JANUS INVESTMENT FUND, 497J, 1995-11-30

JANUS INVESTMENT FUND
497J, 1995-11-30

Previous: JANUS INVESTMENT FUND, 497J, 1995-11-30

Next: VALUE LINE CASH FUND INC, N-30D, 1995-11-30

[LOGO]
JANUS HIGH-YIELD FUND

100 Fillmore Street
Denver, CO 80206-4923
(800) 525-3713

STATEMENT OF ADDITIONAL INFORMATION
November 28, 1995

Janus High-Yield Fund (the "Fund") is a no-load mutual fund that seeks to
obtain high current income as its primary investment objective. Capital
appreciation is a secondary objective when consistent with the primary
objective. The Fund seeks to achieve these objectives by investing primarily in
high-yield, high-risk fixed-income securities.

The Fund is a separate series of Janus Investment Fund, a Massachusetts
business trust (the "Trust"). Each series of the Trust represents shares of
beneficial interest in a separate portfolio of securities and other assets with
its own objective and policies. The Fund is managed by Janus Capital Corporation
("Janus Capital").

This Statement of Additional Information ("SAI") is not a Prospectus and
should be read in conjunction with the Fund's Prospectus dated November 28,
1995, which is incorporated by reference into this SAI and may be obtained from
the Trust at the above address. This SAI contains additional and more detailed
information about the Fund's operations and activities than the Prospectus.

1
<PAGE>

JANUS HIGH-YIELD FUND
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS

Page
- --------------------------------------------------------------------------------
Investment Policies, Restrictions and Techniques .......................... 3

Investment Objectives ................................................... 3

Portfolio Policies ...................................................... 3

Investment Restrictions ................................................. 3

Types of Securities and Investment Techniques ........................... 5

Illiquid Investments .................................................. 5

Zero Coupon, Pay-In-Kind and Step Coupon Securities ................... 5

Pass-Through Securities ............................................... 5

Repurchase and Reverse Repurchase Agreements .......................... 6

Joint Accounts ........................................................ 7

Depositary Receipts ................................................... 7

Futures, Options and Other Derivative Instruments ..................... 7

Investment Adviser ........................................................ 14

Custodian, Transfer Agent and Certain Affiliations ........................ 15

Portfolio Transactions and Brokerage ...................................... 16

Officers and Trustees ..................................................... 17

Purchase of Shares ........................................................ 19

Net Asset Value Determination ........................................... 19

Reinvestment of Dividends and Distributions ............................. 19

Redemption of Shares ...................................................... 20

Shareholder Accounts ...................................................... 20

Telephone Transactions .................................................. 20

Systematic Withdrawals .................................................. 20

Retirement Plans .......................................................... 20

Income Dividends, Capital Gains Distributions and Tax Status .............. 21

Miscellaneous Information ................................................. 21

Shares of the Trust ..................................................... 22

Voting Rights ........................................................... 22

Independent Accountants ................................................. 22

Registration Statement .................................................. 22

Performance Information ................................................... 22
- --------------------------------------------------------------------------------

2
<PAGE>

INVESTMENT POLICIES, RESTRICTIONS AND TECHNIQUES

INVESTMENT OBJECTIVES

As stated in the Prospectus, the Fund's investment objective is high
current income with capital appreciation as a secondary objective. There can be
no assurance that the Fund will achieve its objectives. The investment
objectives of the Fund are not fundamental and may be changed by the Trustees
without shareholder approval.

PORTFOLIO POLICIES

The Prospectus discusses the types of securities in which the Fund will
invest, portfolio policies of the Fund and the investment techniques of the
Fund. The Prospectus includes a discussion of portfolio turnover rates.

Portfolio turnover is calculated by dividing total long-term purchases or
sales, whichever is less, by the average monthly value of a fund's long-term
portfolio securities. The Fund anticipates that its portfolio turnover rate will
be approximately 200%.

INVESTMENT RESTRICTIONS

As indicated in the Prospectus, the Fund is subject to certain fundamental
policies and restrictions that may not be changed without shareholder approval.
Shareholder approval means approval by the lesser of (i) more than 50% of the
outstanding voting securities of the Trust (or the Fund if a matter affects just
the Fund), or (ii) 67% or more of the voting securities present at a meeting if
the holders of more than 50% of the outstanding voting securities of the Trust
(or the Fund) are present or represented by proxy. As fundamental policies, the
Fund may not:

(1) Own more than 10% of the outstanding voting securities of any one
issuer and, as to seventy-five percent (75%) of the value of its total assets,
purchase the securities of any one issuer (except cash items and "government
securities" as defined under the Investment Company Act of 1940, as amended (the
"1940 Act")), if immediately after and as a result of such purchase, the value
of the holdings of the Fund in the securities of such issuer exceeds 5% of the
value of the Fund's total assets.

(2) Invest more than 25% of the value of its assets in any particular
industry (other than U.S. government securities).

(3) Invest directly in real estate or interests in real estate; however,
the Fund may own debt or equity securities issued by companies engaged in those
businesses.

(4) Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this limitation
shall not prevent the Fund from purchasing or selling options, futures, swaps
and forward contracts or from investing in securities or other instruments
backed by physical commodities).

(5) Lend any security or make any other loan if, as a result, more than 25%
of its total assets would be lent to other parties (but this limitation does not
apply to purchases of commercial paper, debt securities or repurchase
agreements).

(6) Act as an underwriter of securities issued by others, except to the
extent that the Fund may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund.

As a fundamental policy, the Fund may, notwithstanding any other investment
policy or limitation (whether or not fundamental), invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies and
limitations as the Fund.

The Trustees have adopted additional investment restrictions for the Fund.
These restrictions are operating policies of the Fund and may be changed by the
Trustees without shareholder approval. The additional investment restrictions
adopted by the Trustees to date include the following:

(a) The Fund's investments in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included within that
amount, but not to exceed 2% of the value of the Fund's net assets, may be
warrants that are not listed on the New York or American Stock Exchange.
Warrants acquired by the Fund in units or attached to securities shall be deemed
to be without value for the purpose of monitoring this policy.

(b) The Fund will not (i) enter into any futures contracts and related
options for purposes other than bona fide hedging transactions within the
meaning of Commodity Futures Trading Commission ("CFTC") regulations if the
aggregate initial margin and premiums required to establish positions in futures
contracts and related options that do not fall within the definition of bona
fide hedging transactions will exceed 5% of the fair market value of the Fund's
net assets, after taking into account unrealized profits and unrealized losses
on any such contracts it has

3
<PAGE>

entered into; and (ii) enter into any futures contracts if the aggregate amount
of the Fund's commitments under outstanding futures contracts positions would
exceed the market value of its total assets.

(c) The Fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to the
securities sold short without the payment of any additional consideration
therefor, and provided that transactions in futures, options and forward
contracts are not deemed to constitute selling securities short.

(d) The Fund does not currently intend to purchase securities on margin,
except that the Fund may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments and other deposits
in connection with transactions in futures, options and forward contracts shall
not be deemed to constitute purchasing securities on margin.

(e) The Fund does not currently intend to (i) purchase securities of other
investment companies, except in the open market where no commission except the
ordinary broker's commission is paid, or (ii) purchase or retain securities
issued by other open-end investment companies. Limitations (i) and (ii) do not
apply to money market funds or to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger. If the Fund invests in a money market fund, Janus Capital will reduce
its advisory fee by the amount of any investment advisory and administrative
services fees paid to the investment manager of the money market fund.

(f) The Fund may not mortgage or pledge any securities owned or held by the
Fund in amounts that exceed, in the aggregate, 15% of the Fund's net asset
value, provided that this limitation does not apply to reverse repurchase
agreements, deposits of assets to margin, guarantee positions in futures,
options or forward contracts, or the segregation of assets in connection with
such contracts.

(g) The Fund does not intend to purchase securities of any issuer (other
than U.S. government agencies and instrumentalities or instruments guaranteed by
an entity with a record of more than three years' continuous operation,
including that of predecessors) with a record of less than three years'
continuous operation (including that of predecessors) if such purchase would
cause the cost of the Fund's investments in all such issuers to exceed 5% of the
Fund's total assets taken at market value at the time of such purchase.

(h) The Fund does not currently intend to invest directly in oil, gas, or
other mineral development or exploration programs or leases; however, the Fund
may own debt or equity securities of companies engaged in those businesses.

(i) The Fund may borrow money for temporary or emergency purposes (not for
leveraging or investment) in an amount not exceeding 25% of the value of its
total assets (including the amount borrowed) less liabilities (other than
borrowings). If borrowings exceed 25% of the value of the Fund's total assets by
reason of a decline in net assets, the Fund will reduce its borrowings within
three business days to the extent necessary to comply with the 25% limitation.
This policy shall not prohibit reverse repurchase agreements, deposits of assets
to margin or guarantee positions in futures, options, swaps or forward
contracts, or the segregation of assets in connection with such contracts.

(j) The Fund does not currently intend to purchase any security or enter
into a repurchase agreement, if as a result, more than 15% of its net assets
would be invested in repurchase agreements not entitling the holder to payment
of principal and interest within seven days and in securities that are illiquid
by virtue of legal or contractual restrictions on resale or the absence of a
readily available market. The Trustees, or the Fund's investment adviser acting
pursuant to authority delegated by the Trustees, may determine that a readily
available market exists for securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 ("Rule 144A Securities"), or any successor to
such rule, Section 4(2) commercial paper and municipal lease obligations.
Accordingly, such securities may not be subject to the foregoing limitation.

(k) The Fund may not invest in companies for the purpose of exercising
control of management.

For purposes of the Fund's restriction on investing in a particular
industry, the Fund will rely primarily on industry classifications as published
by Bloomberg L.P., provided that financial service companies will be classified
according to the end users of their services (for example, automobile finance,
bank finance and diversified finance are each considered to be a separate
industry). To the extent that Bloomberg L.P. classifications are so broad that
the primary economic characteristics in a single class are materially different,
the Fund may further classify issuers in accordance with industry
classifications as published by the Securities and Exchange Commission ("SEC").

4
<PAGE>

TYPES OF SECURITIES AND INVESTMENT TECHNIQUES

ILLIQUID INVESTMENTS

The Fund may invest up to 15% of its net assets in illiquid investments
(i.e., securities that are not readily marketable). The Trustees of the Fund
have authorized Janus Capital to make liquidity determinations with respect to
its securities, including Rule 144A Securities and commercial paper. Under the
guidelines established by the Trustees, Janus Capital will consider the
following factors: 1) the frequency of trades and quoted prices for the
obligation; 2) the number of dealers willing to purchase or sell the security
and the number of other potential purchasers; 3) the willingness of dealers to
undertake to make a market in the security; and 4) the nature of the security
and the nature of marketplace trades, including the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the transfer.
In the case of commercial paper, Janus Capital will also consider whether the
paper is traded flat or in default as to principal and interest and any ratings
of the paper by a Nationally Recognized Statistical Rating Organization.

ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES

The Fund may invest in zero coupon, pay-in-kind and step coupon securities.
Zero coupon bonds are issued and traded at a discount from their face value.
They do not entitle the holder to any periodic payment of interest prior to
maturity. Step coupon bonds trade at a discount from their face value and pay
coupon interest. The coupon rate is low for an initial period and then increases
to a higher coupon rate thereafter. The discount from the face amount or par
value depends on the time remaining until cash payments begin, prevailing
interest rates, liquidity of the security and the perceived credit quality of
the issuer. Pay-in-kind bonds normally give the issuer an option to pay cash at
a coupon payment date or give the holder of the security a similar bond with the
same coupon rate and a face value equal to the amount of the coupon payment that
would have been made.

Current federal income tax law requires holders of zero coupon securities
and step coupon securities to report the portion of the original issue discount
on such securities that accrues during a given year as interest income, even
though the holders receive no cash payments of interest during the year. In
order to qualify as a "regulated investment company" under the Internal Revenue
Code of 1986 and the regulations thereunder (the "Code"), the Fund must
distribute its investment company taxable income, including the original issue
discount accrued on zero coupon or step coupon bonds. Because the Fund will not
receive cash payments on a current basis in respect of accrued original-issue
discount on zero coupon bonds or step coupon bonds during the period before
interest payments begin, in some years the Fund may have to distribute cash
obtained from other sources in order to satisfy the distribution requirements
under the Code. The Fund might obtain such cash from selling other portfolio
holdings which might cause the Fund to incur capital gains or losses on the
sale. In some circumstances, such sales might be necessary in order to satisfy
cash distribution requirements even though investment considerations might
otherwise make it undesirable for the Fund to sell the securities at the time.

Generally, the market prices of zero coupon, step coupon and pay-in-kind
securities are more volatile than the prices of securities that pay interest
periodically and in cash and are likely to respond to changes in interest rates
to a greater degree than other types of debt securities having similar
maturities and credit quality.

