 30, 2001, will require Janus to repurchase all outstanding notes with an accreted value of $83.8 million in April 2004.

      Janus pays commissions on the sale of Class B and C shares in the Janus World Funds and Class C shares in the Janus Adviser Series. Funding of such commissions during the years ended December 31, 2003, 2002 and 2001 totaled $28.0 million, $29.7 million and $6.3 million, respectively. Management expects future cash requirements for sales commissions to be consistent with the level experienced in 2003 and 2002. If necessary, Janus could finance or sell the future revenue generated from the payment of the sales commissions to finance this cash commitment.

      At the beginning of 2004, Janus will consolidate and relocate its corporate headquarters to new office space in Denver, Colorado. An estimated $8.0 million of capital expenditures in 2004 will be necessary to complete the build-out of the new building. Completion of the new building will not have a material impact on depreciation or rent expense since the majority of the build-out expenses will be depreciated over the 15-year lease term and the new building replaces existing office space at two buildings at the end of their lease terms.

      Expected long-term commitments include indebtedness and operating leases, which at December 31, 2003, were as follows (in millions):

      Other possible long-term discretionary uses of cash include:

	•	capital expenditures, including the enhancement of technology infrastructure;
	•	strategic acquisitions;
	•	payment of dividends;
	•	initial investments in new products (seed money);
	•	payment of upfront fund commissions; and
	•	repurchase of Janus common stock.

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      DST Exchange Transaction. As discussed previously, no advance ruling on the DST exchange transaction was obtained from the IRS. Instead, the transaction was implemented in reliance on opinions from Janus’ tax advisors that, although the matter is not free from doubt, the transaction should qualify as a tax-free exchange under Section 355 of the Code. These opinions were based on certain representations made by Janus, CGP and DST, including representations by Janus and CGP that it was the intention of CGP that the cash (approximately $1 billion) would be used in the manner described below. Furthermore, for purposes of such tax opinions, Janus and CGP represented that, for a period of at least three years, CGP would not distribute or loan to Janus or any Janus affiliate any of CGP’s cash, any assets acquired with such cash, or any earnings from such cash or assets. The tax opinions received by Janus and DST are not in any manner binding upon the IRS. CGP plans that the cash in CGP will be used as follows:

	•	up to approximately $450.0 million will be available to purchase outstanding Janus indebtedness;
	•	up to $300.0 million may be used by CGP to purchase Janus common stock in open market transactions over the next three years;
	•	$15.0 million or more will be used for capital expenditures in CGP’s business operations;
	•	approximately $20.0 to $50.0 million will be held by CGP in cash and cash equivalents as working capital in its existing business operations; and
	•	the remaining cash will 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.

      Credit Facility. Janus has a $300 million Five-Year Facility (the “Facility”). The proceeds of any borrowings under the Facility are to be used for working capital and general corporate purposes, including repurchases of outstanding shares of common stock. The Facility contains a number of covenants that could restrict maximum utilization of the Facility, or the ability of the Company to issue securities that are currently available for issuance under the Company’s existing shelf registration statement, including various financial covenants such as a specified financing leverage, minimum net worth, minimum unencumbered liquidity, a fixed charge coverage and minimum average assets under management. Janus was in compliance with all covenants at December 31, 2003.

      Pursuant to a provision included in the Facility, if Janus’ average assets under management over a rolling three-month period are below $180 billion but above $170 billion, the amount available under the Facility is $250 million. If average assets under management are below $170 billion but above $150 billion, the Facility is reduced to $200 million. If average assets under management are below $150 billion, the Facility is reduced to $150 million. Furthermore, Janus is required to repay portions of amounts borrowed under the Facility in excess of the reduced credit availability amount. Janus had no borrowings under the Facility at December 31, 2003, and the total amount available was $150 million.

      On October 1, 2003, Janus amended the terms of the Facility. The amendment was necessary to approve the DST exchange transaction. Available borrowings under the Facility were not changed, but certain covenants were modified and the maturity date was shortened 12 months to October 23, 2004. The amendment became effective with the closing of the DST exchange transaction.

      Shelf Registration. The Company has a Shelf Registration Statement (“Shelf Registration”), under which Janus could issue up to $800 million in aggregate issue price of Janus’ common stock, preferred stock and debt securities. In July 2002, Janus issued $200 million of senior notes under the Shelf Registration. At December 31, 2003, $600 million of securities were available for issuance under the Shelf Registration, subject to the covenant limitations pursuant to the Facility.

      Common Stock Repurchase Program. The Janus Board of Directors has authorized the expenditure of up to $1 billion to repurchase shares of Janus common stock. The stock repurchase program expires

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      Janus’ consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.

      Janus continually evaluates the accounting policies and estimates used to prepare the consolidated financial statements. In general, management’s estimates are based on historical experience, information from third-party professionals and various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

      Janus management believes its critical accounting policies and estimates include:

	•	accounting for income taxes;
	•	accounting for intangible assets and goodwill; and
	•	value determination for compensatory fixed accounting stock plans.

      Accounting for Income Taxes. Significant management judgment is required in developing Janus’ provision for income taxes, including the determination of deferred tax assets and liabilities, valuation allowances that might be required against the deferred tax assets, and the evaluation of various income tax contingencies. Janus has not recorded a valuation allowance on its deferred tax assets as of December 31, 2003, based on management’s belief that operating income and capital gains will, more likely than not, be sufficient to realize the benefit of these assets over time. In the event that actual results differ from these estimates, or if Janus’ historical trend of positive operating income changes, Janus may be required to record a valuation allowance on deferred tax assets which could have a material adverse effect on Janus’ consolidated financial condition and results of operations.

      In 2003, Janus disposed of 32.3 million shares of DST, which resulted in a $631.3 million gain and the reversal of previously recorded deferred income taxes of $176.4 million. The reversal of income taxes occurred as the transaction was implemented in reliance on opinions from Janus’ tax advisers that, although the matter is not free from doubt, the transaction should qualify as a tax-free exchange under Section 355 of the Code. Additional deferred income taxes were not provided for the transaction because the Company believes it will ultimately realize its investment in CGP in a tax-free manner. If the IRS were to successfully challenge the tax-free treatment of the transaction, Janus would be deemed to have a taxable gain of up to $1.1 billion, resulting in an additional tax liability of up to $430.0 million.

      Accounting for Intangible Assets and Goodwill. Intangibles assets and goodwill comprise $2,421.1 million, or 56%, of total assets at December 31, 2003. Goodwill and intangible assets require significant management estimates and judgment, including the valuation and life determination in connection with the initial purchase price allocation and the ongoing evaluation for impairment.

      In connection with the purchase price allocation of acquisitions, Janus will rely on in-house financial expertise or utilize a third-party expert, if considered necessary. For the JCM investment, a valuation was completed by a third-party to determine a reasonable purchase price allocation. Valuations generally rely on management’s estimates and judgments as to growth rates and operating margins over a range of possible assumptions for various products, distribution channels and business strategies.

      In addition, SFAS No. 142 requires that goodwill and indefinite-lived intangibles be tested at least annually for impairment. Goodwill is tested by comparing the fair value of the “reporting unit” associated with the goodwill to the reporting unit’s recorded value. If the fair value of the reporting unit is less than

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      To complete the annual test for potential impairment of intangible assets and goodwill, Janus considers the following: performance compared to peers; significant changes in the underlying business and products of the reporting units; material and ongoing negative industry or economic trends, and/or other factors specific to each asset or reporting unit. Due to the significance of the identified intangible assets and goodwill to Janus’ consolidated balance sheet, any impairment charge could have a material adverse effect on the Company’s financial condition and results of operations. At December 31, 2003, the majority of Janus’ goodwill and intangibles related to the purchase of 16% of JCM from minority shareholders in 2001. The goodwill and indefinite-lived intangibles created by the minority JCM purchases are not highly sensitive to impairment as the annual impairment test for goodwill compares the total fair value of the reporting unit to the net book value of the reporting unit and the total fair value of the intangibles to the carrying value of the intangibles. However, indefinite-lived intangibles include mutual fund advisory contracts, which would be subject to impairment if the mutual fund contract were terminated or not renewed.