PASS-THROUGH SECURITIES

The Fund may invest in various types of pass-through securities, such as
mortgage-backed securities, asset-backed securities and participation interests.
A pass-through security is a share or certificate of interest in a pool of debt
obligations that have been repackaged by an intermediary, such as a bank or
broker-dealer. The purchaser of a pass-through security receives an undivided
interest in the underlying pool of securities. The issuers of the underlying
securities make interest and principal payments to the intermediary which are
passed through to purchasers, such as the Fund. The most common type of
pass-through securities are mortgage-backed securities. Government National
Mortgage Association ("GNMA") Certificates are mortgage-backed securities that
evidence an undivided interest in a pool of mortgage loans. GNMA Certificates
differ from bonds in that principal is paid back monthly by the borrowers over
the term of the loan rather than returned in a lump sum at maturity. The Fund
will generally purchase "modified pass-through" GNMA Certificates, which entitle
the holder to receive a share of all interest and principal payments paid and
owned on the mortgage pool, net of fees paid to the "issuer" and GNMA,
regardless of whether or not the mortgagor actually makes the payment. GNMA
Certificates are backed as to the timely payment of principal and interest by
the full faith and credit of the U.S. government.

The Federal Home Loan Mortgage Corporation ("FHLMC") issues two types of
mortgage pass-through securities: mortgage participation certificates ("PCs")
and guaranteed mortgage certificates ("GMCs"). PCs resemble

5
<PAGE>

GNMA Certificates in that each PC represents a pro rata share of all interest
and principal payments made and owned on the underlying pool. FHLMC guarantees
timely payments of interest on PCs and the full return of principal. GMCs also
represent a pro rata interest in a pool of mortgages. However, these instruments
pay interest semiannually and return principal once a year in guaranteed minimum
payments. This type of security is guaranteed by FHLMC as to timely payment of
principal and interest but it is not guaranteed by the full faith and credit of
the U.S. government.

The Federal National Mortgage Association ("FNMA") issues guaranteed
mortgage pass-through certificates ("FNMA Certificates"). FNMA Certificates
resemble GNMA Certificates in that each FNMA Certificate represents a pro rata
share of all interest and principal payments made and owned on the underlying
pool. This type of security is guaranteed by FNMA as to timely payment of
principal and interest but it is not guaranteed by the full faith and credit of
the U.S. government.

Except for GMCs, each of the mortgage-backed securities described above is
characterized by monthly payments to the holder, reflecting the monthly payments
made by the borrowers who received the underlying mortgage loans. The payments
to the security holders (such as the Fund), like the payments on the underlying
loans, represent both principal and interest. Although the underlying mortgage
loans are for specified periods of time, such as 20 or 30 years, the borrowers
can, and typically do, pay them off sooner. Thus, the security holders
frequently receive prepayments of principal in addition to the principal that is
part of the regular monthly payments. A portfolio manager will consider
estimated prepayment rates in calculating the average weighted maturity of the
Fund. A borrower is more likely to prepay a mortgage that bears a relatively
high rate of interest. This means that in times of declining interest rates,
higher yielding mortgage-backed securities held by the Fund might be converted
to cash and the Fund will be forced to accept lower interest rates when that
cash is used to purchase additional securities in the mortgage-backed securities
sector or in other investment sectors. Additionally, prepayments during such
periods will limit the Fund's ability to participate in as large a market gain
as may be experienced with a comparable security not subject to prepayment.

Asset-backed securities represent interests in pools of consumer loans and
are backed by paper or accounts receivables originated by banks, credit card
companies or other providers of credit. Generally, the originating bank or
credit provider is neither the obligor or guarantor of the security and interest
and principal payments ultimately depend upon payment of the underlying loans by
individuals. Tax-exempt asset-backed securities include units of beneficial
interests in pools of purchase contracts, financing leases, and sales agreements
that may be created when a municipality enters into an installment purchase
contract or lease with a vendor. Such securities may be secured by the assets
purchased or leased by the municipality; however, if the municipality stops
making payments, there generally will be no recourse against the vendor. The
market for tax-exempt asset-backed securities is still relatively new. These
obligations are likely to involve unscheduled prepayments of principal.

REPURCHASE AND REVERSE REPURCHASE AGREEMENTS

In a repurchase agreement, the Fund purchases a security and simultaneously
commits to resell that security to the seller at an agreed upon price on an
agreed upon date within a number of days (usually not more than seven) from the
date of purchase. The resale price reflects the purchase price plus an agreed
upon incremental amount that is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of the seller
to pay the agreed upon price, which obligation is in effect secured by the value
(at least equal to the amount of the agreed upon resale price and marked to
market daily) of the underlying security or "collateral." The Fund may engage in
a repurchase agreement with respect to any security in which it is authorized to
invest. A risk associated with repurchase agreements is the failure of the
seller to repurchase the securities as agreed, which may cause the Fund to
suffer a loss if the market value of such securities declines before they can be
liquidated on the open market. In the event of bankruptcy or insolvency of the
seller, the Fund may encounter delays and incur costs in liquidating the
underlying security. Repurchase agreements that mature in more than seven days
will be subject to the 15% limit on illiquid investments. While it is not
possible to eliminate all risks from these transactions, it is the policy of the
Fund to limit repurchase agreements to those parties whose creditworthiness has
been reviewed and found satisfactory by Janus Capital.

The Fund may use reverse repurchase agreements to provide cash to satisfy
unusually heavy redemption requests or for other temporary or emergency purposes
without the necessity of selling portfolio securities. In a reverse repurchase
agreement, the Fund sells a portfolio security to another party, such as a bank
or broker-dealer, in return for cash and agrees to repurchase the instrument at
a particular price and time. While a reverse repurchase agreement is
outstanding, the Fund will maintain cash and appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement. The
Fund will enter into reverse repurchase agreements only with parties that Janus
Capital deems creditworthy.

6
<PAGE>

JOINT ACCOUNTS

Pursuant to an exemptive order granted by the SEC, the Fund and other funds
advised by Janus Capital may transfer daily uninvested cash balances into one or
more joint trading accounts. Assets in the joint trading accounts are invested
in money market instruments and the proceeds are allocated to the participating
funds on a pro rata basis.

DEPOSITARY RECEIPTS

The Fund may invest in sponsored and unsponsored American Depositary
Receipts ("ADRs"), which are receipts issued by an American bank or trust
company evidencing ownership of underlying securities issued by a foreign
issuer. ADRs, in registered form, are designed for use in U.S. securities
markets. Unsponsored ADRs may be created without the participation of the
foreign issuer. Holders of these ADRs generally bear all the costs of the ADR
facility, whereas foreign issuers typically bear certain costs in a sponsored
ADR. The bank or trust company depositary of an unsponsored ADR may be under no
obligation to distribute shareholder communications received from the foreign
issuer or to pass through voting rights. The Fund may also invest in European
Depositary Receipts ("EDRs"), receipts issued by a European financial
institution evidencing an arrangement similar to that of ADRs, and in other
similar instruments representing securities of foreign companies. EDRs, in
bearer form, are designed for use in European securities markets.

FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS

Futures Contracts. The Fund may enter into contracts for the purchase or
sale for future delivery of fixed-income securities, foreign currencies or
contracts based on financial indices, including indices of U.S. government
securities, foreign government securities, equity or fixed-income securities.
U.S. futures contracts are traded on exchanges which have been designated
"contract markets" by the CFTC and must be executed through a futures commission
merchant ("FCM"), or brokerage firm, which is a member of the relevant contract
market. Through their clearing corporations, the exchanges guarantee performance
of the contracts as between the clearing members of the exchange.

The buyer or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, both the buyer and seller are required to deposit "initial
margin" for the benefit of the FCM when the contract is entered into. Initial
margin deposits are equal to a percentage of the contract's value, as set by the
exchange on which the contract is traded, and may be maintained in cash or
certain high-grade liquid assets by the Fund's custodian for the benefit of the
FCM. Initial margin payments are similar to good faith deposits or performance
bonds. Unlike margin extended by a securities broker, initial margin payments do
not constitute purchasing securities on margin for purposes of the Fund's
investment limitations. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments for the
benefit of the FCM to settle the change in value on a daily basis. The party
that has a gain may be entitled to receive all or a portion of this amount. In
the event of the bankruptcy of the FCM that holds margin on behalf of the Fund,
the Fund may be entitled to return of margin owed to the Fund only in proportion
to the amount received by the FCM's other customers. Janus Capital will attempt
to minimize the risk by careful monitoring of the creditworthiness of the FCMs
with which the Fund does business and by depositing margin payments in a
segregated account with the Fund's custodian.

The Fund intends to comply with guidelines of eligibility for exclusion
from the definition of the term "commodity pool operator" adopted by the CFTC
and the National Futures Association, which regulate trading in the futures
markets. The Fund will use futures contracts and related options primarily for
bona fide hedging purposes within the meaning of CFTC regulations. To the extent
that the Fund holds positions in futures contracts and related options that do
not fall within the definition of bona fide hedging transactions, the aggregate
initial margin and premiums required to establish such positions will not exceed
5% of the fair market value of the Fund's net assets, after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into.

Although the Fund will segregate cash and liquid assets in an amount
sufficient to cover its open futures obligations, the segregated assets would be
available to the Fund immediately upon closing out the futures position, while
settlement of securities transactions could take several days. However, because
the Fund's cash that may otherwise be invested would be held uninvested or
invested in high-grade liquid assets so long as the futures position remains
open, the Fund's return could be diminished due to the opportunity losses of
foregoing other potential investments.

7
<PAGE>

may take a short position in interest rate futures contracts. Taking such a
position would have much the same effect as the Fund selling Treasury bonds in
its portfolio. If interest rates increase as anticipated, the value of the
Treasury bonds would decline, but the value of the Fund's interest rate futures
contract will increase, thereby keeping the net asset value of the Fund from
declining as much as it may have otherwise. If, on the other hand, a portfolio
manager expects interest rates to decline, the Fund may take a long position in
interest rate futures contracts in anticipation of later closing out the futures
position and purchasing the bonds. Although the Fund can accomplish similar
results by buying securities with long maturities and selling securities with
short maturities, given the greater liquidity of the futures market than the
cash market, it may be possible to accomplish the same result more easily and
more quickly by using futures contracts as an investment tool to reduce risk.

The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial margin and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal price relationship between the cash
and futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery of the instrument underlying a futures contract. To the extent
participants decide to make or take delivery, liquidity in the futures market
could be reduced and prices in the futures market distorted. Third, from the
point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of the foregoing
distortions, a correct forecast of general price trends by a portfolio manager
still may not result in a successful use of futures.

Futures contracts entail risks. Although the Fund believes that use of such
contracts will benefit the Fund, the Fund's overall performance could be worse
than if the Fund had not entered into futures contracts if the portfolio
manager's investment judgement proves incorrect. For example, if the Fund has
hedged against the effects of a possible decrease in prices of securities held
in its portfolio and prices increase instead, the Fund will lose part or all of
the benefit of the increased value of these securities because of offsetting
losses in its futures positions. In addition, if the Fund has insufficient cash,
it may have to sell securities from its portfolio to meet daily variation margin
requirements. Those sales may be, but will not necessarily be, at increased
prices which reflect the rising market and may occur at a time when the sales
are disadvantageous to the Fund.

The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of futures
contracts, it is possible that the standardized futures contracts available to
the Fund will not match exactly the Fund's current or potential investments. The
Fund may buy and sell futures contracts based on underlying instruments with
different characteristics from the securities in which it typically invests -
for example, by hedging investments in portfolio securities with a futures
contract based on a broad index of securities which involves a risk that the
futures position will not correlate precisely with the performance of the Fund's
investments.

Futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments closely correlate with the
Fund's investments. Futures prices are affected by factors such as current and
anticipated short-term interest rates, changes in volatility of the underlying
instruments and the time remaining until expiration of the contract. Those
factors may affect securities prices differently from futures prices. Imperfect
correlations between the Fund's investments and its futures positions also may
result from differing levels of demand in the futures markets and the securities
markets, from structural differences in how futures and securities are traded,
and from imposition of daily price fluctuation limits for futures contracts. The
Fund may buy or sell futures contracts with a greater or lesser value than the
securities it wishes to hedge or is considering purchasing in order to attempt
to compensate for differences in historical volatility between the futures
contract and the securities, although this may not be successful in all cases.
If price changes in the Fund's futures positions are poorly correlated with its
other investments, its futures positions may fail to produce desired gains or
result in losses that are not offset by the gains in the Fund's other
investments.

Because futures contracts are generally settled within a day from the date
they are closed out, compared with a settlement period of three days for some
types of securities, the futures markets can provide superior liquidity to the
securities markets. Nevertheless, there is no assurance that a liquid secondary
market will exist for any particular futures contract at any particular time. In
addition, futures exchanges may establish daily price fluctuation limits for
futures contracts and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached, it may be impossible for the Fund to enter
into new positions or close out existing positions. If the secondary market for
a futures contract is not liquid because of price fluctuation limits or
otherwise, the Fund may not be able to promptly liquidate unfavorable futures

8
<PAGE>

positions and potentially could be required to continue to hold a futures
position until the delivery date, regardless of changes in its value. As a
result, the Fund's access to other assets held to cover its futures positions
also could be impaired.

Options on Futures Contracts. The Fund may buy and write put and call
options on futures contracts. An option on a future gives the Fund the right
(but not the obligation) to buy or sell a futures contract at a specified price
on or before a specified date. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call option on an
individual security. Depending on the pricing of the option compared to either
the price of the futures contract upon which it is based or the price of the
underlying instrument, ownership of the option may or may not be less risky than
ownership of the futures contract or the underlying instrument. As with the
purchase of futures contracts, when the Fund is not fully invested it may buy a
call option on a futures contract to hedge against a market advance.

The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures' price at the expiration of the option is below the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures' price at expiration of the option is higher than the exercise
price, the Fund will retain the full amount of the option premium which provides
a partial hedge against any increase in the price of securities which the Fund
is considering buying. If a call or put option the Fund has written is
exercised, the Fund will incur a loss which will be reduced by the amount of the
premium it received. Depending on the degree of correlation between the change
in the value of its portfolio securities and changes in the value of the futures
positions, the Fund's losses from existing options on futures may to some extent
be reduced or increased by changes in the value of portfolio securities.

The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, the Fund may buy a put option on a futures contract to hedge its
portfolio against the risk of falling prices or rising interest rates.

The amount of risk the Fund assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the options bought.

Forward Contracts. A forward contract is an agreement between two parties
in which one party is obligated to deliver a stated amount of a stated asset at
a specified time in the future and the other party is obligated to pay a
specified amount for the assets at the time of delivery. The Fund may enter into
forward contracts to purchase and sell government securities, equity or income
securities, foreign currencies or other financial instruments. Forward contracts
generally are traded in an interbank market conducted directly between traders
(usually large commercial banks) and their customers. Unlike futures contracts,
which are standardized contracts, forward contracts can be specifically drawn to
meet the needs of the parties that enter into them. The parties to a forward
contract may agree to offset or terminate the contract before its maturity, or
may hold the contract to maturity and complete the contemplated exchange.

The following discussion summarizes the Fund's principal uses of forward
foreign currency exchange contracts ("forward currency contracts"). The Fund may
enter into forward currency contracts with stated contract values of up to the
value of the Fund's assets. A forward currency contract is an obligation to buy
or sell an amount of a specified currency for an agreed price (which may be in
U.S. dollars or a foreign currency). The Fund will exchange foreign currencies
for U.S. dollars and for other foreign currencies in the normal course of
business and may buy and sell currencies through forward currency contracts in
order to fix a price for securities it has agreed to buy or sell ("transaction
hedge"). The Fund also may hedge some or all of its investments denominated in a
foreign currency against a decline in the value of that currency relative to the
U.S. dollar by entering into forward currency contracts to sell an amount of
that currency (or a proxy currency whose performance is expected to replicate or
exceed the performance of that currency relative to the U.S. dollar)
approximating the value of some or all of its portfolio securities denominated
in that currency ("position hedge") or by participating in options or futures
contracts with respect to the currency. The Fund also may enter into a forward
currency contract with respect to a currency where the Fund is considering the
purchase or sale of investments denominated in that currency but has not yet
selected the specific investments ("anticipatory hedge"). In any of these
circumstances the Fund may, alternatively, enter into a forward currency
contract to purchase or sell one foreign currency for a second currency that is
expected to perform more favorably relative to the U.S. dollar if the portfolio
manager believes there is a reasonable degree of correlation between movements
in the two currencies ("cross-hedge").

9
<PAGE>

These types of hedging minimize the effect of currency appreciation as well
as depreciation, but do not eliminate fluctuations in the underlying U.S. dollar
equivalent value of the proceeds of or rates of return on the Fund's foreign
currency denominated portfolio securities. The matching of the increase in value
of a forward contract and the decline in the U.S. dollar equivalent value of the
foreign currency denominated asset that is the subject of the hedge generally
will not be precise. Shifting the Fund's currency exposure from one foreign
currency to another removes the Fund's opportunity to profit from increases in
the value of the original currency and involves a risk of increased losses to
the Fund if its portfolio manager's projection of future exchange rates is
inaccurate. Proxy hedges and cross-hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which hedged
securities are denominated. Unforeseen changes in currency prices may result in
poorer overall performance for the Fund than if it had not entered into such
contracts.

The Fund will cover outstanding forward currency contracts by maintaining
liquid portfolio securities denominated in the currency underlying the forward
contract or the currency being hedged. To the extent that the Fund is not able
to cover its forward currency positions with underlying portfolio securities,
the Fund's custodian will segregate cash or high-grade liquid assets having a
value equal to the aggregate amount of the Fund's commitments under forward
contracts entered into with respect to position hedges, cross-hedges and
anticipatory hedges. If the value of the securities used to cover a position or
the value of segregated assets declines, the Fund will find alternative cover or
segregate additional cash or high-grade liquid assets on a daily basis so that
the value of the covered and segregated assets will be equal to the amount of
the Fund's commitments with respect to such contracts. As an alternative to
segregating assets, the Fund may buy call options permitting the Fund to buy the
amount of foreign currency being hedged by a forward sale contract or the Fund
may buy put options permitting it to sell the amount of foreign currency subject
to a forward buy contract.

While forward contracts are not currently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward contacts. In such event,
the Fund's ability to utilize forward contracts may be restricted. In addition,
the Fund may not always be able to enter into forward contracts at attractive
prices and may be limited in its ability to use these contracts to hedge Fund
assets.

Options on Foreign Currencies. The Fund may buy and write options on
foreign currencies in a manner similar to that in which futures or forward
contracts on foreign currencies will be utilized. For example, a decline in the
U.S. dollar value of a foreign currency in which portfolio securities are
denominated will reduce the U.S. dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the Fund may buy put options
on the foreign currency. If the value of the currency declines, the Fund will
have the right to sell such currency for a fixed amount in U.S. dollars, thereby
offsetting, in whole or in part, the adverse effect on its portfolio.

Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Fund may buy call options on the foreign currency.
The purchase of such options could offset, at least partially, the effects of
the adverse movements in exchange rates. As in the case of other types of
options, however, the benefit to the Fund from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, if currency exchange rates do not move in the direction or
to the extent desired, the Fund could sustain losses on transactions in foreign
currency options that would require the Fund to forego a portion or all of the
benefits of advantageous changes in those rates.

The Fund may also write options on foreign currencies. For example, to
hedge against a potential decline in the U.S. dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange rates, the Fund
could, instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the option will most likely not be
exercised and the decline in value of portfolio securities will be offset by the
amount of the premium received.

Similarly, instead of purchasing a call option to hedge against a potential
increase in the U.S. dollar cost of securities to be acquired, the Fund could
write a put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Fund to hedge the increased
cost up to the amount of the premium. As in the case of other types of options,
however, the writing of a foreign currency option will constitute only a partial
hedge up to the amount of the premium. If exchange rates do not move in the
expected direction, the option may be exercised and the Fund would be required
to buy or sell the underlying currency at a loss which may not be offset by the
amount of the premium. Through the writing of options on foreign currencies, the
Fund also may lose all or a portion of the benefits which might otherwise have
been obtained from favorable movements in exchange rates.

10
<PAGE>

The Fund may write covered call options on foreign currencies. A call
option written on a foreign currency by the Fund is "covered" if the Fund owns
the foreign currency underlying the call or has an absolute and immediate right
to acquire that foreign currency without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other foreign currencies held in its portfolio. A
call option is also covered if the Fund has a call on the same foreign currency
in the same principal amount as the call written if the exercise price of the
call held (i) is equal to or less than the exercise price of the call written or
(ii) is greater than the exercise price of the call written, if the difference
is maintained by the Fund in cash or high-grade liquid assets in a segregated
account with the Fund's custodian.

The Fund also may write call options on foreign currencies for
cross-hedging purposes. A call option on a foreign currency is for cross-hedging
purposes if it is designed to provide a hedge against a decline due to an
adverse change in the exchange rate in the U.S. dollar value of a security which
the Fund owns or has the right to acquire and which is denominated in the
currency underlying the option. Call options on foreign currencies which are
entered into for cross-hedging purposes are not covered. However, in such
circumstances, the Fund will collateralize the option by segregating cash or
high-grade liquid assets in an amount not less than the value of the underlying
foreign currency in U.S. dollars marked-to-market daily.

Options on Securities. In an effort to increase current income and to
reduce fluctuations in net asset value, the Fund may write covered put and call
options and buy put and call options on securities that are traded on United
States and foreign securities exchanges and over-the-counter. The Fund may write
and buy options on the same types of securities that the Fund may purchase
directly.

A put option written by the Fund is "covered" if the Fund (i) segregates
cash not available for investment or high-grade liquid assets with a value equal
to the exercise price of the put with the Fund's custodian or (ii) holds a put
on the same security and in the same principal amount as the put written and the
exercise price of the put held is equal to or greater than the exercise price of
the put written. The premium paid by the buyer of an option will reflect, among
other things, the relationship of the exercise price to the market price and the
volatility of the underlying security, the remaining term of the option, supply
and demand and interest rates.

A call option written by the Fund is "covered" if the Fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by the Fund's
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also deemed to be covered if the Fund holds a call
on the same security and in the same principal amount as the call written and
the exercise price of the call held (i) is equal to or less than the exercise
price of the call written or (ii) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash and high-grade
liquid assets in a segregated account with its custodian.

The Fund also may write call options that are not covered for cross-hedging
purposes. The Fund collateralizes its obligation under a written call option for
cross-hedging purposes by segregating cash or high-grade liquid assets in an
amount not less than the market value of the underlying security, marked to
market daily. The Fund would write a call option for cross-hedging purposes,
instead of writing a covered call option, when the premium to be received from
the cross-hedge transaction would exceed that which would be received from
writing a covered call option and its portfolio manager believes that writing
the option would achieve the desired hedge.

The writer of an option may have no control over when the underlying
securities must be sold, in the case of a call option, or bought, in the case of
a put option, since with regard to certain options, the writer may be assigned
an exercise notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains the amount of
the premium. This amount, of course, may, in the case of a covered call option,
be offset by a decline in the market value of the underlying security during the
option period. If a call option is exercised, the writer experiences a profit or
loss from the sale of the underlying security. If a put option is exercised, the
writer must fulfill the obligation to buy the underlying security at the
exercise price, which will usually exceed the then market value of the
underlying security.

The writer of an option that wishes to terminate its obligation may effect
a "closing purchase transaction." This is accomplished by buying an option of
the same series as the option previously written. The effect of the purchase is
that the writer's position will be canceled by the clearing corporation.
However, a writer may not effect a closing purchase transaction after being
notified of the exercise of an option. Likewise, an investor who is the holder
of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously bought. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.

11
<PAGE>

written put option, such transaction will permit the Fund to write another put
option to the extent that the exercise price thereof is secured by deposited
high-grade liquid assets. Effecting a closing transaction also will permit the
Fund to use the cash or proceeds from the concurrent sale of any securities
subject to the option for other investments. If the Fund desires to sell a
particular security from its portfolio on which it has written a call option,
the Fund will effect a closing transaction prior to or concurrent with the sale
of the security.

The Fund will realize a profit from a closing transaction if the price of
the purchase transaction is less than the premium received from writing the
option or the price received from a sale transaction is more than the premium
paid to buy the option. The Fund will realize a loss from a closing transaction
if the price of the purchase transaction is more than the premium received from
writing the option or the price received from a sale transaction is less than
the premium paid to buy the option. Because increases in the market of a call
option generally will reflect increases in the market price of the underlying
security, any loss resulting from the repurchase of a call option is likely to
be offset in whole or in part by appreciation of the underlying security owned
by the Fund.

An option position may be closed out only where a secondary market for an
option of the same series exists. If a secondary market does not exist, the Fund
may not be able to effect closing transactions in particular options and the
Fund would have to exercise the options in order to realize any profit. If the
Fund is unable to effect a closing purchase transaction in a secondary market,
it will not be able to sell the underlying security until the option expires or
it delivers the underlying security upon exercise. The absence of a liquid
secondary market may be due to the following: (i) insufficient trading interest
in certain options, (ii) restrictions imposed by a national securities exchange
("Exchange") on which the option is traded on opening or closing transactions or
both, (iii) trading halts, suspensions or other restrictions imposed with
respect to particular classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances that interrupt normal operations on an
Exchange, (v) the facilities of an Exchange or of the Options Clearing
Corporation ("OCC") may not at all times be adequate to handle current trading
volume, or (vi) one or more Exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that Exchange (or in that class or series of options) would cease to
exist, although outstanding options on that Exchange that had been issued by the
OCC as a result of trades on that Exchange would continue to be exercisable in
accordance with their terms.

The Fund may write options in connection with buy-and-write transactions.
In other words, the Fund may buy a security and then write a call option against
that security. The exercise price of such call will depend upon the expected
price movement of the underlying security. The exercise price of a call option
may be below ("in-the-money"), equal to ("at-the-money") or above
("out-of-the-money") the current value of the underlying security at the time
the option is written. Buy-and-write transactions using in-the-money call
options may be used when it is expected that the price of the underlying
security will remain flat or decline moderately during the option period.
Buy-and-write transactions using at-the-money call options may be used when it
is expected that the price of the underlying security will remain fixed or
advance moderately during the option period. Buy-and-write transactions using
out-of-the-money call options may be used when it is expected that the premiums
received from writing the call option plus the appreciation in the market price
of the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. If the call options
are exercised in such transactions, the Fund's maximum gain will be the premium
received by it for writing the option, adjusted upwards or downwards by the
difference between the Fund's purchase price of the security and the exercise
price. If the options are not exercised and the price of the underlying security
declines, the amount of such decline will be offset by the amount of premium
received.

The writing of covered put options is similar in terms of risk and return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the Fund's gain will be limited to the premium
received. If the market price of the underlying security declines or otherwise
is below the exercise price, the Fund may elect to close the position or take
delivery of the security at the exercise price and the Fund's return will be the
premium received from the put options minus the amount by which the market price
of the security is below the exercise price.

The Fund may buy put options to hedge against a decline in the value of its
portfolio. By using put options in this way, the Fund will reduce any profit it
might otherwise have realized in the underlying security by the amount of the
premium paid for the put option and by transaction costs.

The Fund may buy call options to hedge against an increase in the price of
securities that it may buy in the future. The premium paid for the call option
plus any transaction costs will reduce the benefit, if any, realized by the Fund
upon exercise of the option, and, unless the price of the underlying security
rises sufficiently, the option may expire worthless to the Fund.

12
<PAGE>

Eurodollar Instruments. The Fund may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. The Fund might use Eurodollar futures contracts and options thereon
to hedge against changes in LIBOR, to which many interest rate swaps and
fixed-income instruments are linked.

Swaps and Swap-Related Products. The Fund may enter into interest rate
swaps, caps and floors on either an asset-based or liability-based basis,
depending upon whether it is hedging its assets or its liabilities, and will
usually enter into interest rate swaps on a net basis (i.e., the two payment
streams are netted out, with the Fund receiving or paying, as the case may be,
only the net amount of the two payments). The net amount of the excess, if any,
of the Fund's obligations over its entitlement with respect to each interest
rate swap will be calculated on a daily basis and an amount of cash or
high-grade liquid assets having an aggregate net asset value at least equal to
the accrued excess will be maintained in a segregated account by the Fund's
custodian. If the Fund enters into an interest rate swap on other than a net
basis, it would maintain a segregated account in the full amount accrued on a
daily basis of its obligations with respect to the swap. The Fund will not enter
into any interest rate swap, cap or floor transaction unless the unsecured
senior debt or the claims-paying ability of the other party thereto is rated in
one of the three highest rating categories of at least one nationally recognized
statistical rating organization at the time of entering into such transaction.
Janus Capital will monitor the creditworthiness of all counterparties on an
ongoing basis. If there is a default by the other party to such a transaction,
the Fund will have contractual remedies pursuant to the agreements related to
the transaction.

The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. Janus Capital has determined that, as
a result, the swap market has become relatively liquid. Caps and floors are more
recent innovations for which standardized documentation has not yet been
developed and, accordingly, they are less liquid than swaps. To the extent the
Fund sells (i.e., writes) caps and floors, it will segregate cash or high-grade
liquid assets having an aggregate net asset value at least equal to the full
amount, accrued on a daily basis, of its obligations with respect to any caps or
floors.

There is no limit on the amount of interest rate swap transactions that may
be entered into by the Fund. These transactions may in some instances involve
the delivery of securities or other underlying assets by the Fund or its
counterparty to collateralize obligations under the swap. Under the
documentation currently used in those markets, the risk of loss with respect to
interest rate swaps is limited to the net amount of the payments that the Fund
is contractually obligated to make. If the other party to an interest rate swap
that is not collateralized defaults, the Fund would risk the loss of the net
amount of the payments that it contractually is entitled to receive. The Fund
may buy and sell (i.e., write) caps and floors without limitation, subject to
the segregation requirement described above.

Additional Risks of Options on Foreign Currencies, Forward Contracts and
Foreign Instruments. Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the SEC. To the contrary, such instruments are traded
through financial institutions acting as market-makers, although foreign
currency options are also traded on certain Exchanges, such as the Philadelphia
Stock Exchange and the Chicago Board Options Exchange, subject to SEC
regulation. Similarly, options on currencies may be traded over-the-counter. In
an over-the-counter trading environment, many of the protections afforded to
Exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the buyer of an option
cannot lose more than the amount of the premium plus related transaction costs,
this entire amount could be lost. Moreover, an option writer and a buyer or
seller of futures or forward contracts could lose amounts substantially in
excess of any premium received or initial margin or collateral posted due to the
potential additional margin and collateral requirements associated with such
positions.

Options on foreign currencies traded on Exchanges are within the
jurisdiction of the SEC, as are other securities traded on Exchanges. As a
result, many of the protections provided to traders on organized Exchanges will
be available with respect to such transactions. In particular, all foreign
currency option positions entered into on an Exchange are cleared and guaranteed
by the OCC, thereby reducing the risk of counterparty default. Further, a liquid
secondary market in options traded on an Exchange may be more readily available
than in the over-the-counter market, potentially permitting the Fund to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.

13
<PAGE>

margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on exercise.

In addition, options on U.S. government securities, futures contracts,
options on futures contracts, forward contracts and options on foreign
currencies may be traded on foreign exchanges and over-the-counter in foreign
countries. Such transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in the
Fund's ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) low trading volume.

INVESTMENT ADVISER

As stated in the Prospectus, the Fund has an Investment Advisory Agreement
with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4923. The
Advisory Agreement provides that Janus Capital will furnish continuous advice
and recommendations concerning the Fund's investments, provide office space for
the Fund, pay the salaries, fees and expenses of all Fund officers and of those
Trustees who are affiliated with Janus Capital, and pay all expenses of
promoting the sale of Fund shares other than the cost of complying with
applicable laws relating to the offer or sale of shares of the Fund. Janus
Capital also may make payments to selected broker-dealer firms or institutions
which perform recordkeeping or other services with respect to shareholder
accounts. The minimum aggregate size required for eligibility for such payments,
and the factors in selecting the broker-dealer firms and institutions to which
they will be made, are determined from time to time by Janus Capital. Janus
Capital is also authorized to perform the management and administrative services
necessary for the operation of the Fund.

The Fund pays custodian and transfer agent fees and expenses, brokerage
commissions and dealer spreads and other expenses in connection with the
execution of portfolio transactions, legal and accounting expenses, interest and
taxes, registration fees, expenses of shareholders' meetings and reports to
shareholders, fees and expenses of Trustees who are not affiliated with Janus
Capital, costs of preparing, printing and mailing the Fund's Prospectuses and
Statements of Additional Information to current shareholders, and other costs of
complying with applicable laws regulating the sale of Fund shares. Pursuant to
the Advisory Agreement, Janus Capital furnishes certain other services,
including net asset value determination and Fund accounting, recordkeeping, and
blue sky registration and monitoring services, for which the Fund may reimburse
Janus Capital for its costs.

The Fund has agreed to compensate Janus Capital for its services by the
monthly payment of a fee at the annual rate of .75% of the first $300 million of
the Fund's average daily net assets and .65% of average daily net assets in
excess of $300 million. Janus Capital has agreed to waive the advisory fee
payable by the Fund in an amount equal to the amount, if any, that the Fund's
normal operating expenses chargeable to its income account in any fiscal year,
including the investment advisory fee but excluding brokerage commissions,
interest, taxes and extraordinary expenses, exceed the most restrictive
limitation imposed by any state. The Fund believes that the most restrictive
limitation currently effective is 2.50% of the first $30 million of average
daily net assets, plus 2.00% of the next $70 million of average daily net
assets, plus 1.50% of the balance of the Fund's average daily net assets for a
fiscal year. In addition, Janus Capital has agreed until at least October 31,
1996, to waive the advisory fee payable by the Fund in an amount equal to the
amount, if any, that the Fund's normal operating expenses chargeable to its
income account in any fiscal year, including the investment advisory fee but
excluding brokerage commissions, interest, taxes and extraordinary expenses,
exceed 1.00% of the average daily net assets for a fiscal year.

The current Advisory Agreement became effective on September 27, 1995, and
it will continue in effect until June 16, 1997, and thereafter from year to year
so long as such continuance is approved annually by a majority of the Fund's
Trustees who are not parties to the Advisory Agreement or interested persons of
any such party, and by either a majority of the outstanding voting shares of the
Fund or the Trustees. The Advisory Agreement i) may be terminated without the
payment of any penalty by the Fund or Janus Capital on 60 days' written notice;
ii) terminates automatically in the event of its assignment; and iii) generally,
may not be amended without the approval by vote of a majority of the Trustees,
including the Trustees who are not interested persons of the Fund or Janus
Capital and, to the extent required by the 1940 Act, the vote of a majority of
the outstanding voting securities of the Fund.

14
<PAGE>

Janus Capital also performs investment advisory services for other mutual
funds, and for individual, charitable, corporate and retirement accounts.
Investment decisions for each account managed by Janus Capital, including the
Fund, are made independently from those for any other account that is or may in
the future become managed by Janus Capital or its affiliates. If, however, a
number of accounts managed by Janus Capital are contemporaneously engaged in the
purchase or sale of the same security, the orders may be aggregated and/or the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by an account or the size of the position obtained or liquidated for an
account.

Each account managed by Janus Capital has its own investment objective and
policies and is managed accordingly by a particular portfolio manager or team of
portfolio managers. As a result, from time to time two or more different managed
accounts may pursue divergent investment strategies with respect to investments
or categories of investments.

As indicated in the Prospectus, Janus Capital permits investment and other
personnel to purchase and sell securities for their own accounts in accordance
with a Janus Capital policy regarding personal investing by directors, officers
and employees of Janus Capital and the Fund. The policy requires investment
personnel and officers of Janus Capital, inside directors of Janus Capital and
the Fund and other designated persons deemed to have access to current trading
information to pre-clear all transactions in securities not otherwise exempt
under the policy. Requests for trading authority will be denied when, among
other reasons, the proposed personal transaction would be contrary to the
provisions of the policy or would be deemed to adversely affect any transaction
then known to be under consideration for or to have been effected on behalf of
any client account, including the Fund.

In addition to the pre-clearance requirement described above, the policy
subjects investment personnel, officers and directors/Trustees of Janus Capital
and the Fund to various trading restrictions and reporting obligations. All
reportable transactions are reviewed for compliance with Janus Capital's policy.
Those persons also may be required under certain circumstances to forfeit their
profits made from personal trading.

The provisions of the policy are administered by and subject to exceptions
authorized by Janus Capital.

Kansas City Southern Industries, Inc., a publicly traded holding company
whose primary subsidiaries are engaged in transportation, information processing
and financial services ("KCSI"), owns approximately 83% of Janus Capital. Thomas
H. Bailey, the President and Chairman of the Board of Janus Capital, owns
approximately 12% of its voting stock and, by agreement with KCSI, selects a
majority of Janus Capital's Board.

CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS

Investors Fiduciary Trust Company ("IFTC"), 127 W. 10th Street, Kansas
City, Missouri 64105, has custody of the securities and cash of the Fund
maintained in the United States. IFTC is a wholly-owned subsidiary of State
Street Bank and Trust Company ("State Street"), P.O. Box 351, Boston,
Massachusetts 02101. State Street and the foreign subcustodians selected by it
and approved by the Trustees, have custody of the assets of the Fund held
outside the U.S. and cash incidental thereto. State Street may also have custody
of certain domestic and foreign securities held in connection with repurchase
agreements. The custodians and subcustodians hold the Fund's assets in
safekeeping and collect and remit the income thereon, subject to the
instructions of the Fund.

Janus Service Corporation ("Janus Service"), P.O. Box 173375, Denver,
Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, is the Fund's
transfer agent. In addition, Janus Service provides certain other
administrative, recordkeeping and shareholder relations services to the Fund.

Janus Distributors, Inc. ("Janus Distributors"), 100 Fillmore Street,
Denver, Colorado 80206, a wholly-owned subsidiary of Janus Capital, is a
distributor of the Fund. Janus Distributors is registered as a broker-dealer
under the Securities Exchange Act of 1934 (the "Exchange Act") and is a member
of the National Association of Securities Dealers, Inc. Janus Distributors acts
as the agent of the Fund in connection with the sale of its shares in all states
in which the shares are registered and in which Janus Distributors is qualified
as a broker-dealer. Under the Distribution Agreement, Janus Distributors
continuously offers the Fund's shares and accepts orders at net asset value. No
sales charges are paid by investors. Promotional expenses in connection with
offers and sales of shares are paid by Janus Capital.

For transfer agency and other services, Janus Service receives a fee
calculated at an annual rate of $16 per Fund shareholder account. In addition,
the Fund pays DST Systems, Inc. ("DST"), a subsidiary of KCSI, license fees for
the use of DST's shareholder accounting and portfolio and fund accounting
systems, and postage and forms costs of a DST affiliate incurred in mailing Fund
shareholder transaction confirmations.

15
<PAGE>

The Trustees have authorized the Fund to use another affiliate of DST as
introducing broker for certain Fund portfolio transactions as a means to reduce
Fund expenses through a credit against the charges of DST and its affiliates
with regard to commissions earned by such affiliate. See "Portfolio Transactions
and Brokerage."

PORTFOLIO TRANSACTIONS AND BROKERAGE

Decisions as to the assignment of portfolio business for the Fund and
negotiation of its commission rates are made by Janus Capital whose policy is to
obtain the "best execution" (prompt and reliable execution at the most favorable
security price) of all portfolio transactions. The Fund may trade foreign
securities in foreign countries because the best available market for these
securities is often on foreign exchanges. In transactions on foreign stock
exchanges, brokers' commissions are frequently fixed and are often higher than
in the United States, where commissions are negotiated.

In selecting brokers and dealers and in negotiating commissions, Janus
Capital considers a number of factors, including but not limited to: Janus
Capital's knowledge of currently available negotiated commission rates or prices
of securities currently available and other current transaction costs; the
nature of the security being traded; the size and type of the transaction; the
nature and character of the markets for the security to be purchased or sold;
the desired timing of the trade; the activity existing and expected in the
market for the particular security; confidentiality; the quality of the
execution, clearance and settlement services; financial stability of the broker
or dealer; the existence of actual or apparent operational problems of any
broker or dealer; rebates of commissions by a broker to the fund or to a third
party service provider to the fund to pay fund expenses; and research products
or services provided. In recognition of the value of the foregoing factors,
Janus Capital may place portfolio transactions with a broker or dealer with whom
it has negotiated a commission that is in excess of the commission another
broker or dealer would have charged for effecting that transaction if Janus
Capital determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research provided by such broker
or dealer viewed in terms of either that particular transaction or of the
overall responsibilities of Janus Capital. Research may include furnishing
advice, either directly or through publications or writings, as to the value of
securities, the advisability of purchasing or selling specific securities and
the availability of securities or purchasers or sellers of securities;
furnishing seminars, information, analyses and reports concerning issuers,
industries, securities, trading markets and methods, legislative developments,
changes in accounting practices, economic factors and trends and portfolio
strategy; access to research analysts, corporate management personnel, industry
experts, economists and government officials; comparative performance evaluation
and technical measurement services and quotation services, and products and
other services (such as third party publications, reports and analyses, and
computer and electronic access, equipment, software, information and accessories
that deliver, process or otherwise utilize information, including the research
described above) that assist Janus Capital in carrying out its responsibilities.
Research received from brokers or dealers is supplemental to Janus Capital's own
research efforts. Most brokers and dealers used by Janus Capital provide
research and other services described above.

Janus Capital may use research products and services in servicing other
accounts in addition to the Fund. If Janus Capital determines that any research
product or service has a mixed use, such that it also serves functions that do
not assist in the investment decision-making process, Janus Capital may allocate
the costs of such service or product accordingly. Only that portion of the
product or service that Janus Capital determines will assist it in the
investment decision-making process may be paid for in brokerage commission
dollars. Such allocation may create a conflict of interest for Janus Capital.

Janus Capital does not enter into agreements with any brokers regarding the
placement of securities transactions because of the research services they
provide. It does, however, have an internal procedure for allocating
transactions in a manner consistent with its execution policy to brokers that it
has identified as providing superior executions and research, research-related
products or services which benefit its advisory clients, including the Fund.
Research products and services incidental to effecting securities transactions
furnished by brokers or dealers may be used in servicing any or all of Janus
Capital's clients and such research may not necessarily be used by Janus Capital
in connection with the accounts which paid commissions to the broker-dealer
providing such research products and services.

Janus Capital may consider sales of Fund shares by a broker-dealer or the
recommendation of a broker-dealer to its customers that they purchase Fund
shares as a factor in the selection of broker-dealers to execute Fund portfolio
transactions. Janus Capital may also consider payments made by brokers effecting
transactions for the Fund i) to the Fund or ii) to other persons on behalf of
the Fund for services provided to the Fund for which it would be obligated to
pay. In placing portfolio business with such broker-dealers, Janus Capital will
seek the best execution of each transaction.

16
<PAGE>

When the Fund purchases or sells a security in the over-the-counter market,
the transaction takes place directly with a principal market-maker, without the
use of a broker, except in those circumstances where in the opinion of Janus
Capital better prices and executions will be achieved through the use of a
broker.

The Fund's Trustees have authorized Janus Capital to place transactions
with DST Securities, Inc. ("DSTS"), a wholly-owned broker-dealer subsidiary of
DST. Janus Capital may do so if it reasonably believes that the quality of the
transaction and the associated commission are fair and reasonable and if,
overall, the associated transaction costs, net of any credits described above
under "Custodian, Transfer Agent and Certain Affiliations," are lower than those
that would otherwise be incurred.

OFFICERS AND TRUSTEES

The following are the names of the Trustees and officers of the Trust,
together with a brief description of their principal occupations during the last
five years. In August 1992, Janus Venture Fund, Inc. and Janus Twenty Fund, Inc.
(both separate Maryland corporations) and the Janus Income Series (a
Massachusetts business trust comprised of the Janus Flexible Income Fund and
Janus Intermediate Government Securities Fund series) were reorganized into
separate series of the Trust. In general, all references to Trust offices in
this section include comparable offices with the respective predecessor funds,
unless a Trust office was filled subsequent to the reorganization.

Thomas H. Bailey*# - Trustee, Chairman and President
100 Fillmore Street
Denver, CO 80206-4923
Trustee, Chairman and President of Janus Aspen Series. Chairman, Director
and President of Janus Capital. Chairman and Director of IDEX Management,
Inc., Largo, Florida (50% subsidiary of Janus Capital and investment
adviser to a group of mutual funds) ("IDEX").

James P. Craig, III*# - Trustee and Executive Vice President
100 Fillmore Street
Denver, CO 80206-4923
Trustee and Executive Vice President of Janus Aspen Series. Chief
Investment Officer, Vice President, and Director of Janus Capital.
Executive Vice President and Portfolio Manager of Janus Fund and Janus
Balanced Fund series of the Trust.

Ronald V. Speaker* - Executive Vice President and Portfolio Manager
100 Fillmore Street
Denver, CO 80206-4923
Executive Vice President and Portfolio Manager of Janus Flexible Income
Fund, Janus Intermediate Government Securities Fund, Janus Short-Term Bond
Fund, Janus Federal Tax-Exempt Fund and Janus High-Yield Fund series of the
Trust. Executive Vice President of Janus Aspen Series. Vice President of
Janus Capital. Formerly, securities analyst and research associate at Janus
Capital (1986 to 1992).

David C. Tucker* - Vice President and General Counsel
100 Fillmore Street
Denver, CO 80206-4923
Vice President and General Counsel of Janus Aspen Series. Vice President,
Secretary and General Counsel of Janus Capital. Vice President, General
Counsel and Director of Janus Service and Janus Distributors.

Steven R. Goodbarn* - Treasurer and Chief Financial Officer
100 Fillmore Street
Denver, CO 80206-4923
Treasurer and Chief Financial Officer of Janus Aspen Series. Vice President
of Finance and Treasurer of Janus Service, Janus Distributors and Janus
Capital. Director of IDEX and Janus Distributors. Formerly (1979 to 1992),
with the accounting firm of Price Waterhouse LLP, Denver, Colorado, and
Kansas City, Missouri.

- --------------------------------------------------------------------------------
* Interested person of the Trust and of Janus Capital.
# Member of the Executive Committee.

17
<PAGE>

Kelley Abbott Howes* - Secretary
100 Fillmore Street
Denver, CO 80206-4923
Secretary of Janus Aspen Series. Associate Counsel of Janus Capital.
Formerly (1990 to 1994) with The Boston Company Advisors, Inc., Boston,
Massachusetts (mutual fund administration and advisory services).

John W. Shepardson# - Trustee
910 16th Street, Suite 222
Denver, CO 80202
Trustee of Janus Aspen Series. Historian.

William D. Stewart# - Trustee
5330 Sterling Drive
Boulder, CO 80302
Trustee of Janus Aspen Series. President of HPS Corporation, Boulder,
Colorado (manufacturer of vacuum fittings and valves).

Gary O. Loo - Trustee
102 N. Cascade Avenue, Suite 500
Colorado Springs, CO 80903
Trustee of Janus Aspen Series. President and a Director of High Valley
Group, Inc., Colorado Springs, Colorado (investments) since 1987.

Dennis B. Mullen - Trustee
1601 114th Avenue, SE
Alderwood Building, Suite 130
Bellevue, WA 98004
Trustee of Janus Aspen Series. President and Chief Executive Officer of BC
Northwest, L.P., a franchise of Boston Chicken, Inc., Bellevue, Washington
(restaurant chain). Formerly (1982 to 1993), Chairman, President and Chief
Executive Officer of Famous Restaurants, Inc., Scottsdale, Arizona
(restaurant chain).

Martin H. Waldinger - Trustee
4940 Sandshore Court
San Diego, CA 92130
Trustee of Janus Aspen Series. Private Consultant and Director of Run
Technologies, Inc., a software development firm, San Carlos, California.
Formerly (1989 to 1993), President and Chief Executive Officer of
Bridgecliff Management Services, Campbell, California (a condominium
association management company).

The Trustees are responsible for major decisions relating to the Fund's
objective, policies and techniques. The Trustees also supervise the operation of
the Fund by their officers and review the investment decisions of the officers
although they do not actively participate on a regular basis in making such
decisions.

The Executive Committee of the Trustees shall have and may exercise all the
powers and authority of the Board except for matters requiring action by the
whole Board pursuant to the Trust's Bylaws or Agreement and Declaration of Trust
("Declaration of Trust"), Massachusetts law or the 1940 Act.

The following table shows the aggregate compensation paid to each Trustee
by the Fund and all funds advised and sponsored by Janus Capital (collectively,
the "Janus Funds") for the periods indicated. None of the Trustees receive any
pension or retirement from the Fund or the Janus Funds.

- --------------------------------------------------------------------------------
* Interested person of the Trust and of Janus Capital.
# Member of the Executive Committee.

18
<PAGE>

<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation from the
from the Fund for fiscal year Janus Funds for calendar year
Name of Person, Position ended October 31, 1995** ended December 31, 1994***
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey, Chairman* $ 0 $ 0
James P. Craig, Trustee*+ $ 0 $ 0
John W. Shepardson, Trustee $ 0 $39,250
William D. Stewart, Trustee $ 0 $39,250
Gary O. Loo, Trustee $ 0 $39,250
Dennis B. Mullen, Trustee $ 0 $39,250
Martin H. Waldinger, Trustee $ 0 $39,250
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* An interested person of the Fund and of Janus Capital. Compensated by Janus
Capital and not the Fund.
** The Fund had not commenced operations as of October 31, 1995.
*** As of December 31, 1994, Janus Funds consisted of two registered investment
companies comprised of a total of 20 funds.
+ Mr. Craig became a Trustee as of June 30, 1995.

PURCHASE OF SHARES

As stated in the Prospectus, Janus Distributors is a distributor of the
Fund's shares. Shares of the Fund are sold at the net asset value per share as
determined at the close of the regular trading session of the New York Stock
Exchange (the "NYSE") next occurring after a purchase order is received and
accepted by the Fund. The Shareholder's Manual Section of the Prospectus
contains detailed information about the purchase of shares.

NET ASSET VALUE DETERMINATION

As stated in the Prospectus, the net asset value ("NAV") of Fund shares is
determined once each day on which the NYSE is open, at the close of its regular
trading session (normally 4:00 p.m., New York time, Monday through Friday). The
NAV of Fund shares is not determined on days the NYSE is closed (generally, New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas). The per share NAV of the Fund is determined by
dividing the total value of the Fund's securities and other assets, less
liabilities, by the total number of shares outstanding. In determining NAV,
securities listed on an Exchange, the NASDAQ National Market and foreign markets
are valued at the closing prices on such markets, or if such price is lacking
for the trading period immediately preceding the time of determination, such
securities are valued at their current bid price. Municipal securities held by
the Fund are traded primarily in the over-the-counter market. Valuations of such
securities are furnished by one or more pricing services employed by the Fund
and are based upon a computerized matrix system or appraisals obtained by a
pricing service, in each case in reliance upon information concerning market
transactions and quotations from recognized municipal securities dealers. Other
securities that are traded on the over-the-counter market are valued at their
closing bid prices. Foreign securities and currencies are converted to U.S.
dollars using the exchange rate in effect at the close of the NYSE. The Fund
will determine the market value of individual securities held by it, by using
prices provided by one or more professional pricing services which may provide
market prices to other funds, or, as needed, by obtaining market quotations from
independent broker-dealers. Short-term securities maturing within 60 days are
valued on the amortized cost basis. Securities for which quotations are not
readily available, and other assets, are valued at fair values determined in
good faith under procedures established by and under the supervision of the
Trustees.

Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York (i.e., a day on which the NYSE is open). In
addition, European or Far Eastern securities trading generally or in a
particular country or countries may not take place on all business days in New
York. Furthermore, trading takes place in Japanese markets on certain Saturdays
and in various foreign markets on days which are not business days in New York
and on which the Fund's NAV is not calculated. The Fund calculates its NAV per
share, and therefore effects sales, redemptions and repurchases of its shares,
as of the close of the NYSE once on each day on which the NYSE is open. Such
calculation may not take place contemporaneously with the determination of the
prices of the foreign portfolio securities used in such calculation.

REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS

If investors do not elect in writing or by phone to receive their dividends
and distributions in cash, all income dividends and capital gains distributions,
if any, on the Fund's shares are reinvested automatically in additional shares
of the Fund at the NAV determined on the first business day following the record
date. Dividend statements will be mailed at the end of each calendar quarter.
Checks for cash dividends and distributions and confirmations of

19
<PAGE>

reinvestments are usually mailed to shareholders within ten days after the
record date. Any election of the manner in which a shareholder wishes to receive
dividends and distributions (which may be made on the New Account Application
form or by phone) will apply to dividends and distributions the record dates of
which fall on or after the date that the Fund receives such notice. Investors
receiving cash distributions and dividends may elect in writing or by phone to
change back to automatic reinvestment at any time.

REDEMPTION OF SHARES

Procedures for redemption of shares are set forth in the Shareholder's
Manual section of the Prospectus. Shares normally will be redeemed for cash,
although the Fund retains the right to redeem its shares in kind under unusual
circumstances, in order to protect the interests of remaining shareholders, by
delivery of securities selected from its assets at its discretion. However, the
Fund is governed by Rule 18f-1 under the 1940 Act, which requires the Fund to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the NAV of
the Fund during any 90-day period for any one shareholder. Should redemptions by
any shareholder exceed such limitation, the Fund will have the option of
redeeming the excess in cash or in kind. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage costs in converting the assets to
cash. The method of valuing securities used to make redemptions in kind will be
the same as the method of valuing portfolio securities described under "Purchase
of Shares - Net Asset Value Determination" and such valuation will be made as of
the same time the redemption price is determined.

The right to require the Fund to redeem its shares may be suspended, or the
date of payment may be postponed, whenever (1) trading on the NYSE is
restricted, as determined by the SEC, or the NYSE is closed except for holidays
and weekends, (2) the SEC permits such suspension and so orders, or (3) an
emergency exists as determined by the SEC so that disposal of securities or
determination of NAV is not reasonably practicable.

SHAREHOLDER ACCOUNTS

Detailed information about the general procedures for shareholder accounts
and specific types of accounts is set forth in the Prospectus. Applications for
specific types of accounts may be obtained by calling the Fund at 1-800-525-3713
or writing to the Fund at P.O. Box 173375, Denver, Colorado 80217-3375.

TELEPHONE TRANSACTIONS

As stated in the Prospectus, shareholders may initiate a number of
transactions by telephone. The Fund, its transfer agent and its distributor
disclaim responsibility for the authenticity of instructions received by
telephone. Such entities will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures may include,
among others, requiring personal identification prior to acting upon telephone
instructions, providing written confirmation of the transactions and tape
recording telephone conversations.

SYSTEMATIC WITHDRAWALS

As stated in the Shareholder's Manual section of the Prospectus, if you
have a regular account or are eligible for normal distributions from a
retirement plan, you may establish a systematic withdrawal program. The payments
will be made from the proceeds of periodic redemptions of shares in the account
at the NAV. Depending on the size or frequency of the disbursements requested,
and the fluctuation in value of the Fund's portfolio, redemptions for the
purpose of making such disbursements may reduce or even exhaust the
shareholder's account. Either an investor or the Fund, by written notice to the
other, may terminate the investor's systematic withdrawal program without
penalty at any time.

Information about requirements to establish a systematic withdrawal program
may be obtained by writing or calling the Fund at the address or phone number
shown above.

RETIREMENT PLANS

The Fund offers several different types of tax-deferred retirement plans
that an investor may establish to invest in Fund shares, depending on rules
prescribed by the Code. The Individual Retirement Account ("IRA") may be used by
most individuals who have taxable compensation. Simplified Employee Pension
Plans ("SEPs") and Defined Contribution Plans (Profit Sharing or Money Purchase
Pension Plans) may be used by most employers, including corporations,
partnerships and sole proprietors, for the benefit of business owners and their
employees. In addition, the Fund offers a Section 403(b)(7) Plan for employees
of educational organizations and other qualifying tax-exempt organizations.
Investors should consult their tax advisor or legal counsel before selecting a
retirement plan.

20
<PAGE>

Contributions under IRAs, SEPs, Defined Contribution Plans and Section
403(b)(7) Plans are subject to specific contribution limitations. Generally,
such contributions will be invested at the direction of the participant. The
investment is then held by IFTC as custodian. Each participant's account is
charged an annual fee of $12. There is a maximum annual fee of $24 per taxpayer
identification number. In lieu of the annual fee, a special nonrefundable
one-time fee of $100 may be paid. This fee covers all retirement plans discussed
above that are maintained under the same taxpayer identification number in any
series of the Trust, and carries over to spousal beneficiaries who transfer or
rollover the plan assets to a plan in their name upon the death of the
participant, as long as the accounts remain with Janus on a continuing basis.

Distributions from retirement plans are generally subject to ordinary
income tax and may be subject to an additional 10% tax if withdrawn prior to age
591/2. Several exceptions to the general rule may apply. However, shareholders
must start withdrawing retirement plan assets no later than April 1 of the year
after they reach age 701/2. Several methods exist to determine the amount of the
minimum annual distribution. Shareholders should consult with their tax advisor
or legal counsel prior to receiving any distribution from any retirement plan,
in order to determine the income tax impact of any such distribution.

To receive additional information about IRAs, SEPs, Defined Contribution
Plans and Section 403(b)(7) Plans along with the necessary materials to
establish an account, please call the Fund at 1-800-525-3713 or write to the
Fund at P.O. Box 173375, Denver, Colorado 80217-3375. No contribution to an IRA,
SEP, Defined Contribution Plan or Section 403(b)(7) Plan can be made until the
appropriate forms to establish any such plan have been completed.

INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS

It is a policy of the Fund to make distributions of substantially all of
its investment income and any net realized capital gains. The Fund declares
dividends daily and makes monthly distributions of income. Any capital gains
realized during each fiscal year ended October 31, as defined by the Code, are
normally declared and payable to shareholders in December. The Fund intends to
qualify as a regulated investment company by satisfying certain requirements
prescribed by Subchapter M of the Code. Dividend statements will be sent to
shareholders at the end of each calendar quarter.

The Fund may purchase the securities of certain foreign corporations
considered to be passive foreign investment companies by the IRS. In order to
avoid taxes and interest that must be paid by the Fund if these investments are
profitable, the Fund may make various elections permitted by the tax laws.
However, these elections could require that the Fund recognize taxable income,
which in turn must be distributed, before the securities are sold and before
cash is received to pay the distributions.

Some foreign securities purchased by the Fund may be subject to foreign
taxes which could reduce the yield on such securities. The amount of such
foreign taxes is expected to be insignificant. Accordingly, the Fund does not
intend to make the election permitted under section 853 of the Code to pass
through such taxes to shareholders as a foreign tax credit. As a result, any
foreign taxes paid or accrued will represent an expense to the Fund which will
reduce its investment company taxable income as this would increase the taxable
income reported to shareholders and require shareholders to take the credit on
their tax returns, complicating the preparation of such returns.

MISCELLANEOUS INFORMATION

The Fund is a series of the Trust, a Massachusetts business trust which was
created on February 11, 1986. The Trust is an open-end management investment
company registered under the 1940 Act. As of the date of this SAI, the Trust
consists of 17 other series, which are offered by separate prospectuses.

Janus Capital reserves the right to the name "Janus." In the event that
Janus Capital does not continue to provide investment advice to the Fund, the
Fund must cease to use the name "Janus" as soon as reasonably practicable.

Under Massachusetts law, shareholders of the Fund could, under certain
circumstances, be held liable for the obligations of the Fund. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Fund and requires that notice of this disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or the Trustees.
The Declaration of Trust also provides for indemnification from the assets of
the Fund for all losses and expenses of the Fund shareholder held liable for the
obligations of the Fund. Thus, the risk of a shareholder incurring a financial
loss on account of its liability as a shareholder of one of the Fund is limited
to circumstances in which the Fund would be unable to meet its obligations. The
possibility that these circumstances would occur is remote. The Trustees intend
to conduct the operations of the Fund to avoid, to the extent possible,
liability of shareholders for liabilities of the Fund.

21
<PAGE>

SHARES OF THE TRUST

The Trust is authorized to issue an unlimited number of shares of
beneficial interest with a par value of one cent per share for each series of
the Trust. Shares of the Fund are fully paid and nonassessable when issued. All
shares of the Fund participate equally in dividends and other distributions by
the Fund, and in residual assets of the Fund in the event of liquidation. Shares
of the Fund have no preemptive, conversion or subscription rights. Shares of the
Fund may be transferred by endorsement or stock power as is customary, but the
Fund is not bound to recognize any transfer until it is recorded on its books.

VOTING RIGHTS

The present Trustees were elected at a meeting of shareholders held on July
10, 1992, with the exception of Mr. Craig who was appointed by the Trustees as
of June 30, 1995. Under the Declaration of Trust, each Trustee will continue in
office until the termination of the Trust or his earlier death, resignation,
bankruptcy, incapacity or removal. Vacancies will be filled by a majority of the
remaining Trustees, subject to the 1940 Act. Therefore, no annual or regular
meetings of shareholders normally will be held, unless otherwise required by the
Declaration of Trust or the 1940 Act. Subject to the foregoing, shareholders
have the power to vote to elect or remove Trustees, to terminate or reorganize
the Fund, to amend the Declaration of Trust, to bring certain derivative actions
and on any other matters on which a shareholder vote is required by the 1940
Act, the Declaration of Trust, the Trust's Bylaws or the Trustees.

Each share of each series of the Trust has one vote (and fractional votes
for fractional shares). Shares of all series of the Trust have noncumulative
voting rights, which means that the holders of more than 50% of the shares of
all series of the Trust voting for the election of Trustees can elect 100% of
the Trustees if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any Trustees. Each series of the
Trust will vote separately only with respect to those matters that affect only
that series or if a portfolio's interest in a matter differs from the interests
of other portfolios of the Trust.

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado
80202, independent accountants for the Fund, audit the Fund's annual financial
statements and prepare its tax returns.

REGISTRATION STATEMENT

The Trust has filed with the SEC, Washington, D.C., a Registration
Statement under the Securities Act of 1933, as amended, with respect to the
securities to which this SAI relates. If further information is desired with
respect to the Fund or such securities, reference is made to the Registration
Statement and the exhibits filed as a part thereof.

PERFORMANCE INFORMATION

The Prospectus contains a brief description of how performance is
calculated.

Quotations of average annual total return for the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5, and 10 years (up to the life of the
Fund). These are the annual total rates of return that would equate the initial
amount invested to the ending redeemable value. These rates of return are
calculated pursuant to the following formula: P(1 + T)n = ERV (where P = a
hypothetical initial payment of $1,000, T = the average annual total return, n =
the number of years and ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the period). All total return figures
reflect the deduction of a proportional share of Fund expenses on an annual
basis, and assume that all dividends and distributions are reinvested when paid.

Quotations of the Fund's yield are based on the investment income per share
earned during a particular 30-day period (including dividends, if any, and
interest), less expenses accrued during the period ("net investment income"),
and are computed by dividing net investment income by the net asset value per
share on the last day of the period, according to the following formula:

YIELD = 2 [(a-b + 1)6 - 1]
cd

where a = dividend and interest income
b = expenses accrued for the period
c = average daily number of shares outstanding during the period
that were entitled to receive dividends
d = maximum net asset value per share on the last day of the
period

22
<PAGE>

From time to time in advertisements or sales material, the Fund may discuss
its performance ratings or other information as published by recognized mutual
fund statistical rating services, including, but not limited to, Lipper
Analytical Services, Inc., Ibbotson Associates, Micropal or Morningstar or by
publications of general interest such as Forbes or Money. The Fund may also
compare its performance to that of other selected mutual funds, mutual fund
averages or recognized stock market indicators, including, but not limited to,
the Standard & Poor's 500 Composite Stock Price Index, the Standard & Poor's
Midcap Index, the Dow Jones Industrial Average, the Lehman Brothers
Government/Corporate Bond Index, the Lehman Brothers Government/Corporate 1-3
Year Bond Index, the Lehman Brothers Long Government/Corporate Bond Index, the
Lehman Brothers Intermediate Government Bond Index, the Lehman Brothers
Municipal Bond Index, the Russell 2000 Index and the NASDAQ composite. In
addition, the Fund may compare its total return to the yield on U.S. Treasury
obligations and to the percentage change in the Consumer Price Index. Such
performance ratings or comparisons may be made with funds that may have
different investment restrictions, objectives, policies or techniques than the
Fund and such other funds or market indicators may be comprised of securities
that differ significantly from the Fund's investments.

23
<PAGE>

This page intentionally left blank.

24
<PAGE>

[LOGO]
JANUS OLYMPUS FUND

100 Fillmore Street
Denver, CO 80206-4923
(800) 525-3713

STATEMENT OF ADDITIONAL INFORMATION
November 28, 1995

Janus Olympus Fund (the "Fund") is a no-load mutual fund that seeks
long-term growth of capital. The Fund invests primarily in common stocks of
issuers of any size, which may include larger, well-established issuers and/or
smaller emerging growth companies.

1
<PAGE>

JANUS OLYMPUS FUND
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS

Page
- --------------------------------------------------------------------------------
Investment Policies, Restrictions and Techniques .......................... 3

Investment Objective .................................................... 3

Portfolio Policies ...................................................... 3

Investment Restrictions ................................................. 3

Types of Securities and Investment Techniques ........................... 5

Illiquid Investments .................................................. 5

Zero Coupon, Pay-In-Kind and Step Coupon Securities ................... 5

Pass-Through Securities ............................................... 5

Other Income-Producing Securities ..................................... 6

Repurchase and Reverse Repurchase Agreements .......................... 7

Joint Accounts ........................................................ 7

Depository Receipts ................................................... 7

High-Yield/High-Risk Bonds ............................................ 7

Futures, Options and Other Derivative Instruments ..................... 8

Investment Adviser ........................................................ 15

Custodian, Transfer Agent and Certain Affiliations ........................ 16

Portfolio Transactions and Brokerage ...................................... 16

Officers and Trustees ..................................................... 17

Purchase of Shares ........................................................ 19

Net Asset Value Determination ........................................... 19

Reinvestment of Dividends and Distributions ............................. 20

Redemption of Shares ...................................................... 20

Shareholder Accounts ...................................................... 20

Telephone Transactions .................................................. 21

Systematic Withdrawals .................................................. 21

Retirement Plans .......................................................... 21

Income Dividends, Capital Gains Distributions and Tax Status .............. 21

Miscellaneous Information ................................................. 22

Shares of the Trust ..................................................... 22

Voting Rights ........................................................... 22

Independent Accountants ................................................. 22

Registration Statement .................................................. 23

Performance Information ................................................... 23

Appendix A ................................................................ 24

Explanation of Rating Categories ........................................ 24
- --------------------------------------------------------------------------------

2
<PAGE>

INVESTMENT POLICIES, RESTRICTIONS AND TECHNIQUES

INVESTMENT OBJECTIVE

As stated in the Prospectus, the Fund's investment objective is long-term
growth of capital. There can be no assurance that the Fund will, in fact,
achieve its objective. The investment objective of the Fund is not fundamental
and may be changed by the Trustees without shareholder approval.

PORTFOLIO POLICIES

INVESTMENT RESTRICTIONS

As indicated in the Prospectus, the Fund is subject to certain fundamental
policies and restrictions that may not be changed without shareholder approval.
Shareholder approval means approval by the lesser of (i) more than 50% of the
outstanding voting securities of the Trust (or a particular Fund if a matter
affects just that Fund), or (ii) 67% or more of the voting securities present at
a meeting if the holders of more than 50% of the outstanding voting securities
of the Trust (or a particular Fund) are present or represented by proxy. As
fundamental policies, the Fund may not:

(1) Own more than 10% of the outstanding voting securities of any one
issuer and, as to fifty percent (50%) of the value of its total assets, purchase
the securities of any one issuer (except cash items and "government securities"
as defined under the Investment Company Act of 1940, as amended (the "1940
Act")), if immediately after and as a result of such purchase, the value of the
holdings of the Fund in the securities of such issuer exceeds 5% of the value of
the Fund's total assets.

(2) Invest more than 25% of the value of its assets in any particular
industry (other than U.S. government securities).

(3) Invest directly in real estate or interests in real estate; however,
the Fund may own debt or equity securities issued by companies engaged in those
businesses.

(6) Act as an underwriter of securities issued by others, except to the
extent that the Fund may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund.

3
<PAGE>

Fund's net assets, after taking into account unrealized profits and unrealized
losses on any such contracts it has entered into; and (ii) enter into any
futures contracts if the aggregate amount of the Fund's commitments under
outstanding futures contracts positions would exceed the market value of its
total assets.

(c) The Fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to the
securities sold short without the payment of any additional consideration
therefor, and provided that transactions in futures, options, swaps and forward
contracts are not deemed to constitute selling securities short.

(d) The Fund does not currently intend to purchase securities on margin,
except that the Funds may obtain such short-term credits as are necessary for
the clearance of transactions, and provided that margin payments and other
deposits in connection with transactions in futures, options, swaps and forward
contracts shall not be deemed to constitute purchasing securities on margin.

(f) The Fund may not mortgage or pledge any securities owned or held by the
Fund in amounts that exceed, in the aggregate, 15% of the Fund's net asset
value, provided that this limitation does not apply to reverse repurchase
agreements, deposits of assets to margin, guarantee positions in futures,
options, swaps or forward contracts, or the segregation of assets in connection
with such contracts.

(k) The Fund may not invest in companies for the purpose of exercising
control of management.

4
<PAGE>

TYPES OF SECURITIES AND INVESTMENT TECHNIQUES

ILLIQUID INVESTMENTS

ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES

The Fund may invest up to 10% of its assets in zero coupon, pay-in-kind and
step coupon securities. Zero coupon bonds are issued and traded at a discount
from their face value. They do not entitle the holder to any periodic payment of
interest prior to maturity. Step coupon bonds trade at a discount from their
face value and pay coupon interest. The coupon rate is low for an initial period
and then increases to a higher coupon rate thereafter. The discount from the
face amount or par value depends on the time remaining until cash payments
begin, prevailing interest rates, liquidity of the security and the perceived
credit quality of the issuer. Pay-in-kind bonds normally give the issuer an
option to pay cash at a coupon payment date or give the holder of the security a
similar bond with the same coupon rate and a face value equal to the amount of
the coupon payment that would have been made.

PASS-THROUGH SECURITIES

5
<PAGE>

Certificates in that each PC represents a pro rata share of all interest and
principal payments made and owned on the underlying pool. FHLMC guarantees
timely payments of interest on PCs and the full return of principal. GMCs also
represent a pro rata interest in a pool of mortgages. However, these instruments
pay interest semiannually and return principal once a year in guaranteed minimum
payments. This type of security is guaranteed by FHLMC as to timely payment of
principal and interest but it is not guaranteed by the full faith and credit of
the U.S. government.

OTHER INCOME-PRODUCING SECURITIES

Other types of income producing securities that the Fund may purchase
include, but are not limited to, the following types of securities:

Variable and floating rate obligations. These types of securities have
variable or floating rates on interest and, under certain limited circumstances,
may have varying principal amounts. Variable and floating rate securities pay
interest at rates that are adjusted periodically according to a specified
formula, usually with reference to some interest rate index or market interest
rate (the "underlying index"). Certain variable rate securities (including
certain mortgage-backed securities) pay interest at a rate that varied inversely
to prevailing short-term interest rates (sometimes referred to as inverse
floaters). For example, upon reset the interest rate payable on a security may
go down when the underlying index has risen.

Standby commitments. These instruments, which are similar to a put, give
the Fund the option to obligate a broker, dealer or bank to repurchase a
security held by the Fund at a specified price.

Tender option bonds. Tender option bonds are relatively long-term bonds
that are coupled with the agreement of a third party (such as a broker, dealer
or bank) to grant the holders of such securities the option to tender the
securities to the institution at periodic intervals.

Inverse floaters. Inverse floaters are instruments whose interest bears an
inverse relationship to the interest rate on another security. Certain inverse
floaters may have an interest rate reset mechanism that multiplies the effects
of change in the underlying index. Such mechanism may increase the volatility of
the security's market value. The Fund will not invest more than 5% of its assets
in inverse floaters.

The Fund will purchase standby commitments, tender option bonds and
instruments with demand features primarily for the purpose of increasing the
liquidity of its portfolio.

6
<PAGE>

REPURCHASE AND REVERSE REPURCHASE AGREEMENTS

JOINT ACCOUNTS

DEPOSITARY RECEIPTS

The Fund may invest in sponsored and unsponsored American Depositary
Receipts ("ADRs"), which are receipts issued by an American bank or trust
company evidencing ownership of underlying securities issued by a foreign
issuer. ADRs, in registered form, are designed for use in U.S. securities
markets. Unsponsored ADRs may be created without the participation of the
foreign issuer. Holders of these ADRs generally bear all the costs of the ADR
facility, whereas foreign issuers typically bear certain costs in a sponsored
ADR. The bank or trust company depositary of an unsponsored ADR may be under no
obligation to distribute shareholder communications received from the foreign
issuer or to pass through voting rights. The Fund may also invest in European
Depositary Receipts ("EDRs"), similar instruments representing securities of
foreign companies. EDRs, in bearer form, are designed for use in European
securities markets.

HIGH-YIELD/HIGH-RISK BONDS

The Fund may invest up to 35% of its net assets in corporate debt
securities that are rated below investment grade (securities rated BB or lower
by Standard & Poor's Ratings Services ("Standard & Poor's") or Ba or lower by
Moody's Investors Service, Inc. ("Moody's") and unrated securities of equivalent
quality). Lower rated bonds involve a higher degree of credit risk, which is the
risk that the issuer will not make interest or principal payments when due. In
the event of an unanticipated default, the Fund would experience a reduction in
its income, and could expect a decline in the market value of the securities so
affected.

The Fund may also invest in unrated debt securities of foreign and domestic
issuers. Unrated debt, while not necessarily of lower quality than rated
securities, may not have as broad a market. Sovereign debt of foreign
governments is generally rated by country. Because these ratings do not take
into account individual factors relevant to each issue and may not be updated
regularly, Janus Capital may treat such securities as unrated debt. Unrated debt
securities will be included in the 35% limit of the Fund unless its portfolio
manager deems such securities to be the equivalent of investment grade
securities.

7
<PAGE>

FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS

The Fund's primary purpose in entering into futures contracts is to protect
the Fund from fluctuations in the value of securities or interest rates without
actually buying or selling the underlying debt or equity security. For example,
if the Fund anticipates an increase in the price of stocks, and it intends to
purchase stocks at a later time, the Fund could enter into a futures contract to
purchase a stock index as a temporary substitute for stock purchases. If an
increase in the market occurs that influences the stock index as anticipated,
the value of the futures contracts will increase, thereby serving as a hedge
against the Fund not participating in a market advance. This technique is
sometimes known as an anticipatory hedge. To the extent the Fund enters into
futures contracts for this purpose, the segregated assets maintained to cover
the Fund's obligations with respect to the futures contracts will consist of
high-grade liquid assets from its portfolio in an amount equal to the difference
between the contract price and the aggregate value of the initial and variation
margin payments made by the Fund with respect to the futures contracts.
Conversely, if the Fund holds stocks and seeks to protect itself from a decrease
in stock prices, the Fund might sell stock index futures contracts, thereby
hoping to offset the potential decline in the value of its portfolio securities
by a corresponding increase in the value of the futures contract position. The
Fund could protect against a decline in stock prices by selling portfolio
securities and investing in money market instruments, but the use of futures
contracts enables it to maintain a defensive position without having to sell
portfolio securities.

If the Fund owns Treasury bonds and the portfolio manager expects interest
rates to increase, the Fund may take a short position in interest rate futures
contracts. Taking such a position would have much the same effect as the Fund
selling Treasury bonds in its portfolio. If interest rates increase as
anticipated, the value of the Treasury bonds would decline, but the value of the
Fund's interest rate futures contract will increase, thereby keeping the net
asset value of the Fund from declining as much as it may have otherwise. If, on
the other hand, a portfolio manager expects interest rates to decline, the Fund
may take a long position in interest rate futures contracts in anticipation of
later

8
<PAGE>

closing out the futures position and purchasing the bonds. Although the Fund can
accomplish similar results by buying securities with long maturities and selling
securities with short maturities, given the greater liquidity of the futures
market than the cash market, it may be possible to accomplish the same result
more easily and more quickly by using futures contracts as an investment tool to
reduce risk.

The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of futures
contracts, it is possible that the standardized futures contracts available to
the Fund will not match exactly the Fund's current or potential investments. The
Fund may buy and sell futures contracts based on underlying instruments with
different characteristics from the securities in which it typically invests --
for example, by hedging investments in portfolio securities with a futures
contract based on a broad index of securities -- which involves a risk that the
futures position will not correlate precisely with the performance of the Fund's
investments.

9
<PAGE>

to the purchase of a call option on an individual security. Depending on the
pricing of the option compared to either the price of the futures contract upon
which it is based or the price of the underlying instrument, ownership of the
option may or may not be less risky than ownership of the futures contract or
the underlying instrument. As with the purchase of futures contracts, when the
Fund is not fully invested it may buy a call option on a futures contract to
hedge against a market advance.

10
<PAGE>

the Fund if its portfolio manager's projection of future exchange rates is
inaccurate. Proxy hedges and cross-hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which hedged
securities are denominated. Unforeseen changes in currency prices may result in
poorer overall performance for the Fund than if it had not entered into such
contracts.

11
<PAGE>

In the case of a written call option, effecting a closing transaction will
permit the Fund to write another call option on the underlying security with
either a different exercise price or expiration date or both. In the case of a
written put option, such transaction will permit the Fund to write another put
option to the extent that the exercise price thereof is secured by deposited
high-grade liquid assets. Effecting a closing transaction also will permit the
Fund to use the cash or proceeds from the concurrent sale of any securities
subject to the option for other investments. If the Fund desires to sell a
particular security from its portfolio on which it has written a call option,
the Fund will effect a closing transaction prior to or concurrent with the sale
of the security.

12
<PAGE>

is more than the premium received from writing the option or the price received
from a sale transaction is less than the premium paid to buy the option. Because
increases in the market of a call option generally will reflect increases in the
market price of the underlying security, any loss resulting from the repurchase
of a call option is likely to be offset in whole or in part by appreciation of
the underlying security owned by the Fund.

13
<PAGE>

usually enter into interest rate swaps on a net basis (i.e., the two payment
streams are netted out, with the Fund receiving or paying, as the case may be,
only the net amount of the two payments). The net amount of the excess, if any,
of the Fund's obligations over its entitlement with respect to each interest
rate swap will be calculated on a daily basis and an amount of cash or
high-grade liquid assets having an aggregate net asset value at least equal to
the accrued excess will be maintained in a segregated account by the Fund's
custodian. If the Fund enters into an interest rate swap on other than a net
basis, it would maintain a segregated account in the full amount accrued on a
daily basis of its obligations with respect to the swap. The Fund will not enter
into any interest rate swap, cap or floor transaction unless the unsecured
senior debt or the claims-paying ability of the other party thereto is rated in
one of the three highest rating categories of at least one nationally recognized
statistical rating organization at the time of entering into such transaction.
Janus Capital will monitor the creditworthiness of all counterparties on an
ongoing basis. If there is a default by the other party to such a transaction,
the Fund will have contractual remedies pursuant to the agreements related to
the transaction.

The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on exercise.

14
<PAGE>

INVESTMENT ADVISER

The Fund pays custodian and transfer agent fees and expenses, brokerage
commissions and dealer spreads and other expenses in connection with the
execution of portfolio transactions, legal and accounting expenses, interest and
taxes, registration fees, expenses of shareholders' meetings and reports to
shareholders, fees and expenses of Trustees who are not affiliated with Janus
Capital, costs of preparing, printing and mailing the Fund's Prospectuses and
Statements of Additional Information to current shareholders, and other costs of
complying with applicable laws regulating the sale of Fund shares. Pursuant to
the Advisory Agreements, Janus Capital furnishes certain other services,
including net asset value determination and Fund accounting, recordkeeping, and
blue sky registration and monitoring services, for which the Fund may reimburse
Janus Capital for its costs.

The Fund has agreed to compensate Janus Capital for its services by the
monthly payment of a fee at the annual rate of 1.00% of the first $30 million of
the Fund's average daily net assets, plus 0.75% of the next $270 million of the
Fund's average daily net assets, plus 0.70% of the next $200 million of the
Fund's average daily net assets, plus 0.65% of average daily net assets in
excess of $500 million. Janus Capital has agreed to waive the advisory fee
payable by the Fund in an amount equal to the amount, if any, that the Fund's
normal operating expenses chargeable to its income account in any fiscal year,
including the investment advisory fee but excluding brokerage commissions,
interest, taxes and extraordinary expenses, exceed the most restrictive
limitation imposed by any state. The Fund believes that the most restrictive
limitation currently effective is 2.50% of the first $30 million of average
daily net assets, plus 2.00% of the next $70 million of average daily net
assets, plus 1.50% of the balance of the Fund's average daily net assets for a
fiscal year.

The current Advisory Agreement became effective on September 27, 1995 and
it will continue in effect until June 16, 1997, and thereafter from year to year
so long as such continuance is approved annually by a majority of the Trustees
who are not parties to the Advisory Agreement or interested persons of any such
party, and by either a majority of the outstanding voting shares of the Fund or
the Trustees. The Advisory Agreement i) may be terminated without the payment of
any penalty by the Fund or Janus Capital on 60 days' written notice; ii)
terminates automatically in the event of its assignment; and iii) generally, may
not be amended without the approval by vote of a majority of the Trustees,
including the Trustees who are not interested persons of the Fund or Janus
Capital and, to the extent required by the 1940 Act, the vote of a majority of
the outstanding voting securities of the Fund.

15
<PAGE>

The provisions of the policy are administered by and subject to exceptions
authorized by Janus Capital.

CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS

PORTFOLIO TRANSACTIONS AND BROKERAGE

16
<PAGE>

OFFICERS AND TRUSTEES

17
<PAGE>

the Janus Flexible Income Fund and Janus Intermediate Government Securities Fund
series) were reorganized into separate series of the Trust. In general, all
references to Trust offices in this section include comparable offices with the
respective predecessor funds, unless a Trust office was filled subsequent to the
reorganization.

James P. Craig, III*# - Trustee and Executive Vice President
100 Fillmore Street
Denver, CO 80206-4923
Trustee and Executive Vice President of Janus Aspen Series. Chief
Investment Officer, Vice President and Director of Janus Capital. Executive
Vice President and Portfolio Manager of Janus Fund and Janus Balanced Fund
series of the Trust.

Scott W. Schoelzel* - Executive Vice President and Portfolio Manager
100 Fillmore Street
Denver, CO 80206-4923
Vice President of Janus Capital. Co-Portfolio Manager of WRL Growth
Portfolio, IDEX II Growth Portfolio, IDEX Fund and IDEX Fund 3. From 1991
to 1993, a Portfolio Manager with Founders Asset Management, Denver,
Colorado. Prior to 1991, a general partner of Ivy Lane Investments, Denver,
Colorado (a real estate investment partnership).

Kelley Abbott Howes* - Secretary
100 Fillmore Street
Denver, CO 80206-4923
Secretary of Janus Aspen Series. Associate Counsel of Janus Capital.
Formerly (1990 to 1994), with The Boston Company Advisors, Inc., Boston,
Massachusetts (mutual fund administration and advisory services).

John W. Shepardson# - Trustee
910 16th Street, Suite 222
Denver, CO 80202
Trustee of Janus Aspen Series. Historian.

William D. Stewart# - Trustee
5330 Sterling Drive
Boulder, CO 80302
Trustee of Janus Aspen Series. President of HPS Corporation, Boulder,
Colorado (manufacturer of vacuum fittings and valves).

- --------------------------------------------------------------------------------
* Interested person of the Trust and of Janus Capital.
# Member of the Executive Committee.

18
<PAGE>

<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation from the
from the Fund for fiscal year Janus Funds for calendar year
Name of Person, Position ended October 31, 1995** ended December 31, 1994***
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey, Chairman* $ 0 $ 0
James P. Craig, Trustee*+ $ 0 $ 0
John W. Shepardson, Trustee $ 0 $39,250
William D. Stewart, Trustee $ 0 $39,250
Gary O. Loo, Trustee $ 0 $39,250
Dennis B. Mullen, Trustee $ 0 $39,250
Martin H. Waldinger, Trustee $ 0 $39,250
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* An interested person of the Fund and of Janus Capital. Compensated by Janus
Capital and not the Fund.
** The Fund had not commenced operations as of October 31, 1995.
*** As of December 31, 1994, Janus Funds consisted of two registered investment
companies comprised of a total of 20 funds.
+ Mr. Craig became a Trustee as of June 30, 1995.

PURCHASE OF SHARES

NET ASSET VALUE DETERMINATION

- --------------------------------------------------------------------------------
* Interested person of the Trust and of Janus Capital.
# Member of the Executive Committee.

19
<PAGE>

period immediately preceding the time of determination, such securities are
valued at their current bid price. Municipal securities held by the Fund are
traded primarily in the over-the-counter market. Valuations of such securities
are furnished by one or more pricing services employed by the Fund and are based
upon a computerized matrix system or appraisals obtained by a pricing service,
in each case in reliance upon information concerning market transactions and
quotations from recognized municipal securities dealers. Other securities that
are traded on the over-the-counter market are valued at their closing bid
prices. Foreign securities and currencies are converted to U.S. dollars using
the exchange rate in effect at the close of the NYSE. The Fund will determine
the market value of individual securities held by it, by using prices provided
by one or more professional pricing services which may provide market prices to
other funds, or, as needed, by obtaining market quotations from independent
broker-dealers. Short-term securities maturing within 60 days are valued on the
amortized cost basis. Securities for which quotations are not readily available,
and other assets, are valued at fair values determined in good faith under
procedures established by and under the supervision of the Trustees.

REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS

If investors do not elect in writing or by phone to receive their dividends
and distributions in cash, all income dividends and capital gains distributions,
if any, on a Fund's shares are reinvested automatically in additional shares of
the Fund at the NAV determined on the first business day following the record
date. Checks for cash dividends and distributions and confirmations of
reinvestments are usually mailed to shareholders within ten days after the
record date. Any election of the manner in which a shareholder wishes to receive
dividends and distributions (which may be made on the New Account Application
form or by phone) will apply to dividends and distributions the record dates of
which fall on or after the date that the Fund receives such notice. Investors
receiving cash distributions and dividends may elect in writing or by phone to
change back to automatic reinvestment at any time.

REDEMPTION OF SHARES

Procedures for redemption of shares are set forth in the Shareholder's
Manual section of the Prospectus. Shares normally will be redeemed for cash,
although the Fund retains the right to redeem its shares in kind under unusual
circumstances, in order to protect the interests of remaining shareholders, by
delivery of securities selected from its assets at its discretion. However, the
Fund is governed by Rule 18f-1 under the 1940 Act, which requires the Fund to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the NAV of
the Fund during any 90-day period for any one shareholder. Should redemptions by
any shareholder exceed such limitation, the Fund will have the option of
redeeming the excess in cash or in kind. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage costs in converting the assets to
cash. The method of valuing securities used to make redemptions in kind will be
the same as the method of valuing portfolio securities described under "Purchase
of Shares -- Net Asset Value Determination" and such valuation will be made as
of the same time the redemption price is determined.

SHAREHOLDER ACCOUNTS

20
<PAGE>

TELEPHONE TRANSACTIONS

SYSTEMATIC WITHDRAWALS

Information about requirements to establish a systematic withdrawal program
may be obtained by writing or calling the Fund at the address or phone number
shown above.

RETIREMENT PLANS

INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS

It is a policy of the Fund to make distributions of substantially all of
its investment income and any net realized capital gains. The Fund declares and
makes annual distributions of income (if any). Any capital gains realized during
each fiscal year ended October 31, as defined by the Code, are normally declared
and payable to shareholders in December. The Fund intends to qualify as a
regulated investment company by satisfying certain requirements prescribed by
Subchapter M of the Code.

21
<PAGE>

profitable, the Fund may make various elections permitted by the tax laws.
However, these elections could require that the Fund recognize taxable income,
which in turn must be distributed, before the securities are sold and before
cash is received to pay the distributions.

MISCELLANEOUS INFORMATION

SHARES OF THE TRUST

VOTING RIGHTS

Each share of each series of the Trust has one vote (and fractional votes
for fractional shares). Shares of all series of the Trust have noncumulative
voting rights, which means that the holders of more than 50% of the shares of
all series of the Trust voting for the election of Trustees can elect 100% of
the Trustees if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any Trustees. Each series of the
Trust will vote separately only with respect to those matters that affect only
that series or if a portfolio's interest in the matter differs from the
interests of other portfolios of the Trust.

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado
80202, independent accountants for the Fund, audit the Fund's annual financial
statements and prepare its tax returns.

22
<PAGE>

REGISTRATION STATEMENT

PERFORMANCE INFORMATION

The Prospectus contains a brief description of how performance is
calculated.

YIELD = 2 [(a-b + 1)6 - 1]
cd

23
<PAGE>

APPENDIX A

EXPLANATION OF RATING CATEGORIES

The following is a description of credit ratings issued by two of the major
credit ratings agencies. Credit ratings evaluate only the safety of principal
and interest payments, not the market value risk of lower quality securities.
Credit rating agencies may fail to change credit ratings to reflect subsequent
events on a timely basis. Although the adviser considers security ratings when
making investment decisions, it also performs its own investment analysis and
does not rely solely on the ratings assigned by credit agencies.

STANDARD & POOR'S RATINGS SERVICES

Bond Rating Explanation
- --------------------------------------------------------------------------------
Investment Grade
- ----------------
AAA Highest rating; extremely strong capacity to pay principal
and interest.
AA High quality; very strong capacity to pay principal and
interest.
A Strong capacity to pay principal and interest; somewhat more
susceptible to the adverse effects of changing circumstances
and economic conditions.
BBB Adequate capacity to pay principal and interest; normally
exhibit adequate protection parameters, but adverse economic
conditions or changing circumstances more likely to lead to
a weakened capacity to pay principal and interest than for
higher rated bonds.

Noninvestment Grade
- -------------------
BB, B, Predominantly speculative with respect to the issuer's
CCC, CC, C capacity to meet required interest and principal payments.
BB - lowest degree of speculation; C - the highest degree of
speculation. Quality and protective characteristics
outweighed by large uncertainties or major risk exposure to
adverse conditions.
D In default.
- --------------------------------------------------------------------------------
MOODY'S INVESTORS SERVICE, INC.

Investment Grade
- ----------------
Aaa Highest quality, smallest degree of investment risk.
Aa High quality; together with Aaa bonds, they compose the
high-grade bond group.
A Upper-medium grade obligations; many favorable investment
attributes.
Baa Medium-grade obligations; neither highly protected nor
poorly secured. Interest and principal appear adequate for
the present but certain protective elements may be lacking
or may be unreliable over any great length of time.

Noninvestment Grade
- -------------------
Ba More uncertain, with speculative elements. Protection of
interest and principal payments not well safeguarded during
good and bad times.
B Lack characteristics of desirable investment; potentially
low assurance of timely interest and principal payments or
maintenance of other contract terms over time.
Caa Poor standing, may be in default; elements of danger with
respect to principal or interest payments.
Ca Speculative in a high degree; could be in default or have
other marked shortcomings.
C Lowest-rated; extremely poor prospects of ever attaining
investment standing.
- --------------------------------------------------------------------------------

*Unrated securites are treated as noninvestment grade securities unless the
portfolio manager determines that such securities are the equivalent of
investment grade. Split rated securities may be treated as investment grade so
long as at least one major agency has rated the security as investment grade.