      In accordance with the annual testing requirement of SFAS No. 142, Janus tested indefinite-lived intangibles and goodwill for potential impairment as of October 1, 2003, and no impairment charge was required. In connection with the disposition of Nelson, Janus recorded goodwill impairments in 2003 and 2002.

      Definite-lived intangible assets are tested only when there are indications of impairment. In 2003, Janus recorded an impairment of $9.3 million associated with the termination of certain subadvised contracts. In February 2004, Janus recorded an additional write-down of intangible assets of $14.0 million as a result of the notification received by Janus to withdraw assets by certain subadvised accounts. As each subadvised contact has a specific allocation of value, the loss of such contract will cause an impairment charge.

      Value Determination for Compensatory Fixed Accounting Stock Plans. In March 2003, JCM became a wholly-owned subsidiary of the Company through the conversion of all minority owned shares to shares of Janus common stock. Between 1998 and 2002, restricted shares of JCM were granted to and repurchased from certain employees. The accounting for such transactions was completed using the fair value of the JCM shares at the date of grant, repurchase, or conversion. Because the JCM shares were not traded on an active market, management relied on independent nationally recognized investment banking and accounting firms to assist in determining the fair value. These valuations included management’s estimates and judgments as to growth rates and operating margins over a range of assumptions for various products, distribution channels and business strategies. In the event that an inappropriate estimate or judgment was applied in management’s determination of the fair value of the restricted stock awards then the amount of restricted stock compensation or purchase price would be incorrect.

      The following information, together with information included in other parts of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, describe the key aspects of certain financial instruments that have market risk to Janus.

Investment Management Fees

      Janus’ 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, assets under management are affected by new money investments or redemptions and fluctuations in the financial markets. The graph at the beginning of Item 7 — Managements Discussion and Analysis of Financial Condition and Results of Operations — General presents the direct relationship between revenue and average assets under management.

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Available-for-Sale Investment Sensitivity

      Janus invests a portion of the revenues earned from providing investment advisory services in certain non-money market sponsored funds. These investments are carried in Janus’ consolidated financial statements at fair market value and are subject to market fluctuations and the performance of the underlying sponsored fund. The Company also owns 7.4 million shares of DST. As an available-for-sale security, Janus’ investment in DST is recorded at fair value with unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive income. A $1.00 change in the fair value of the DST shares would cause a $7.4 million corresponding change in Janus’ total assets. Any unrealized gain or loss is recognized upon the sale of the investment.

Foreign Exchange Sensitivity

      Janus has subsidiaries in the United Kingdom and Hong Kong. With respect to these investments, matters arise as to financial accounting and reporting for foreign currency transactions and for translating foreign currency financial statements into U.S. dollars. The exposure to foreign currency fluctuations is not material as the majority of the revenue earned by our international subsidiaries is denominated in U.S. dollars.

Interest Rate Risk

      All of Janus’ outstanding debt has fixed interest rate terms. Therefore, Janus is not exposed to interest rate risk for its interest payments.

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Index to Financial Statements

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INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders of

      We have audited the accompanying consolidated balance sheets of Janus Capital Group Inc. and subsidiaries (the “Company”) as of December 31, 2003 and 2002, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of DST Systems, Inc. (“DST”), an equity method investment of the Company as of December 31, 2002 and for the years ended December 31, 2002 and 2001. The Company’s investment in DST constitutes 14% of consolidated total assets as of December 31, 2002, and the Company’s equity in earnings of DST constitutes 21% and 12% of consolidated total revenues for the years ended December 31, 2002 and 2001, respectively. The financial statements of DST were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for DST for 2002 and 2001, is based solely on the report of such other auditors.

      We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

      In our opinion, based on our audits and the report of other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

      As discussed in Notes 2 and 8 to the consolidated financial statements, the Company changed its method of accounting for goodwill and other intangible assets in 2002 with implementation of Statement of Financial Statements Accounting Standards No. 142.

Denver, Colorado

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JANUS CAPITAL GROUP INC.

CONSOLIDATED BALANCE SHEETS

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

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JANUS CAPITAL GROUP INC.

CONSOLIDATED STATEMENTS OF INCOME

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

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JANUS CAPITAL GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS