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TABLE OF CONTENTS
Our Message to You 1
Portfolio Manager's Commentary and Schedule of Investments
Janus Flexible Income Fund 2
Janus High-Yield Fund 6
Janus Federal Tax-Exempt Fund 9
Janus Short-Term Bond Fund 12
Janus Money Market Fund 15
Janus Government Money Market Fund 18
Janus Tax-Exempt Money Market Fund 19
Statements of Operations--Bond Funds 21
Statements of Assets and Liabilities - Bond Funds 22
Statements of Changes in Net Assets - Bond Funds 23
Financial Highlights - Bond Funds 24
Statements of Operations - Money Market Funds 26
Statements of Assets and Liabilities - Money Market Funds 26
Statements of Changes in Net Assets - Money Market Funds 27
Financial Highlights - Money Market Funds 28
Notes to Schedules of Investments 29
Notes to Financial Statements 29
Report of Independent Accountants 32
______________________________________________________________________________
Performance Information
Performance overview graphs on the following pages compare
the performance of a $10,000 investment in each fund, since its
inception, to one or more widely used market indexes. Each graph
reflects the lifetime performance of the fund through October
31, 1996.
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When comparing the performance of a fund to an index, keep
in mind that market indexes do not take into account brokerage
commissions that would be incurred if you purchased the individual
securities that comprise the index. They also do not include taxes
payable on dividends and interest payments, or operating expenses
necessary to maintain a portfolio investing in the index.
Average annual total returns are quoted for each fund.
Average annual total return is calculated by taking the growth or
decline in value of an investment over a period of time, including
reinvestment of dividends and distributions, and then calculating the
annual compound percentage rate that would have produced the
same result had the rate of growth been constant throughout the
period.
An Explanation of the Schedule of Investments
Following the performance overview graph is each fund's
Schedule of Investments. This schedule reports the industry
concentrations and the different types of securities held in the
fund's portfolio on the last day of the reporting period. Securities
are usually listed by type (common stocks, corporate bonds, U.S.
government obligations, etc.) and by industry classification
(banking, communications, insurance, etc.).
The market value of each security represents its value on the
last day of the reporting period. Funds that own securities
denominated in foreign currencies convert the value of their
securities into U.S. dollars.
An Explanation of the Forward
Currency ContractTable
A table listing forward currency contracts will follow each
fund's Schedule of Investments (if applicable). Forward currency
contracts represent agreements to deliver or receive a preset
amount of currency at a future date. Forward currency contracts
are used to hedge against foreign currency risk in the fund's long-
term holdings.
The table provides the foreign currency being sold and the
settlement date, the amount sold, the value of the currency in U.S.
dollars, and the amount of unrealized gain or loss. The amount of
unrealized gain or loss reflects the change in currency exchange
rates from the time the contract was opened to the last day of the
reporting period.
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OUR MESSAGE TO YOU
Dear Shareholders:
During our 1996 fiscal year ended October 31, bonds came almost full
circle, beginning and ending the year at approximately the same levels. But in
between those numbers there was plenty of excitement. Yields went through
fairly wide swings this year, as the table below illustrates.
Interest rates rose and fell along with our Gross Domestic Product (GDP),
a broad measure of economic strength. In the fourth quarter of 1995, GDP
growth was an anemic 0.5%, but jumped to 4.7% just six months later, in the
second calendar quarter of 1996. Yield on the benchmark 30-year Treasury
tracked the rise in GDP, peaking above 7% on July 5.
Rates moved higher because bond investors feared the second quarter spike
in economic growth would carry over into the final six months of the year and
precipitate higher inflation. However, when the fast-growth scenario failed to
materialize, rates subsided and bond prices rose.
Treasury Yields
_____________________________________________________________________________
October 31, FY96 FY96 October 31,
1996 High Low 1995
30-Year Treasury Bond 6.64% 7.19% 5.95% 6.33%
10-Year Treasury Note 6.34% 7.06% 5.52% 6.02%
One Year Treasury Bills 5.96% 4.78% 6.23% 5.55%
_____________________________________________________________________________
The Bond Market, Not the Fed, Set Rates. Bond yields rose even as the
Federal Reserve Board, which controls short-term interest rates, was lowering
the federal funds rate to 5.25% (in February). The bond market, however, was
already focused on the acceleration in commodity prices and the recent strong
employment figures. Historically, these conditions have preceded a jump in
inflation. Demand was also strong at both the manufacturing and retail levels.
Market forces, and not the Federal Reserve Board, set intermediate and long-
term interest rates. Faced with a stronger economy, the market began pushing
rates higher in an effort to find the interest rate level that would slow
economic growth and stifle inflationary pressures before they strengthened.
The Fed evidently believed the market was doing a good job of maintaining
the economy's equilibrium. Although it threatened to raise rates, the Fed
stayed on the sidelines for the rest of the year, and left short rates
unchanged. By late summer, signs of a slowdown appeared and rates began
falling.
Bonds ended the year on a very strong note. Inflation remained weak, and
the November elections appeared to confirm that Washington would remain
focused on fiscal restraint. There was also good demand for U.S. bonds from
3
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foreign investors. Our yields are high compared to much overseas debt. A
number of foreign governments -- the Japanese in particular -- have lowered
interest rates in an attempt to stimulate their sluggish economies. The strong
dollar, and weak yen, also added to the attractiveness of U.S. obligations.
Foreigners want to own our bonds in order to avoid any devaluation (versus the
dollar) of their own currencies.
How Our Funds Performed
An important function of an actively managed bond fund is to protect
investors' capital from market volatility. For the last three years, bonds
have -- on a relative basis -- been more volatile than stocks. As you may
recall, 1994 was one of the worst years on record for bonds, just as 1995 was
one of the best. This year was mixed: Bonds made rapid adjustments both up and
down.
As a result, our funds had to play offense as well as defense, and on the
whole they did a very good job. Having avoided much of the damage in 1994 and
capitalized on the gains in 1995, most beat their benchmark averages this
year, and also ranked high in their fund groups.(1) You can find the specific
numbers in each fund's annual letter, but Ron Speaker, Sharon Pichler, Sandy
Rufenacht, and Darrell Watters are all to be congratulated on a fine year.
Although the general bond market was volatile this year, high-yield/high-
risk (junk) bonds were a consistent bright spot. The high-yield sector tends
to perform well in a healthy economy because the companies that issue lower-
rated debt can better improve their financial condition when the economy is
strong. The generous income streams from these bonds can also serve to
"cushion" them against price declines when interest rates are rising.
The high-yield market is interesting to us at Janus because it provides an
opportunity to add value for our shareholders through intensive, equity-style
research. Hands-on analysis of individual companies can make a substantial
difference to one's success in the high-yield sector.
We appreciate your investment with Janus.
Thomas H. Bailey
Chairman
_____________________________________________________________________________
(1) For a prospectus containing more complete information, including expenses,
please call a Janus Investor Service Representative at 1-800-525-3713. Read
the prospectus carefully before you invest or send money. Past performance is
no guarantee of future results. Lipper rankings are based on total return,
including reinvestment of dividends and capital gains.
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JANUS FLEXIBLE INCOME FUND
Portfolio Managers, Ronald V. Speaker, Sandy R. Rufenacht
Performance
The Janus Flexible Income Fund outperformed the Lehman Government/
Corporate Bond Index for the fiscal year ended October 31, 1996. The Fund
returned 9.01%, compared to a gain of 5.39% for the Lehman Index. Both returns
include reinvested dividends.
For the fiscal year, Janus Flexible Income Fund's total return put it in
the top 25% (10/40) of the general bond funds tracked by Lipper Analytical
Services, a large mutual fund rating company.(1)
Janus Flexible Income Fund's diversity was the primary factor contributing
to its good performance. Although the Fund struggled in the first months of
1996, when interest rates moved higher, its weighting in high-yield/high-risk
(junk) bonds, as well as in preferred and convertible securities, produced a
significantly better total return than the Lehman Index by year end.
The Year in Review
Because fixed-income yields were volatile this year, the prices of higher-
rated bonds -- governments and investment-grade corporates -- rose and fell
dramatically. But prices in the high-yield sector behaved considerably better.
The weak economy of 1995 had pushed the high-yield sector to very inexpensive
levels compared to other areas of the fixed-income market. As the economy
began to strengthen, the sector rallied. High-yield securities often respond
more to a healthy economy and a good stock market than to interest rate
movements.
The robust equity market also increased investors' appetite for
convertible and preferred stocks. These securities performed especially well
in the second half of the year, when the Dow Jones Industrial Average broke
6000.
_____________________________________________________________________________
Fund Profile October 31, 1996 October 31, 1995
Weighted Avg. Maturity 8.2 Yrs. 12.8 Yrs.
Average Modified Duration* 4.9 Yrs. 6.7 Yrs.
30-Day Avg. Yield 8.15% 7.39%
Average Rating BBB BBB
_____________________________________________________________________________
*A theoretical measure of price volatility.
_____________________________________________________________________________
October 31, 1996 October 31, 1995
Investment-Grade
Corporate Bonds 30.0% 39.0%
High-Yield/High-Risk Bonds 47.0% 37.0%
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U.S. Government Bonds 9.5% 13.0%
Foreign Non-Dollar Bonds 0.1% 4.0%
Preferred Stock 2.0% 1.0%
Cash 11.4% 6.0%
_____________________________________________________________________________
Portfolio Strategy
Portfolio strategy had the net effect of reducing interest rate risk and
raising credit risk. The addition of lower-rated bonds explains the Fund's
greater yield at year end. Weighted average maturity and duration also dropped
as Treasury and investment-grade corporate bonds, especially in the 30-year
area, were reduced.
For much of the year, holdings in U.S. Treasury issues had maturities of
approximately ten years. Among the Fund's investment-grade corporate holdings,
high-quality banks and financial institutions were widely represented. Bank of
Boston, First Union, Chase Manhattan, and NationsBank remained significant
positions, as did IBM, Ford Motor Credit, GMAC, Ralston Purina, and Time
Warner, Inc.
In the high-yield sector, the ability to pick the right bonds is critical
because hands-on, "tire-kicking" research can add significant value. Early in
1996, the focus was on the gaming area. As the year progressed, the portfolio
diversified into food and supermarket chains, cellular communications,
financial institutions, and consumer products. Ballys (gaming), Wireless One
(telecommunications), Neodata Services (data processing), Carr-Gottstein
Foods, and El Paso Electric (utility) indicate the variety in high-yield
holdings.
We also maintained small positions in the government bonds of Germany and
New Zealand as well as in the preferred stock of Chevy Chase Savings Bank,
which aided this year's performance.
Going Forward
The volatility in interest rates over the last 12 months proved to be a
good time to relearn the virtues of portfolio flexibility. Flexibility and
diversification can provide a good defense when interest rates rise and a good
offense when they decline. The economy now appears to be slowing, but if
growth should pick up again and inflation gains speed, a flexible strategy
gives us the ability to make adjustments quickly.
In closing, please welcome Sandy Rufenacht as co-manager of Janus Flexible
Income Fund. Sandy and I have worked together on Janus Flexible Income Fund
for almost seven years. We have been partners on many portfolio decisions.
Sandy's experience, insight, and dedication have always made substantial
contributions to the Fund's strong performance. His promotion is well-
deserved.
Thank you for your continued investment in Janus Flexible Income Fund.
6
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_____________________________________________________________________________
(1) According to Lipper Analytical Services, General Bond Funds "Do not have
any quality or maturity restrictions and intend to keep bulk of assets in
corporate and government debt issues." The Lipper ranking is based on total
return, including reinvestment of dividends and capital gains for the stated
period. Past performance is not predictive of future results.
7
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Performance Overview
GRAPHIC
A graphic comparison of the change in value of a hypothetical $10,000
investment in Janus Flexible Income Fund and the Lehman Brothers
Government/Corporate Bond Index. Janus Flexible Income Fund is represented by
a solid blue line. The Lehman Brothers Government/Corporate Bond Index is
represented by a single dashed black line. The "y" axis reflects the value of
the investment. The "x" axis reflects the computation periods from inception,
July 2, 1987, through October 31, 1996. The upper right quadrant reflects the
ending value of the hypothetical investment in Janus Flexible Income Fund
($22,899) as compared to the Lehman Brothers Government/Corporate Bond Index
($21,526). There is a legend in the upper left quadrant of the graph which
indicates Janus Flexible Income Fund's one-year, five-year and since inception
(July 2, 1987) average annual total returns as 9.01%, 10.54% and 9.26%,
respectively.
Source - Lipper Analytical Services, Inc. 1996. All returns reflect reinvested
dividends.
Past performance is not predictive of future performance. Investment return
and principal value may fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. The Fund's portfolio may differ
significantly from the securities in the index. The index is unmanaged and
therefore does not reflect the cost of portfolio management of trading.
JANUS FLEXIBLE INCOME FUND
October 31, 1996
_____________________________________________________________________________
Principal Amount Market Value
_____________________________________________________________________________
Corporate Bonds - 76.0%
_____________________________________________________________________________
Agricultural Operations - 1.2%
$7,000,000 Hines Horticulture, Inc., 11.75%
senior subordinated notes, due 10/15/05 $7,332,500
_____________________________________________________________________________
Cable Television - 2.1%
2,000,000 Heartland Wireless Communications,
Inc., 13.00% senior notes,
due 4/15/03 2,145,000
2,000,000 Net Sat Servicos Ltda., 12.75%
senior notes, due 8/5/04+ 2,090,000
5,500,000 Pegasus Media & Communications,
Inc., 12.50% notes, due
7/1/05 5,912,500
3,000,000 Viacom, Inc., 8.00%
8
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subordinated debentures,
due 7/7/06 2,820,000
_____________________________________________________________________________
12,967,500
_____________________________________________________________________________
Casino Hotels - 4.6%
5,000,000 California Hotel Financial, 11.00%
senior subordinated notes,
due 12/1/02 5,225,000
3,000,000 Casino America, Inc., 12.50%
senior notes, due 8/1/03 3,067,500
9,000,000 GNF Corp., 10.625%
first mortgage bonds, due
4/1/03 9,843,750
5,000,000 Lady Luck Gaming Corp., 11.875%
first mortgage notes, due
3/1/01 4,762,500
3,000,000 Mohegan Tribal Gaming Authority,
13.50% senior notes, due
11/15/02 3,832,500
1,000,000 Trump Castle Funding, 11.75%
mortgage notes, due 11/15/03 955,000
_____________________________________________________________________________
27,686,250
_____________________________________________________________________________
Commercial Services - 1.6%
8,434,000 NeoData Services, Inc., 12.00%
senior notes, due 5/1/03 8,665,935
1,000,000 Outsourcing Solutions, Inc., 11.00%
senior subordinated notes,
due 11/1/06+ 1,000,000
_____________________________________________________________________________
9,665,935
_____________________________________________________________________________
Computers - Mainframe - 2.2%
IBM Corp.:
5,000,000 7.25% global notes,
due 11/1/02 5,181,250
8,000,000 7.50% debentures, due 6/15/13 8,300,000
_____________________________________________________________________________
13,481,250
_____________________________________________________________________________
Diversified Minerals - 0.5%
3,000,000 Freeport-McMoRan Resource Partners, L.P.,
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7.00% senior notes, due 2/15/08 2,895,000
_____________________________________________________________________________
Electric - Integrated - 2.0%
El Paso Electric Co.:
2,656,000 8.90% first mortgage bonds, due 2/1/0 62,739,000
9,000,000 9.40% first mortgage bonds, due 5/1/11 9,450,000
_____________________________________________________________________________
Engineering - Research and Development Services - 1.0%
6,000,000 IntertekFinance PLC, 10.25%
senior subordinated notes,
due 11/1/06+ 6,025,000
_____________________________________________________________________________
Finance - Auto Loan - 5.1%
20,000,000 Ford Motor Credit Corp., 7.75%
notes, due 3/15/05 20,950,000
10,000,000 General Motors Acceptance Corp., 6.625%
notes, due 10/15/05 9,762,500
_____________________________________________________________________________
30,712,500
_____________________________________________________________________________
Finance - Leasing Companies - 0.4%
$2,000,000 Alamo Rent-A-Car, Inc., 11.75%
senior notes, due 1/31/06 $2,202,500
_____________________________________________________________________________
Food - Distribution - 0.3%
2,000,000 Americold Corp., 12.875%
senior subordinated notes, due 5/1/08 2,067,500
_____________________________________________________________________________
Food - Diversified - 1.4%
8,000,000 Ralston Purina Co., 7.875%
debentures, due 6/15/25 8,210,000
_____________________________________________________________________________
Food - Retail - 5.2%
8,000,000 Carr-Gottstein Foods Co., 12.00%
senior subordinated notes, due 11/15/05 8,500,000
2,000,000 International Home Foods, Inc., 10.375%
senior subordinated notes, due 11/1/06+ 2,015,000
5,000,000 Ralphs Grocery Co., 10.45%
senior notes, due 6/15/04 5,050,000
10,000,000 Smith's Food & Drug Centers, Inc., 11.25%
senior subordinated notes, due 5/15/07 10,787,500
4,500,000 TLC Beatrice International Holdings, Inc., 11.50%
senior notes, due 10/1/05 4,725,000
_____________________________________________________________________________
10
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31,077,500
_____________________________________________________________________________
Food - Wholesale - 0.9%
5,000,000 Doane Products Co., 10.625%
senior notes, due 3/1/06 5,225,000
_____________________________________________________________________________
Home Furnishings - 0.8%
4,900,000 Lifestyle Furnishings, Inc., 10.875%
senior subordinated guarantee notes,
due 8/1/06 5,096,000
_____________________________________________________________________________
Hotels and Motels - 1.9%
11,000,000 Courtyard By Marriott II, L.P., 10.75%
senior notes, due 2/1/08 11,385,000
_____________________________________________________________________________
Human Resources - 0.4%
2,000,000 Primeco, Inc., 12.75%
senior subordinated notes, due 3/1/05 2,245,000
_____________________________________________________________________________
Industrial Audio and Video Products - 0.8%
$5,000,000 Unifrax Investment Corp., 10.50%
senior notes, due 10/1/03 $5,087,500
_____________________________________________________________________________
Instruments - Controls - 0.3%
2,000,000 Imo Industries, Inc., 11.75%
senior subordinated notes, due 5/1/06 2,055,000
_____________________________________________________________________________
Leisure and Recreation Services - 1.0%
7,000,000 Six Flags Theme Parks, zero coupon
senior subordinated notes, due 6/15/05 6,326,250
_____________________________________________________________________________
Life and Health Insurance - 1.8%
11,000,000 Delphi Financial Group, Inc., 8.00%
senior notes, due 10/1/03 10,931,250
_____________________________________________________________________________
Machinery - Farm - 0.8%
5,000,000 AGCO Corp., 8.50%
senior subordinated notes, due 3/15/06 5,050,000
_____________________________________________________________________________
Machinery - General Industrial - 0.3%
1,980,000 Spinnaker Industries, Inc., 10.75%
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senior notes, due 10/15/06 2,014,650
_____________________________________________________________________________
Medical - Hospitals - 1.3%
Tenet Healthcare Corp.:
3,000,000 8.625% senior notes, due 12/1/033,172,500 3,172,500
4,000,000 10.125% senior subordinated notes,
due 3/1/05 4,390,000
_____________________________________________________________________________
7,562,500
_____________________________________________________________________________
Medical Labs and Testing Services - 1.5%
8,500,000 Dade International, Inc., 11.125%
senior subordinated notes, due 5/1/06 9,031,250
_____________________________________________________________________________
Money Center Banks - 4.9%
10,000,000 BankAmerica Corp., 7.125%
subordinated notes, due 5/1/06 10,112,500
20,000,000 Chase Manhattan Corp., 6.75%
subordinated notes, due 8/15/08 19,450,000
_____________________________________________________________________________
29,562,500
_____________________________________________________________________________
Multimedia - 2.5%
Time Warner, Inc.:
$ 2,500,000 7.75% notes, due 6/15/05 $ 2,521,875
12,000,000 8.11% notes, due 8/15/06 12,375,000
_____________________________________________________________________________
14,896,875
_____________________________________________________________________________
Oil Companies - Exploration and Production - 0.8%
$ 4,750,000 Gulf Canada Resources, Ltd., 9.25%
senior subordinated debentures, due 1/15/04 $ 4,928,125
_____________________________________________________________________________
Petrochemicals - 0.4%
2,000,000 Texas Petrochemical Corp., 11.125%
senior subordinated notes, due 7/1/06 2,115,000
_____________________________________________________________________________
Property and Casualty Insurance - 2.4%
5,000,000 Arkwright CSN Trust, 9.625%
notes, due 8/15/26+ 5,518,750
9,000,000 Orion Capital Corp., 7.25%
senior notes, due 7/15/05 9,056,250
_____________________________________________________________________________
14,575,000
_____________________________________________________________________________
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Retail - Leisure Products - 1.7%
9,750,000 Selmer Co., Inc., 11.00%
senior subordinated notes, due 5/15/05 10,383,750
_____________________________________________________________________________
Retail - Music Store - 0.5%
3,000,000 Guitar Center Management Co., 11.00%
senior notes, due 7/1/06 3,150,000
_____________________________________________________________________________
Retail - Regional Department Stores - 0.9%
5,000,000 Federated Department Stores, Inc., 8.50%
senior notes, due 6/15/03 5,200,000
_____________________________________________________________________________
Savings/Loan/Thrifts - 4.5%
5,000,000 Anchor Bancorp, Inc., 8.9375%
senior notes, due 7/9/03 5,193,750
10,000,000 First Nationwide Escrow Corp., 10.625%
senior subordinated notes, due 10/1/03 10,500,000
2,000,000 First Nationwide Holdings, Inc., 12.50%
senior notes, due 4/15/03 2,165,000
8,500,000 Standard Federal Bancorp, 7.75%
subordinated notes, due 7/17/06 8,850,625
_____________________________________________________________________________
26,709,375
_____________________________________________________________________________
Super-Regional Banks - 7.2%
10,000,000 First National Bank of Boston, 7.375%
subordinated notes, due 9/15/06 10,225,000
10,000,000 First Union Corp., 7.05%
subordinated notes, due 8/1/05 10,037,500
8,000,000 Fleet Financial Group, Inc., 7.125%
subordinated notes, due 4/15/06 8,050,000
8,000,000 NationsBank Corp., 7.75%
subordinated notes, due 8/15/15 8,270,000
7,000,000 Wells Fargo & Co., 7.125%
subordinated notes, due 8/15/06 7,052,500
_____________________________________________________________________________
43,635,000
_____________________________________________________________________________
Telecommunication Services - 5.6%
$7,000,000 A+ Network, Inc., 11.875%
senior subordinated notes, due 11/1/05 $ 7,017,500
2,000,000 Galaxy Telecom, L.P., 12.375%
senior subordinated notes, due 10/1/05 2,090,000
2,000,000 Globo Participacoes, 10.75%
company guaranteed notes, due 10/31/03 2,080,000
3,000,000 Intermedia Communications of Florida, Inc.,
13.50% senior notes, due 6/1/05 3,420,000
8,400,000 NEXTLINK Communications, L.L.C., 12.50%
senior notes, due 4/15/06 8,568,000
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2,735,000 Omnipoint Corp., 11.625%
senior notes, due 8/15/06 2,789,700
3,980,000 RSL Communications, Ltd., 12.25%
units, due 11/15/06+ 4,019,800
6,500,000 WinStar Communications, Inc.,
zero coupon senior discount notes,
due 10/15/05 3,640,000
_____________________________________________________________________________
33,625,000
_____________________________________________________________________________
Textile - Products - 1.7%
9,500,000 Polysindo International Finance Co. B.V., 11.375%
guaranteed secured notes, due 6/15/06 10,070,000
_____________________________________________________________________________
Theaters - 0.6%
3,967,059 United Artists Theatres Circuit, Inc., 9.30%
pass thru certificates, due 7/1/15 3,654,653
_____________________________________________________________________________
Wireless Telecommunications - 2.9%
2,200,000 CAI Wireless Systems, Inc., 12.25%
senior notes, due 9/15/02 2,139,500
5,000,000 Paging Network, Inc., 10.00%
senior subordinated notes, due 10/15/08 4,962,500
10,000,000 Wireless One, Inc., 13.00%
senior notes, due 10/15/03 10,325,000
_____________________________________________________________________________
17,427,000
_____________________________________________________________________________
Total Corporate Bonds (cost $447,450,782) 458,454,113
Convertible Bonds - 0.4%
_____________________________________________________________________________
Data Processing and Management - 0.3%
2,000,000 National Data Corp., 5.00%
subordinated notes, due 11/1/03 2,000,000
_____________________________________________________________________________
Protection - Safety - 0.1%
500,000 Protection One Alarm, Inc., 6.75%
convertible senior subordinated notes,
due 9/15/03 478,125
_____________________________________________________________________________
Total Convertible Bonds (cost $2,500,000) 2,478,125
_____________________________________________________________________________
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U.S. Government Obligations - 9.5%
U.S. Treasury Notes:
53,000,000 7.00%, 7/15/06** 55,349,490
2,000,000 6.50%, 10/15/06** 2,019,040
_____________________________________________________________________________
Total U.S. Government Obligations (cost $56,439,808) 57,368,530
_____________________________________________________________________________
Foreign Bond - 0.1%
NZD 1,000,000 New Zealand Government, 8.00%
foreign government guaranteed,
due 4/15/04 (cost $690,302) 735,005
_____________________________________________________________________________
Common Stock - 0%
550 Pegasus Media & Communications, Inc.*,+
(cost $0) 192,500
Preferred Stock - 2.0%
_____________________________________________________________________________
Financial - Bank Commercial - 1.7%
300,000 Chevy Chase Savings, 13.00%,
Non-Cumulative 9,825,000
_____________________________________________________________________________
Financial - Savings/Loan/Thrifts - 0.3%
40,000 Glendale Federal Bank FSB, 8.75%,
Non-Cumulative - Series E 1,935,000
_____________________________________________________________________________
Total Preferred Stock (cost $10,998,400) 11,760,000
_____________________________________________________________________________
Warrants - 0.1%
12,000 Heartland Wireless Communications, Inc. -
exp. 4/15/00*,+ 102,000
3,000 Intermedia Communications of Florida, Inc. -
exp. 6/1/00*,+ 3,000
30,000 Wireless One, Inc. - exp. 10/19/00* 210,000
1,131 Wright Medical Technology, Inc. -
exp. 6/30/03*,+ 186,624
_____________________________________________________________________________
Total Warrants (cost $139,179) 501,624
_____________________________________________________________________________
Short-Term Corporate Notes - 9.5%
General Electric Capital Corp.
$30,000,000 5.55%, 11/1/96 30,000,000
Prudential Funding Corp.
27,400,000 5.50%, 11/1/96 27,400,000
_____________________________________________________________________________
Total Short-Term Corporate Notes (amortized cost $57,400,000) 57,400,000
15
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_____________________________________________________________________________
Total Investments (total cost $575,618,471) - 97.6% 588,889,897
_____________________________________________________________________________
Cash, Receivables and Other Assets, net of
Liabilities - 2.4% 14,765,048
_____________________________________________________________________________
Net Assets - 100% $603,654,945
_____________________________________________________________________________
_____________________________________________________________________________
Financial Futures - Short
200 Contracts U.S. Treasury - 10 year note,
expires December 1996,
principal amount $21,578,125,
value $21,925,000, cumulative
depreciation $346,875
75 Contracts U.S. Treasury - 30 year bond,
expires December 1996,
principal amount $8,100,000,
value $8,475,000,
cumulative depreciation 375,000
__________________________________________________________________________
$721,875
__________________________________________________________________________
See Notes to Schedule of Investments
JANUS INCOME FUNDS OCTOBER 31, 1996 ANNUAL REPORT
16
<PAGE>
JANUS HIGH-YIELD FUND
Portfolio Managers, Ronald V. Speaker, Sandy R. Rufenacht
Performance Review
Since opening on December 29, 1995, Janus High-Yield Fund has produced a
total return of 19.71%, compared to a total return of 8.42% for the Lehman
Brothers High-Yield Bond Index during the same ten months. Both returns
include reinvested dividends.
Before discussing the Fund's performance in more detail, I would like to
welcome Sandy Rufenacht as co-manager of Janus High-Yield Fund. Sandy has
worked on Janus High-Yield Fund since inception. As a portfolio manager, his
experience, insight, and dedication will continue to be a great asset to
performance.
The Fund outperformed its benchmark high-yield index during its initial
ten months due to overweighting in certain sectors of the market early in the
year and strong performance from individual bond selections. Selectivity,
backed up by intensive research, can add value in the high-yield/high-risk
market. Research not only provides a better understanding of a company's
balance sheet, but can also uncover earnings potential and other factors that
make a bond attractive. During the period, Sandy and I were able to uncover a
number of companies that were candidates for rating upgrades - sometimes to
investment grade. Other companies were acquisition candidates, often by a
higher rated company, and many possessed earnings potential that was largely
underappreciated. We also avoided zero coupon bonds, which do not have a
regular income component and are therefore more vulnerable to price
fluctuations. We wanted to keep the Fund's yield high and duration low.
The First Ten Months
During this period, high-yield securities were one of the best performing
fixed-income asset classes. The slow economy in 1995 helped make the sector
less expensive than other areas of the bond market. In a soft economy,
companies with weaker balance sheets have less chance to improve their
financial condition. When the economy began to rebound in early 1996, and
interest rates started climbing, high-yield securities launched a rally that
gained momentum throughout the year. Investors became more confident about
taking on credit risk. Generous yields and shorter maturities cushioned price
fluctuations, while a healthy stock market was also beneficial. When equities
are in demand, companies can deleverage more easily by issuing stock to pay
off their debt.
The high-yield rally was also fueled by a sophisticated and segmented
calendar of new offerings. We saw several companies with bright business
prospects and participated in their new debt issues. The list included
familiar names such as Rayovac (batteries) and U.S. Can, as well as names that
may become familiar in the future, such as Paging Network, the largest
provider of paging services in the U.S., and Teleport Communications, a
competitive access provider of telephone services.
17
<PAGE>
Cash inflows into the high-yield market from mutual funds, pension plans,
and insurance companies were also very robust, and included many new entrants.
Investors were searching for better income in a yield environment that was
still relatively low.
Portfolio Strategy
The portfolio focused on gaming securities early in the year. These bonds
carried good yields, and the industry was in a cycle of rapid growth. Customer
traffic was surging and large hotel chains such as Marriott were entering the
business and precipitating a wave of consolidations. As assets grew later in
the year, the Fund became more diversified, with positions in supermarkets,
home builders, wireless cable providers, and telecommunications. Holdings
included Ralph's Grocery, a chain of California supermarkets, Smith's Food and
Drug, and telecommunications companies NextLink, Wireless One, A+ Network, and
PriCellular.
Active portfolio management is critical in the high-yield sector. Prices
can sometimes get ahead of themselves and bonds become overvalued. We stuck to
our discipline, taking profits when a holding exceeded our valuation target.
All things considered, it was not a year to simply collect coupons.
Fund Data
_____________________________________________________________________________
October 31, 1996
Weighted Avg. Maturity 8.1 Yrs.
Avg. Modified Duration* 5.05 Yrs.
Avg. 30-Day Yield 9.04%
Avg. Rating B+
_____________________________________________________________________________
*A theoretical measure of price volatility.
Going Forward
As long as the economy remains healthy and interest rates are at
relatively low levels, high-yield bonds should continue to provide interesting
opportunities. Over time, we believe there could be more global participation
in the high-yield sector, as foreign companies tap this growing source of
capital in the U.S. The high-yield universe contains many attractive issues
with excellent yields. But individual security selection is crucial. Sandy and
I both plan to spend plenty of time on the road in 1997, meeting with
management teams and analyzing companies first hand.
Thank you for your investment in Janus High-Yield Fund.
18
<PAGE>
JANUS HIGH-YIELD FUND
October 31, 1996
Performance Overview
GRAPHIC
A graphic comparison of the change in value of a hypothetical $10,000
investment in Janus High-Yield Fund and the Lehman Brothers High-Yield Bond
Index. Janus High-Yield Fund is represented by a solid blue line. The Lehman
Brothers High Yield Bond Index is represented by a single dashed black line.
The "y" axis reflects the value of the investment. The "x" axis reflects the
computation periods from inception, December 29, 1995, through October 31,
1996. The upper right quadrant reflects the ending value of the hypothetical
investment in Janus High-Yield Fund ($11,971) as compared to the Lehman
Brothers High Yield Bond Index ($10,842). There is a legend in the upper left
quadrant of the graph which indicates Janus High-Yield Fund's total return
since inception (December 29, 1995) as 19.71%.
Source - Lipper Analytical Services, Inc. 1996. All returns reflect reinvested
dividends.
Past performance is not predictive of future performance. Investment return
and principal value may fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. The index is unmanaged and therefore
does not reflect the cost of portfolio management or trading. The Fund's
portfolio may differ significantly from the securities in the index.
_____________________________________________________________________________
Principal Amount Market Value
_____________________________________________________________________________
Corporate Bonds - 94.7%
_____________________________________________________________________________
Aerospace and Defense - 1.0%
$2,000,000 K & F Industries, Inc., 10.375%
senior subordinated notes, due 9/1/04 $2,060,000
_____________________________________________________________________________
Auto Parts - Retail and Wholesale - 1.4%
3,000,000 CSK Auto, Inc., 11.00%
senior subordinated notes, due 11/1/06+ 3,045,000
_____________________________________________________________________________
Batteries and Battery Systems - 1.9%
4,000,000 Rayovac Corp., 10.25%
senior subordinated notes, due 11/1/06 4,050,000
_____________________________________________________________________________
Broadcast Media - 2.8%
2,000,000 Allbritton Communications, 11.50%
senior subordinated debentures, due 8/15/04 2,092,500
4,000,000 Sinclair Broadcast Group, Inc., 10.00%,
senior subordinated notes, due 9/30/05 3,890,000
_____________________________________________________________________________
19
<PAGE>
5,982,500
_____________________________________________________________________________
Building - Residential and Commercial - 3.5%
7,000,000 Fortress Group, Inc., 13.75%
senior notes, due 5/15/03 7,437,500
_____________________________________________________________________________
Cable Television - 2.0%
2,000,000 Heartland Wireless Communications, Inc., 13.00%
senior notes, due 4/15/03 2,145,000
2,000,000 Net Sat Servicos Ltda., 12.75%
senior notes, due 8/5/04 2,090,000
_____________________________________________________________________________
4,235,000
_____________________________________________________________________________
Casino Hotels - 7.3%
5,000,000 California Hotel Financial, 11.00%
senior subordinated notes, due 12/1/02 5,225,000
4,000,000 Casino America, Inc., 12.50%
senior notes, due 8/1/03 4,090,000
4,000,000 Lady Luck Gaming Corp., 11.875%
first mortgage notes, due 3/1/01 3,810,000
$2,000,000 Majestic Star Casino L.L.C., 12.75%
senior notes, due 5/15/03+ $ 2,155,000
_____________________________________________________________________________
15,280,000
_____________________________________________________________________________
Cellular Telecommunications - 1.4%
3,000,000 Pricellular Wireless Corp., 10.75%
senior notes, due 11/1/04+ 3,022,500
_____________________________________________________________________________
Chemicals - Diversified - 1.0%
2,000,000 Sterling Chemicals, Inc., 11.75%
senior subordinated notes, due 8/15/06 2,020,000
_____________________________________________________________________________
Commercial Banks - 1.2%
2,485,000 Banamex, 11.00%
junior subordinated notes, due 7/15/03 2,497,425
_____________________________________________________________________________
Commercial Services - 1.9%
2,000,000 NeoData Services, Inc., 12.00%
senior notes, due 5/1/03 2,055,000
2,000,000 Outsourcing Solutions, Inc., 11.00%
senior subordinated notes, due 11/1/06+ 2,000,000
_____________________________________________________________________________
4,055,000
_____________________________________________________________________________
Containers - Metal and Glass - 2.4%
5,000,000 U.S. Can Corp., 10.125%
senior subordinated notes, due 10/15/06 5,150,000
_____________________________________________________________________________
Engineering - Research and Development Services - 3.8%
20
<PAGE>
3,000,000 ICF Kaiser International, 13.00%
units, due 12/31/03 $ 2,962,500
5,025,000 Intertek Finance PLC, 10.25%
senior subordinated notes, due 11/1/06+ 5,025,000
_____________________________________________________________________________
7,987,500
_____________________________________________________________________________
Finance - Leasing Companies - 0.8%
1,500,000 Alamo Rent-A-Car, Inc., 11.75%
senior notes, due 1/31/06 1,651,875
_____________________________________________________________________________
Food - Retail - 8.7%
1,500,000 Grand Union Co., 12.00%
senior notes, due 9/1/04 1,511,250
5,000,000 Ralphs Grocery Co., 10.45%
senior notes, due 6/15/04 5,050,000
5,000,000 Ralphs Grocery Co., 13.75%
senior subordinated notes, due 6/15/05 5,325,000
6,000,000 Smith's Food & Drug Centers, Inc., 11.25%
senior subordinated notes, due 5/15/07 6,472,500
_____________________________________________________________________________
18,358,750
_____________________________________________________________________________
Funeral Services - 1.5%
2,985,000 Prime Succession Acquisition Co., 10.75%
senior subordinated notes, due 8/15/04 3,201,413
_____________________________________________________________________________
Home Furnishings - 2.0%
1,000,000 Cort Furniture Rental, 12.00%
senior notes, due 9/1/00 1,063,750
3,000,000 Lifestyle Furnishings, Inc., 10.875%
senior subordinated guarantee notes,
due 8/1/06 3,120,000
_____________________________________________________________________________
4,183,750
_____________________________________________________________________________
Hotels and Motels - 0.7%
1,500,000 Courtyard By Marriott II, L.P., 10.75%
senior notes, due 2/1/08 1,552,500
_____________________________________________________________________________
Industrial Audio and Video Products - 2.5%
5,200,000 Unifrax Investment Corp., 10.50%
senior notes, due 10/1/03 5,291,000
_____________________________________________________________________________
Instruments - Controls - 0.7%
1,500,000 Imo Industries, Inc., 11.75%
senior subordinated notes, due 5/1/06 1,541,250
_____________________________________________________________________________
Leisure and Recreation Services - 3.6%
3,000,000 Cobblestone Golf Group, Inc., 11.50%
senior notes, due 6/1/03 3,090,000
21
<PAGE>
5,000,000 Six Flags Theme Parks, zero coupon
senior subordinated notes, due 6/15/05 4,518,750
_____________________________________________________________________________
7,608,750
_____________________________________________________________________________
Machine Tools and Related Products - 1.7%
3,485,000 International Knife & Saw, Inc., 11.375%
senior subordinated notes, due 11/15/06+ 3,485,000
_____________________________________________________________________________
Machinery - General Industrial - 1.9%
$4,000,000 Spinnaker Industries, Inc., 10.75%
senior notes, due 10/15/06 $ 4,070,000
_____________________________________________________________________________
Manufacturing - 2.5%
5,000,000 Plastic Specialties & Technologies, Inc., 11.25%
senior secured notes, due 12/1/03 5,162,500
_____________________________________________________________________________
Office Supplies - 1.1%
2,000,000 American Pad & Paper, 13.00%
senior subordinated notes, due 11/15/05 2,315,000
_____________________________________________________________________________
Petrochemicals - 1.0%
2,000,000 Texas Petrochemical Corp., 11.125%
senior subordinated notes, due 7/1/06 2,115,000
_____________________________________________________________________________
Retail - Diversified - 2.4%
5,000,000 Core-Mark International, Inc., 11.375%
senior subordinated notes, due 9/15/03+ 5,075,000
_____________________________________________________________________________
Retail - Music Store - 2.5%
5,000,000 Guitar Center Management Co., 11.00%
senior notes, due 7/1/06 5,250,000
_____________________________________________________________________________
Savings/Loan/Thrifts - 2.0%
2,000,000 First Nationwide Escrow Corp., 10.625%
senior subordinated notes, due 10/1/03 2,100,000
2,000,000 First Nationwide Holdings, Inc., 12.50%
senior notes, due 4/15/03 2,165,000
_____________________________________________________________________________
4,265,000
_____________________________________________________________________________
Steel - Producers - 1.4%
$ 3,000,000 Weirton Steel Corp., 11.375%
senior notes, due 7/1/04 $ 3,007,500
_____________________________________________________________________________
Telecommunication Services - 12.7%
3,000,000 A+ Network, Inc., 11.875%
senior subordinated notes, due 11/1/05 3,007,500
2,000,000 Galaxy Telecom, L.P., 12.375%
senior subordinated notes, due 10/1/05 2,090,000
5,000,000 NEXTLINK Communications, L.L.C., 12.50%
22
<PAGE>
senior notes, due 4/15/06 5,100,000
6,000,000 Omnipoint Corp., 11.625%
senior notes, due 8/15/06 6,120,000
1,500,000 Peoples Telephone Co., Inc., 12.25%
senior notes, due 7/12/02 1,571,250
3,500,000 RSL Communications, Ltd., 12.25%
units, due 11/15/06+ 3,535,000
4,000,000 Teleport Communications Group, Inc., 9.875%
senior notes, due 7/1/06 4,070,000
2,000,000 Viatel, Inc., zero coupon
senior discount notes, due 1/15/05 1,235,000
_____________________________________________________________________________
26,728,750
_____________________________________________________________________________
Textile - Products - 2.0%
4,000,000 Polysindo International Finance Co. B.V., 11.375%
guaranteed secured notes, due 6/15/06 4,240,000
_____________________________________________________________________________
Theaters - 1.0%
2,000,000 Cinemark USA, Inc., 9.625%
senior subordinated notes, due 8/1/08 1,995,000
_____________________________________________________________________________
Transportation - Marine - 4.0%
3,000,000 Moran Transportation Co., 11.75%
notes, due 7/15/04 3,172,500
5,000,000 Stena Rederi A.B., 10.50%
senior notes, due 12/15/05 5,225,000
_____________________________________________________________________________
8,397,500
_____________________________________________________________________________
Wire and Cable Products - 3.0%
2,000,000 Alpine Group, Inc., 12.25%
senior notes, due 7/15/03 2,140,000
4,000,000 International Wire Group, 11.75%
senior subordinated notes, due 6/1/05 4,230,000
_____________________________________________________________________________
6,370,000
_____________________________________________________________________________
Wireless Telecommunications - 3.4%
4,000,000 Paging Network, Inc., 10.00%
senior subordinated notes, due 10/15/08 3,970,000
3,000,000 Wireless One, Inc., 13.00%
senior notes, due 10/15/03 3,097,500
______________________________________________________________________________
7,067,500
_____________________________________________________________________________
Total Corporate Bonds (cost $196,243,750) 199,755,463
_____________________________________________________________________________
Preferred Stock - 0.3%
20,000 Chevy Chase Savings, 13.00%
Non-Cumulative (cost $622,500) 655,000
23
<PAGE>
_____________________________________________________________________________
Warrants - 0%
3,000 Wireless One, Inc. - exp. 10/19/00* (cost $0) 21,000
_____________________________________________________________________________
Short-Term Corporate Notes - 6.5%
Ford Motor Credit Corp.
$10,000,000 5.55%, 11/1/96 10,000,000
Prudential Funding Corp.
3,600,000 5.50%, 11/1/96 3,600,000
_____________________________________________________________________________
Total Short-Term Corporate Notes (amortized cost $13,600,000) 13,600,000
_____________________________________________________________________________
Total Investments (total cost $210,466,250) - 101.5% 214,031,463
_____________________________________________________________________________
Liabilities, net of Cash, Receivables and Other Assets - (1.5%) (3,098,708)
_____________________________________________________________________________
Net Assets - 100% $ 210,932,755
_____________________________________________________________________________
See Notes to Schedule of Investments
JANUS INCOME FUNDS OCTOBER 31, 1996 ANNUAL REPORT
24
<PAGE>
JANUS FEDERAL TAX-EXEMPT FUND
Portfolio Manager, Darrell W. Watters
Performance Review
Janus Federal Tax-Exempt Fund performed well during the fiscal year ended
October 31, 1996, gaining 5.94%, compared to 5.70% for the Lehman Brothers
Municipal Bond Index. Both returns include reinvested dividends.
The municipal bond market was volatile this year, and so the Fund spent
much of the period positioned defensively. This strategy was in place through
mid-October, and helped protect the Fund's yield and stabilize its net asset
value.
Portfolio liquidity was our focus throughout the year, especially when
fears of a flat tax clouded the municipal picture during the spring primary
season. Municipal bonds rallied, however, when the flat tax dropped from the
political agenda. As the 1996 elections drew closer, municipal bonds began to
weaken in anticipation of increased post-election supply and year-end selling.
Portfolio Profile
_____________________________________________________________________________
October 31, 1996 October 31, 1995
General Obligation Bonds 37% 30%
Essential Service Revenue Bonds 63% 70%
_____________________________________________________________________________
_____________________________________________________________________________
Fund Data October 31, 1996 October 31, 1995
Weighted Avg. Maturity 17.0 Yrs. 13.29 Yrs.
Avg. Modified Duration* 7.5 Yrs 8.13 Yrs.
Avg. Rating AA3 AA1
30-Day Avg. Yield 5.08% 5.18%
_____________________________________________________________________________
*A theoretical measure of price volatility.
Going Forward
The portfolio will continue to hold high-quality bonds that have strong
market demand. I also intend to adjust the Fund's duration in an effort to
keep the net asset value stable and the yield competitive.
Thank you for your continued investment in Janus Federal Tax-Exempt Fund.
Performance Overview
GRAPHIC
A graphic comparison of the change in value of a hypothetical $10,000
investment in Janus Federal Tax-Exempt Fund and the Lehman Brothers Municipal
Bond Index. Janus Federal Tax-Exempt Fund is represented by a solid blue
25
<PAGE>
line. The Lehman Brothers Municipal Bond Index is represented by a single
dashed black line. The "y" axis reflects the value of the investment. The
"x" axis reflects the computation periods from inception, May 3, 1993, through
October 31, 1996. The upper right quadrant reflects the ending value of the
hypothetical investment in Janus Federal Tax-Exempt Fund ($11,839) as compared
to the Lehman Brothers Municipal Bond Index ($12,046). There is a legend in
the upper left quadrant of the graph which indicates Janus Federal Tax-Exempt
Fund's one-year and since inception (May 3, 1993) average annual total returns
as 5.94% and 4.95, respectively.
Source - Lipper Analytical Services, Inc. 1996. All returns reflect reinvested
dividends.
Past performance is not predictive of future performance. Investment return
and principal value may fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. The index is unmanaged and therefore
does not reflect the cost of portfolio management or trading. The Fund's
portfolio may differ significantly from the securities in the index.
26
<PAGE>
JANUS FEDERAL TAX-EXEMPT FUND
October 31, 1996
_____________________________________________________________________________
Principal Amount Market Value
_____________________________________________________________________________
Municipal Securities - 98.4%
_____________________________________________________________________________
California - 11.2%
$1,000,000 California, (FGIC Insured), 5.375%, 6/1/26 $ 957,500
1,000,000 Foothill/Eastern Transportation Revenue,
(Corridor Agency Toll Road), Senior Lien,
Series A, 6.00%, 1/1/34 977,500
2,200,000 Los Angeles Regional Airports
Improvement Corp. Lease Revenue,
(Sub Lease - L.A. International),
Variable Rate, 3.65%, 12/1/25 2,200,000
1,000,000 San Diego Public Facilities Financing
Authority Sewer Revenue, (FGIC Insured),
5.00%, 5/15/25 903,750
_____________________________________________________________________________
5,038,750
_____________________________________________________________________________
Colorado - 18.3%
750,000 Arvada Urban Renewal Authority,
(Arvada County Center Urban Renewal),
8.75%, 3/1/06 736,875
1,080,000 Bachelor Gulch Metropolitan District,
6.80%, 12/1/06 1,080,000
1,000,000 Colorado Housing Financing Authority,
(Single Family Program), 7.10%, 5/1/15 1,087,500
750,000 Denver West Metropolitan District,
6.50%, 12/1/16 752,813
1,000,000 Meridian Metropolitan District,
7.50%, 12/1/11 1,082,500
500,000 Mid Valley Metro District Eagle County,
5.40%, 12/15/04 499,375
1,000,000 Mountain Village Metropolitan District,
(San Miguel County), 8.10%, 12/1/11 1,100,000
1,000,000 South Suburban Parks and Recreational
District Colorado Golf Course and
Ice Arena Facilities, 6.00%, 11/1/15 980,000
Upper Cherry Creek Metropolitan District:
500,000 6.20%, 12/1/05 501,875
400,000 6.75%, 12/1/11 402,500
_____________________________________________________________________________
8,223,438
_____________________________________________________________________________
Florida - 12.1%
1,710,000 Dade County, (Seaport), (MBIA Insured),
27
<PAGE>
5.125%, 10/1/26 1,581,750
2,000,000 Dade County Special Obligation,
(AMBAC Insured), Series B,
5.00%, 10/1/35 1,787,500
1,030,000 Florida State Turnpike Authority, Turnpike
Revenue, (FGIC Insured), Series A,
6.35%, 7/1/22 1,126,563
1,000,000 Jacksonville District Water and
Sewer Revenue, (MBIA Insured),
5.00%, 10/1/20** 927,500
_____________________________________________________________________________
5,423,313
_____________________________________________________________________________
Guam - 2.3%
1,000,000 Guam Power Authority Revenue, Series A,
6.30%, 10/1/22 1,011,250
_____________________________________________________________________________
Idaho - 3.8%
1,715,000 Cassia and Twin Falls Joint School District,
(No. 151), (FGIC Insured), 5.375%, 8/1/15 1,695,706
_____________________________________________________________________________
Illinois - 9.2%
$1,150,000 Chicago, (FGIC Insured), Series B,
5.125%, 1/1/25 $1,037,875
1,000,000 Chicago Motor Fuel Tax Revenue,
(AMBAC Insured), 6.125%, 1/1/09 1,066,250
1,000,000 Metropolitan Pier and Exposition Authority
Dedicated State Tax Revenue, (McCormick
Place Exposition Project), (AMBAC
Insured), Series A, 5.25%, 6/15/27 922,500
1,000,000 Metropolitan Pier and Exposition Authority
Hospitality Facilities Revenue,
(McCormick Place Convention
Center Project), 7.00%, 7/1/26 1,112,500
______________________________________________________________________________
4,139,125
_____________________________________________________________________________
Indiana - 1.3%
500,000 St. Joseph County Educational Facilities
Revenue, (University of Notre Dame
Du Lac), 6.50%, 3/1/26 565,000
_____________________________________________________________________________
Massachusetts - 2.1%
1,000,000 Massachusetts Bay Transportation Authority,
(General Transportation System),
(FSA Insured), Series B, 5.25%, 3/1/20 942,500
_____________________________________________________________________________
Missouri - 2.0%
1,000,000 Sikeston Electric Revenue, (MBIA Insured),
5.00%, 6/1/22 916,250
_____________________________________________________________________________
28
<PAGE>
Montana - 6.3%
775,000 Lewis and Clark County High School District,
(No. 1), (FSA Insured), 5.50%, 7/1/16 777,906
1,000,000 Montana State Board of Investment
Workers Compensation Program,
(MBIA Insured), 6.875%, 6/1/20 1,094,025
1,000,000 Montana State University Revenues,
(Higher Educational Facilities),
(MBIA Insured), 5.375%, 11/15/21 970,000
_____________________________________________________________________________
2,841,931
_____________________________________________________________________________
New Mexico - 7.8%
385,000 Chaves County Hospital Revenue, (Eastern
New Mexico Medical Center Project),
7.25%, 12/1/10 404,731
1,000,000 Gallup Pollution Control Revenue,
(Plains Electric Generation Project),
(MBIA Insured), 6.65%, 8/15/17 1,077,500
1,000,000 Santa Fe Gross Receipts Tax Revenue,
(Municipal Recreation Complex),
Subordinated Lien, Series C,
(AMBAC Insured), 5.75%, 6/1/16 1,006,250
950,000 University of New Mexico University
Revenue, Series A, 6.00%, 6/1/21 992,750
______________________________________________________________________________
3,481,231
_____________________________________________________________________________
New Jersey - 2.4%
1,000,000 North Brunswick Township,
Board of Education, 6.30%, 2/1/14 1,060,000
_____________________________________________________________________________
New York - 4.3%
1,000,000 New York State Dorm Authority Revenue,
(State University Educational Facilities),
Series A, 5.50%, 5/15/19** 945,000
1,000,000 New York State Urban Development Corp.
Revenue, (University Facilities Grants),
5.875%, 1/1/21 997,500
______________________________________________________________________________
1,942,500
_____________________________________________________________________________
Ohio - 0.5%
$ 200,000 Cuyahoga County Hospital Revenue,
(University Hospital - Cleveland),
Variable Rate, 3.70%, 1/1/16 $ 200,000
_____________________________________________________________________________
Oklahoma - 3.6%
1,000,000 Grand River Dam Authority Revenue,
(AMBAC Insured), 6.25%, 6/1/11** 1,098,750
500,000 McGee Creek Authority Water Revenue,
29
<PAGE>
(MBIA Insured), 6.00%, 1/1/23 526,875
______________________________________________________________________________
1,625,625
_____________________________________________________________________________
Puerto Rico - 1.2%
500,000 Puerto Rico Commonwealth Aqueduct and
Sewer Authority Revenue, 6.00%, 7/1/09 533,125
_____________________________________________________________________________
Texas - 3.4%
500,000 Grapevine Industrial Development Corp.,
(American Airlines), Variable Rate,
Series B-4, 3.65%, 12/1/24 500,000
1,000,000 Orange County Naval and Port District
Industrial Development Corp. Revenue,
(North Star Steel Texas), 6.375%, 2/1/17 1,047,500
1,547,500
_____________________________________________________________________________
Utah - 2.1%
900,000 Intermountain Power Agency, (Power Supply
Revenue), Series D, 8.625%, 7/1/21 946,242
_____________________________________________________________________________
Virginia - 2.2%
1,000,000 Hampton Roads Regional Jail Authority,
(Regional Jail Facilities Revenue),
(MBIA Insured), Series A, 5.50%, 7/1/24 983,750
_____________________________________________________________________________
Wyoming - 2.3%
1,000,000 Sweetwater County Pollution Control
Revenue, (Idaho Power Co.), Series A,
6.05%, 7/15/26 1,016,250
______________________________________________________________________________
Total Investments (total cost $43,798,908) - 98.4% 44,133,486
______________________________________________________________________________
Cash, Receivables and Other Assets, net of Liabilities - 1.6% 724,794
Net Assets - 100%
$44,858,280
_____________________________________________________________________________
AMBAC - American Municipal Bond Assurance Corp.
FGIC - Financial Guaranty Insurance Corp.
FSA - Financial Security Assurance Corp.
MBIA - Municipal Bond Insurance Association Corp.
_____________________________________________________________________________
Financial Futures - Long
50 Contracts U.S. Treasury - 30 year bond,
expires March 1997,
principal amount $5,354,688,
value $5,628,125, cumulative
appreciation $273,437
Financial Futures - Short
30
<PAGE>
50 Contracts U.S. Treasury - 30 year bond,
expires December 1996,
principal amount $5,498,438,
value $5,650,000,
cumulative depreciation ($151,562)
_____________________________________________________________________________
$121,875
_____________________________________________________________________________
See Notes to Schedule of Investments
JANUS INCOME FUNDS OCTOBER 31, 1996 ANNUAL REPORT
31
<PAGE>
JANUS SHORT-TERM BOND FUND
Portfolio Manager, Sandy R. Rufenacht
Performance Review
The Janus Short-Term Bond Fund had a total return of 6.49% during our
fiscal year ended October 31, 1996, versus a gain of 4.87% for the Lehman
Brothers Government/Corporate 1-3 Year Bond Index. Both results include
reinvested dividends.
For the fiscal year, Janus Short-Term Bond Fund's total return put it in
the top 10% (9/98) of the Short-Term Investment Grade Debt Funds tracked by
Lipper Analytical Services, a large mutual fund rating company.(1)
The Fund performed well despite struggling earlier in the year, when
interest rates were volatile. As measured by the yield on the benchmark 3-year
Treasury note, short-term rates swung from a low of 4.88% on February 13, to a
high of 6.61% just four months later, on June 12. Yields ended the year at
5.69%, close to where they began it, at 5.87%. Rates responded to the rapid
changes in economic growth, which accelerated in the first two calendar
quarters of 1996 and then tapered off as the period ended.
The Fund was able to outperform the Lehman Index due to its high weighting
in investment-grade corporate bonds, which provided slightly better yields
than Treasury issues this year. A modest weighting in high-yield/high-risk
debt also increased returns.
Portfolio Profile
_____________________________________________________________________________
October 31, 1996 October 31, 1995
Investment-Grade Corp. Bonds 69% 78%
High-Yield/High-Risk(Junk) Bonds 5% --
U.S. Government Securities 12% 21%
Cash & Cash Equivalents 14% 1%
_____________________________________________________________________________
_____________________________________________________________________________
Portfolio Data October 31, 1996 October 31, 1995
Weighted Avg. Maturity 2.4 Yrs. 2.4 Yrs.
Avg. Modified Duration* 2.0 Yrs. 2.0 Yrs.
Avg. Rating A A+
Avg. 30-day Yield 5.51% 5.81%
_____________________________________________________________________________
*A theoretical measure of price volatility.
Investment-grade corporate bonds were represented by familiar names such
as GMAC, Lockheed Martin, and Union Pacific. High-yield holdings included
Ralph's Grocery, a chain of California supermarkets, and Poland Communication,
32
<PAGE>
Inc., a Polish cable company. The U.S. Treasury position was a single 3-year
note.
Portfolio Strategy
Since assuming management responsibilities for the Fund on January 1,
1996, my strategy has been to keep the majority of assets in securities that
closely mirror the Lehman Index. To gain an advantage on the Index, the
portfolio was weighted in investment grade corporate bonds, and held modest
positions in high-yield securities. Cash remained relatively high in order to
allow the portfolio to adjust more rapidly to interest rate changes and to
take advantage of special opportunities. But with interest rates relatively
low, companies have tended to issue more long-term debt in order to lock in
lower rates, so attractive short-term obligations have been harder to find.
In the coming year, I may increase the percentage of high-yield holdings
in the portfolio. The high-yield market has become much more sophisticated and
segmented. Information flow is good and detailed analysis of the companies
issuing these bonds can add value to performance.
But high-yield bonds still need to be chosen carefully. I intend to focus
on the debt of companies we know well both through Janus' equity research
effort and from our own first-hand analysis. I will also look for "cushion"
bonds-lower-rated bonds that are either going through a ratings upgrade or
that are likely to be called or refinanced in the near future. Although
cushion bonds provide less capital appreciation, the portfolio can collect a
better coupon with a higher degree of safety.
Going Forward
The U.S. economy appears to be slowing. Moderate growth and continued low
inflation should provide a good climate for bonds. I intend to remain
flexible, however, in order to respond quickly should this scenario alter. My
intention is to maintain a stable net asset value and competitive yield within
the context of short-term obligations.
Thank you for your continued investment in Janus Short-Term Bond Fund.
_____________________________________________________________________________
(1) Lipper Analytical Services defines Short-Term Investment Grade Debt Funds
as investing "at least 65% of assets in investment grade debt issues (rated in
top four grades) with dollar-weighted average maturities of 5 years or less."
The Lipper ranking is based on total return, including reinvestment of
dividends and capital gains for the stated period. Past performance is not
predictive of future results.
33
<PAGE>
JANUS SHORT-TERM BOND FUND
Portfolio Manager, Sandy R. Rufenacht
Performance Overview
GRAPHIC
A graphic comparison of the change in value of a hypothetical $10,000
investment in Janus Short-Term Bond Fund and the Lehman Brothers 1-3 Year
Government/Corporate Bond Index. Janus Short-Term Bond Fund is represented by
a solid blue line. The Lehman Brothers 1-3 Year Government/Corporate Bond
Index is represented by a single dashed black line. The "y" axis reflects the
value of the investment. The "x" axis reflects the computation periods from
inception, September 1, 1992, through October 31, 1996. The upper right
quadrant reflects the ending value of the hypothetical investment in Janus
Short-Term Bond Fund ($12,068) as compared to the Lehman Brothers 1-3 Year
Government/Corporate Bond Index ($12,097). There is a legend in the upper
left quadrant of the graph which indicates Janus Short-Term Bond Fund's one-
year and since inception (September 1, 1992) average annual total returns as
6.49% and 4.60%, respectively.
Source - Lipper Analytical Services, Inc. 1996. All returns reflect reinvested
dividends.
Past performance is not predictive of future performance. Investment return
and principal value may fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. The Fund's portfolio may differ
significantly from the securities in the index. The index is unmanaged and
therefore does not reflect the cost of portfolio management or trading.
34
<PAGE>
JANUS SHORT-TERM BOND FUND
October 31, 1996
_____________________________________________________________________________
Principal Amount Market Value
_____________________________________________________________________________
Corporate Bonds - 73.9%
_____________________________________________________________________________
Aerospace and Defense - 4.3%
$1,750,000 Lockheed Martin Corp., 6.55%
guaranteed unsecured notes, due 5/15/99 $ 1,763,125
_____________________________________________________________________________
Cable Television - 2.5%
1,000,000 Poland Communications, Inc., 9.875%
senior notes, due 11/1/03 997,500
_____________________________________________________________________________
Computers - Mainframe - 4.3%
1,750,000 IBM Corp., 6.375%
global notes, due 6/15/00 1,752,188
_____________________________________________________________________________
Containers - Metal and Glass - 4.3%
1,750,000 Crown Cork & Seal Co., Inc., 5.875%
notes, due 4/15/98 1,745,625
_____________________________________________________________________________
Diversified Operations - 4.4%
1,800,000 Grand Metropolitan Investment Corp., 6.50%
guaranteed notes, due 9/15/99 1,811,250
_____________________________________________________________________________
Finance - Auto Loan - 8.7%
1,750,000 Ford Motor Credit Corp., 7.25%
notes, due 5/15/99 1,791,562
1,750,000 General Motors Acceptance Corp., 6.65%
notes, due 5/24/00 1,760,938
_____________________________________________________________________________
3,552,500
_____________________________________________________________________________
Finance - Credit Card - 12.9%
1,750,000 Capital One Bank, 6.73%
deposit notes, due 6/04/98 1,765,312
1,750,000 Dean Witter Discovery & Co., 6.00%
notes, due 3/1/98 1,752,187
1,750,000 First USA Bank, Inc., 5.75%
notes, due 1/15/99 1,730,313
35
<PAGE>
_____________________________________________________________________________
5,247,812
_____________________________________________________________________________
Food - Retail - 2.6%
$1,000,000 Ralphs Grocery Co., 13.75%
senior subordinated notes, due 6/15/05 $ 1,065,000
_____________________________________________________________________________
Medical - Hospitals - 4.8%
1,950,000 Columbia/HCA Healthcare Corp., 6.50%
notes, due 3/15/99 1,964,625
_____________________________________________________________________________
Multi-Line Insurance - 4.3%
1,750,000 International Lease Finance Corp., 6.625%
notes, due 4/1/99 1,767,500
_____________________________________________________________________________
Retail - Apparel and Shoe - 4.3%
1,750,000 TJX Companies, Inc., 6.625%
notes, due 6/15/00 1,745,625
_____________________________________________________________________________
Savings/Loan/Thrifts - 4.3%
1,750,000 Great Western Financial Corp., 6.125%
notes, due 6/15/98 1,754,375
_____________________________________________________________________________
Super-Regional Banks - 4.3%
1,750,000 Norwest Corp., 6.25%
senior notes, due 4/15/99 1,756,562
_____________________________________________________________________________
Transportation - Railroad - 4.3%
1,750,000 Union Pacific Corp., 6.25%
notes, due 3/15/99 1,747,813
_____________________________________________________________________________
Transportation - Truck - 3.6%
1,500,000 J.B. Hunt Transport Service, 6.00%
senior notes, due 12/12/00 1,466,250
_____________________________________________________________________________
Total Corporate Bonds (cost $29,872,862) 30,137,750
_____________________________________________________________________________
U.S. Government Obligation - 12.4%
$5,000,000 U.S. Treasury Note, 6.125%,
due 8/31/98 (cost $5,018,538) $ 5,033,350
_____________________________________________________________________________
Short-Term Corporate Notes - 12.0%
36
<PAGE>
General Electric Capital Corp.
2,000,000 5.55%, 11/1/96 2,000,000
Household Finance Corp.
900,000 5.55%, 11/1/96 900,000
Prudential Funding Corp.
2,000,000 5.50%, 11/1/96 2,000,000
_____________________________________________________________________________
Total Short-Term Corporate Notes (amortized cost $4,900,000) 4,900,000
_____________________________________________________________________________
Total Investments (total cost $39,791,400) - 98.3% 40,071,100
_____________________________________________________________________________
Cash, Receivables and Other Assets, net of Liabilities - 1.7% 712,851
______________________________________________________________________________
Net Assets - 100% $40,783,951
_____________________________________________________________________________
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1996 ANNUAL REPORT
37
<PAGE>
MONEY MARKET FUNDS
Portfolio Manager, Sharon S. Pichler
The Year in Review
During our fiscal year ended October 31, 1996, interest rates moved
dramatically, but when the dust had settled at year-end, little had changed.
Rates had almost come full circle, back to roughly the same levels as when the
year began. For example, the yield on the one-year Treasury started the year
at 5.47%, hit a low of 4.78% on February 13, then climbed quickly to a high of
5.96% on July 8. It then dropped again, finishing the year close to where it
started, at 5.41%.
In December 1995, the only question on bond investors minds was how much
lower the Federal Reserve Board would push rates in order to restart a
sluggish economy. Normally, the portfolios' weighted average maturities would
have been getting longer under such a scenario in an attempt to lock in better
yields for longer periods. However, the yield curve was so flat, the yield
differential between one-year and overnight paper so small, that there was no
incentive to do so. One-year obligations were not paying enough to assume the
extra interest rate risk. Many money market fund managers took the risk
anyway, and paid the price (in lower yields) later, when the decline in
interest rates came to a screeching halt and yields then moved sharply higher.
The Funds' flexibility stood it in good stead. Betting assets on interest
rate forecasts, which are usually based on less reliable models than
predictions about the weather, is almost never a good long-term strategy.
Janus money market portfolios remained in short-term paper, much of it
overnight obligations, where yields were competitive.
Overall, the year served to reinforce the need for discipline and for
detailed underlying credit research to support our strategy. It is well worth
the effort to look hard for exceptional opportunities no matter what the
interest rate environment. Our research team is willing to take a base hit,
rather than swing for the fences and risk a strikeout.
Janus Money Market Fund
For much of the year the portfolio remained in a "barbell": The vast
majority of assets were in very short obligations, with little or nothing in
intermediate maturities, and a few selected opportunities in longer-term debt
(6 months to one year). As a result, we were able to take advantage of higher
short-term rates while getting help from longer-term positions, but without
locking the portfolio into yields that would underperform if interest rates
moved higher. This approach has given the Fund a weighted average maturity of
just 40 days as of October 31, 1996. Janus Money Market Fund is rated Aa by
Moody's Investor Services.
For the 12 months ended October 31, Janus Money Market Fund ranked 59 of
289 funds (top 20%) in the U.S. Money Market category defined by Lipper
Analytical Services, a large mutual fund rating company.(1)
38
<PAGE>
_____________________________________________________________________________
(1) Lipper Analytical Services defines a U.S. Money Market Fund as one that
invests "in high-quality financial instruments rated in the top two grades
with dollar-weighted average maturities of less than 90 days" and that intends
"to keep constant net asset value."
Janus Government Money Market Fund
Government money market instruments operate in highly efficient markets.
It is very hard to get an edge. This year our investment strategy was two-
pronged: first, to maintain high levels of liquidity and safety by stressing
low-risk (from interest rate volatility), short-term paper; and second, to
scrap for every basis point (.01%, one hundredth of one percent) by being
opportunistic in longer-term securities.
All government debt in the Fund is rated AAA, the highest credit quality
available. Janus Government Money Market Fund also has a rating of Aaa from
Moody's Investor Services. Moody's analyzes the Fund's credit quality, market
price exposure, and management. The portfolio had a weighted average maturity
of 42 days on October 31, 1996.
For the 12 months ended October 31, Janus Government Money Market Fund
ranked 20 of 113 funds (top 18%) in the U.S. Government Money Market category
defined by Lipper Analytical Services, a large mutual fund rating company.(2)
_____________________________________________________________________________
(2) Lipper defines a U.S. Government Money Market Fund as one that "invests
principally in financial instruments issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, with dollar-weighted average
maturities of less than 90 days," and that intends "to keep constant net asset
value."
Janus Tax-Exempt Money Market Fund
Two factors influence municipal money market rates: supply and demand; and
investors' expectations of marginal tax rates. If investors expect higher
marginal tax rates, they will accept lower tax-exempt rates. This year, lack
of supply and investors' expectations of continued high taxes have kept
municipal rates at approximately 65% to 70% of taxable rates. They used to be
closer to 80%.
California debt returned to respectability this year. In the wake of the
Orange County default, many local counties and municipalities upgraded their
investment pools and obtained ratings for their portfolios. This increased
their creditworthiness and improved the investment climate for municipal
paper.
Long-term and short-term rates were virtually the same for most of the
year, so we opted for the greater flexibility of short-term securities. The
Fund's weighted average maturity was 41 days as of October 31.
39
<PAGE>
For the 12 months ended October 31, Janus Tax-Exempt Money Market Fund
ranked 12 of 132 funds (top 8%) in the U.S. Tax-Exempt Money Market category
defined by Lipper Analytical Services, a mutual fund rating company.(3)
_____________________________________________________________________________
(3) Lipper defines a Tax-Exempt Money Market Fund as one that "invests in high
quality municipal obligations with dollar-weighted average maturities of less
than 90 days," and that intends "to keep constant net asset value." Past
performance is not a guarantee of future results.
Money market funds are neither insured nor guaranteed by the U.S. government
and there can be no assurance that money market funds will be able to maintain
a $1.00 share price. Lipper rankings are based on total return, including
reinvestment of dividends and capital gains.
Thank you for your investment in Janus Money Market Funds.
40
<PAGE>
JANUS MONEY MARKET FUND
October 31, 1996
_____________________________________________________________________________
Principal Amount Market Value
_____________________________________________________________________________
Short-Term Corporate Notes - 25.9%
$ 7,700,000 Alabama State Industrial Development
Authority 5.8201%, 12/20/96+ $ 7,700,000
50,000,000 American Honda Finance Corp.
5.665%, 6/23/97 50,000,000
30,000,000 BTM Capital Corp. 5.44%, 1/15/97 29,660,000
22,291,000 Cogentrix of Richmond, Inc.
5.42%, 11/21/96 22,223,879
25,300,000 Dean Health System, Inc.
5.4323%, 11/27/96 25,200,739
10,000,000 General Electric Capital Corp.
5.27%, 11/25/96 9,964,867
General Motors Acceptance Corp.:
25,000,000 5.04%, 12/3/96 24,888,000
15,000,000 5.29%, 12/6/96 14,922,854
20,000,000 5.47%, 2/14/97 19,680,917
40,000,000 5.53%, 5/1/97 38,887,856
30,000,000 5.50%, 6/23/97 28,927,500
Hanover Direct, Inc.:
7,600,000 Series A, 5.8201%, 12/20/96+ 7,600,000
6,500,000 Series B, 5.8201%, 12/20/96+ 6,500,000
Heller International Corp.:
15,000,000 5.43%, 11/8/96 14,984,162
10,000,000 5.33%, 11/20/96 9,971,869
25,000,000 5.43%, 12/4/96 24,875,562
25,000,000 IBM Credit Corp. 5.80%, 10/7/97 24,999,296
Kubota Finance Corp.:
30,000,000 5.37%, 11/4/96 29,986,575
10,000,000 5.38%, 11/12/96 9,983,561
18,500,000 Los Angeles County California Metropolitan
Transit Authority, Series A,
5.7125%, 12/9/96+ 18,500,000
16,804,000 Mitsubishi Motors Credit of America
5.33%, 11/26/96 16,741,802
35,500,000 Orix America, Inc. 5.34%, 11/1/9635,500,000
Sanwa Business Credit:
15,000,000 5.36%, 11/6/96 14,988,833
20,000,000 5.32%, 11/14/96 19,961,578
12,000,000 5.32%, 11/18/96 11,969,853
50,000,000 5.32%, 11/26/96 49,815,278
74,560,000 75th State Street, 5.40%, 12/4/96 74,190,928
______________________________________________________________________________
Total Short-Term Corporate Notes
41
<PAGE>
(amortized cost $642,625,909) 642,625,909
_____________________________________________________________________________
Taxable Variable Rate Demand Notes - 30.5%
30,000,000 American Honda Finance Corp.,
5.6875%, 8/1/97 29,994,813
50,000,000 Bankers Trust Co., 5.40%, 10/16/97 49,976,889
4,300,000 Bayliss Group Partnership, 5.50%, 1/1/10 4,300,000
18,900,000 Bedford County Virginia, Industrial
Development Authority, Series D,
5.42%, 12/1/25 18,900,000
50,000,000 Boatmens Credit Card Bank of New Mexico,
5.394%, 8/8/97 49,992,329
16,160,000 Community Health System, Inc., Series A,
5.55%, 10/1/03 16,160,000
25,000,000 Crozer - Keystone Health Systems,
5.52%, 12/15/21 25,000,000
13,000,000 Downtown Marietta Georgia, Development
Authority Marietta Conference Center
Revenue, Series A, 5.40%, 7/1/21 13,000,000
14,500,000 Fontana, California Property Acquisition
Program, 5.67%, 10/1/20 14,500,000
80,000,000 General American Life Insurance Co.,
5.63%, 8/13/97 80,000,000
15,000,000 General Electric Capital Corp., 5.58%,
7/7/97 15,011,596
9,300,000 H/M Partners, L.L.C., 5.75%, 10/1/20 9,300,000
_____________________________________________________________________________
Taxable Variable Rate Demand Notes (continued)
$12,900,000 Jackson County, Alabama Industrial
Development, (Beaulieu America Project),
5.525%, 7/1/10 $12,900,000
22,500,000 Key Bank of New York, senior notes,
5.26%, 2/14/97 22,494,144
4,000,000 Liliha Partners, L.P. of California,
5.80%, 8/1/24 4,000,000
50,000,000 MBNA America Bank, 5.4141%, 7/3/97 50,000,000
63,000,000 MBNA American Bank, N.A. of Newark,
Delaware, 5.375%, 6/13/97 63,000,000
Mississippi Business Finance Industrial
Development Revenue:
4,600,000 (Dana Lighting Project), 5.45%, 5/1/10 4,600,000
6,700,000 (Choctaw Foods, Inc. Project),
5.45%, 8/1/15 6,700,000
17,000,000 Oakwood Medical Enterprises, Inc.,
Series A, 5.59%, 9/1/12 17,000,000
40,000,000 PNC Bank, N.A. of Pittsburgh, Pennsylvania,
5.3375%, 7/1/97 39,973,851
14,100,000 Pasadena California COPS, (Los Robles
Avenue Parking Facility Project),
42
<PAGE>
5.55%, 11/1/12 14,100,000
11,910,000 Philip R. Wegman, (The Manors Project),
5.80%, 10/1/20 11,910,000
25,000,000 Rehau, Inc., 5.50%, 10/1/19 25,000,000
SMM Trust:
42,000,000 Series 1996-L, 5.4367%, 6/17/97+ 42,000,000
25,000,000 Series 1996-U, 5.4289%, 6/20/97+ 25,000,000
3,090,000 St. Francis, Hawaii Healthcare Foundation
Revenue, 5.70%, 8/1/12 3,090,000
17,800,000 St. Joseph Health Systems of California,
Series A, 5.68%, 7/1/11 17,800,000
7,400,000 San Bernardino County, California,
(Capital Improvement Refining Project),
5.65%, 11/1/25 7,400,000
9,365,000 San Jose, California Financing Authority,
(Hayes Mansion Revenue Project),
Series A, 5.55%, 12/1/25 9,365,000
25,000,000 Southtrust Bank of North Carolina,
Medium Term Senior Notes,
5.3867%, 10/16/97 25,000,000
8,155,000 Tyler, Texas Health Facilities Development
Corp., (East Texas Medical Center),
5.80%, 11/1/25 8,155,000
5,315,000 Union City, Tennessee Industrial
Development Board, (Cobank Limited,
L.L.C., Project), 5.68%, 1/1/25 5,315,000
5,000,000 Venturecor, Inc., Healthcare Revenue,
5.60%, 5/15/35 5,000,000
9,300,000 Virginia State Housing Development
Authority Residential Mortgage Revenue,
Series A, 5.45%, 3/1/02 9,300,000
_____________________________________________________________________________
Total Taxable Variable Rate Demand Notes
(amortized cost $755,238,622) 755,238,622
_____________________________________________________________________________
Certificates of Deposit - 9.7%
25,000,000 Caisse Nationale de Credit Agricole of
Chicago, Illinois 5.90%, 10/20/97 25,000,000
10,000,000 Canadian Imperial Bank 5.50%, 3/11/97 10,000,000
50,000,000 Bank of Tokyo 5.55%, 12/18/96 50,000,000
Industrial Bank of Japan:
20,000,000 5.48%, 12/30/96 20,000,000
40,000,000 5.50%, 1/29/97 40,000,000
20,000,000 MBNA America 5.42%, 12/18/96 20,000,000
25,000,000 Midland Bank PLC 5.90%, 11/7/97 25,000,000
50,000,000 Sumitomo Bank of New York 5.43%, 11/1/96 50,000,000
_____________________________________________________________________________
43
<PAGE>
Total Certificates of Deposit (cost $240,000,000) 240,000,000
_____________________________________________________________________________
Promissory Notes - 5.6%
$140,000,000 Goldman Sachs Group, L.P.
5.5351%, 1/21/97 (cost $140,000,000) $140,000,000
_____________________________________________________________________________
Put Bonds - 1.2%
Northglenn Colorado Urban Renewal
Authority, (Northglenn Mall Project):
8,700,000 Series A-2, 5.90%, 12/1/13 8,700,000
5,700,000 Series B, 5.90%, 12/1/16 5,700,000
15,200,000 Richmond County, Georgia, (Monsanto Co.
Project), 6.01%, 6/1/20 15,200,000
_____________________________________________________________________________
Total Put Bonds (cost $29,600,000) 29,600,000
_____________________________________________________________________________
General Obligation Notes - 1.5%
New York City, New York:
30,000,000 Series 95 A-2, 5.70%, 2/21/97 30,000,000
6,000,000 Subseries A-2, 5.68%, 2/6/97 6,000,000
_____________________________________________________________________________
Total General Obligation Notes (cost $36,000,000) 36,000,000
_____________________________________________________________________________
Bank Notes - 1.8%
25,000,000 American Express Centurion Bank of
Newark, Delaware 5.53%, 11/12/96 25,000,000
20,000,000 FCC National Bank of Wilmington, Delaware
5.73%, 8/21/97 19,953,504
_____________________________________________________________________________
Total Bank Notes (amortized cost $44,953,504) 44,953,504
_____________________________________________________________________________
Repurchase Agreements - 26.8%
$197,480,000 Bankers Trust Securities Corp., 5.66%,
dated 10/31/96, maturing 11/1/96, to be
repurchased at $197,511,048, collateralized
by $100,000,000 in Huntington National Bank
Certificate of Deposit, 5.85%, 9/30/97;
$100,000,000 in Societe Generale
Certificate of Deposit 5.77% - 6.09%,
5/15/97 - 6/13/97; with respective
values of $100,699,358 and $102,725,449 $ 197,480,000
268,000,000 J.P. Morgan and Co., 5.65% - 6.00%,
dated 10/31/96, maturing 11/1/96, to be
repurchased at $268,042,479, collateralized
by $75,000,000 in J.P. Morgan Commercial
44
<PAGE>
Paper 5.86%, 10/3/97; $54,387,419 in
Canadian Imperial Bank of Commerce
Certificate of Deposit 5.42%, 1/17/97;
$100,000,000 in Banque National de Paris
Certificate of Deposit 5.29% - 5.32%,
12/2/96 - 12/19/96; $30,695,000 in U.S.
Treasury Notes 8.875%, 2/15/99;
$53,682,635 in Government National
Mortgage Association Notes 9.00% - 9.50%,
8/15/16 - 6/15/21 with respective
values of $75,000,000; $54,500,000;
$100,000,000; $33,233,783 and
$10,630,693 268,000,000
200,000,000 Lehman Brothers, Inc., 5.65%,
dated 10/31/96, maturing 11/1/96,
to be repurchased at $200,031,389,
collateralized by $425,980,507 in
Federal National Mortgage Association
Notes 0% - 7.00%, 7/1/26 - 8/1/26
with a value of $204,000,676 200,000,000
_____________________________________________________________________________
Total Repurchase Agreements (cost
$665,480,000) 665,480,000
_____________________________________________________________________________
Total Investments (total cost $2,553,898,035) - 103.0% 2,553,898,035
_____________________________________________________________________________
Liabilities, net of Cash, Receivables and
Other Assets - (3.0%) (74,400,764)
_____________________________________________________________________________
Net Assets - 100% $2,479,497,271
_____________________________________________________________________________
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1996 ANNUAL REPORT
45
<PAGE>
JANUS GOVERNMENT MONEY MARKET FUND
October 31, 1996
_____________________________________________________________________________
Principal Amount Market Value
_____________________________________________________________________________
U.S. Government Agency Notes - 34.4%
Federal Farm Credit Bank:
$ 500,000 5.24%, 12/16/96 $ 496,725
1,000,000 5.46%, 1/15/97 988,625
Federal Home Loan Bank System:
5,000,000 5.26%, 11/20/96 4,986,120
325,000 5.43%, 12/2/96 323,480
5,000,000 5.26%, 12/3/96 4,976,622
3,225,000 5.275%, 1/15/97 3,189,559
2,000,000 5.22%, 2/21/97 1,967,520
1,365,000 5.25%, 3/14/97 1,338,525
2,365,000 5.30%, 4/25/97 2,304,068
2,265,000 5.30%, 6/24/97 2,186,637
3,000,000 5.32%, 7/17/97 2,885,620
10,000,000 6.00%, 8/1/97 10,007,391
Federal Home Loan Mortgage Corp.:
246,000 5.37%, 1/2/97 243,725
5,000,000 5.29%, 2/24/97 4,915,507
Federal National Mortgage Association:
10,000,000 5.21% - 5.26%, 11/27/96 9,962,192
7,225,000 5.341%, 12/3/96 7,190,470
3,000,000 5.25%, 1/29/97 2,961,063
_____________________________________________________________________________
Total U.S. Government Agency Notes (amortized cost
60,923,849
_____________________________________________________________________________
U.S. Government Agency Variable Notes - 20.5%
Federal Farm Credit Bank:
2,000,000 5.35%, 6/13/97 1,999,406
5,000,000 5.32%, 8/20/97 4,998,065
Federal Home Loan Bank System:
5,000,000 5.46%, 7/10/97 5,002,526
3,000,000 5.36%, 9/2/97 2,992,442
5,000,000 5.195%, 9/24/97 4,996,461
Federal National Mortgage Association
5,000,000 5.4762%, 9/9/97 4,996,666
Student Loan Marketing Association:
1,240,000 5.50%, 3/3/97 1,240,026
5,000,000 5.37%, 4/18/97 4,998,856
5,000,000 5.35%, 11/24/97 4,996,220
_____________________________________________________________________________
Total U.S. Government Agency Variable Notes
46
<PAGE>
(amortized cost $36,220,668) 36,220,668
_____________________________________________________________________________
Repurchase Agreements - 45.0%
$11,900,000 Goldman, Sachs & Co., 5.60%,
dated 10/31/96, maturing 11/1/96,
to be repurchased at $11,901,851,
collateralized by $12,138,001
in Federal National Mortgage Association
pooled assets 7.293% and 6.463%,
4/1/24 and 1/1/26 with respective
values of $10,830,737 and $1,307,264 $ 11,900,000
40,000,000 HSBC Securities, Inc., 5.625%,
dated 10/31/96, maturing 11/1/96,
to be repurchased at $40,006,250,
collateralized by $778,570 in Federal Home
Loan Mortgage Corp. 5.9375%, 7/25/23;
$43,838,070 in Federal National Mortgage
Association pooled assets 6.061%
and 6.074%, 8/1/29 and 1/1/34 with
respective values of $545,882; $22,443,867
and $17,814,230 40,000,000
27,700,000 NationsBanc Capital Markets, Inc., 5.31%,
dated 10/29/96, maturing 11/5/96, to be
repurchased at $27,728,600, collateralized
by $28,250,000 in Student Loan Mortgage
Association Floating Rate Bond 5.9189%,
10/26/09 with a value of $28,300,850 27,700,000
_____________________________________________________________________________
Total Repurchase Agreements (cost $79,600,000) 79,600,000
_____________________________________________________________________________
Total Investments (total cost $176,744,517) - 99.9% 176,744,517
_____________________________________________________________________________
Cash, Receivables and Other Assets,
net of Liabilities - 0.1% 153,008
_____________________________________________________________________________
Net Assets - 100% $176,897,525
_____________________________________________________________________________
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1996 ANNUAL REPORT
47
<PAGE>
JANUS TAX-EXEMPT MONEY MARKET FUND
October 31, 1996
_____________________________________________________________________________
Principal Amount Market Value
_____________________________________________________________________________
Variable Rate Demand Notes - 83.7%
_____________________________________________________________________________
Alabama - 4.8%
$ 800,000 Athens Industrial Development Board
Revenue, (Coilplus Income Project),
3.65%, 9/1/99 $ 800,000
Birmingham Baptist Medical Center,
Special Care Facilities Financing
Authority Revenue:
1,500,000 Senior Living Communities, Inc.
Project, Series A, 3.70%, 9/1/20 1,500,000
1,330,000 Baptist Health Systems, Inc., Series A,
3.70%, 11/15/24 1,330,000
_____________________________________________________________________________
3,630,000
_____________________________________________________________________________
California - 8.4%
2,700,000 California Statewide Communities,
(Whispering Winds Apartments),
Series D, 3.85%, 12/1/22 2,700,000
1,600,000 Carlsbad Housing and Redevelopment
Community, (Seascape Village Project),
3.85%, 12/1/05 1,600,000
Los Angeles Regional Airport Improvements
Corp. Lease Revenue,
(American Airlines - L.A. International):
400,000 Series B, 3.65%, 12/1/24 400,000
300,000 Series D, 3.65%, 12/1/24 300,000
1,400,000 Series E, 3.65%, 12/1/24 1,400,000
_____________________________________________________________________________
6,400,000
_____________________________________________________________________________
Colorado - 6.6%
450,000 Colorado Health Facility Authority Revenue,
(Valley View Hospital Association Project),
4.15%, 10/1/12 450,000
3,300,000 Denver City & County Airport Revenue,
Series B, 3.70%, 12/1/25 3,300,000
1,300,000 Englewood Industrial Development Revenue,
(Swedish Mobility Limited Project),
3.65%, 12/1/10 1,300,000
48
<PAGE>
_____________________________________________________________________________
5,050,000
_____________________________________________________________________________
Delaware - 0.3%
200,000 Wilmington Hospital Revenue,
(Dates - Franciscan Health System),
Series A, 3.65%, 7/1/11 200,000
_____________________________________________________________________________
Florida - 4.2%
3,200,000 Dade County, Apartment Revenue, Series A,
3.70%, 10/1/09 3,200,000
_____________________________________________________________________________
Georgia - 2.2%
1,700,000 Burke County Development Authority
Pollution Control Revenue, (Georgia
Power Company Plant Vogtle - 5th),
3.65%, 7/1/24 1,700,000
_____________________________________________________________________________
Hawaii - 1.4%
Hawaii State Housing Finance and
Development Corp. Revenue,
(Rental Housing System):
800,000 Series A, 3.60% 7/1/25 800,000
300,000 Series B, 3.60% 7/1/25 300,000
_____________________________________________________________________________
1,100,000
_____________________________________________________________________________
Illinois - 3.1%
$ 649,070 Village of Franklin Park, (AM Castle and
Company Project), 3.85%, 6/1/17 $ 649,070
187,500 Village of Rosemont, (AM Castle and
Company Project), 3.85%, 6/1/17 187,500
1,500,000 Wood Dale Industrial Development
Revenue, (Nippon Express, Inc. Project),
3.65%, 6/1/00 1,500,000
_____________________________________________________________________________
2,336,570
_____________________________________________________________________________
Kansas - 2.9%
2,245,000 Shawnee Industrial Development Revenue,
(Shawnee Village Association Project),
49
<PAGE>
3.75%, 12/1/09 2,245,000
_____________________________________________________________________________
Kentucky - 1.3%
1,000,000 Mayfield Multi-City Lease Revenue,
(League of Cities Funding Transportation
Project), 3.75%, 7/1/26 1,000,000
_____________________________________________________________________________
Louisiana - 2.0%
1,485,000 Sulphur Industrial Development Revenue,
(La Quinta Inns Project), 3.70%, 12/1/04 1,485,000
_____________________________________________________________________________
Maryland - 0.4%
300,000 Frederick General Obligation, 3.75%, 8/1/11 300,000
_____________________________________________________________________________
Michigan - 4.7%
200,000 Michigan State Job Development Authority
Revenue, (Kentwood Residence),
3.70%, 11/1/14 200,000
Michigan State Hospital
Finance Authority Revenue,
(Hospital Equipment Loan Program):
200,000 3.55%, 12/1/23 200,000
3,200,000 Series A, 3.55%, 12/1/23 3,200,000
_____________________________________________________________________________
3,600,000
_____________________________________________________________________________
Minnesota - 6.4%
1,800,000 Golden Valley Industrial Development
Revenue, (Unicare Homes Project),
3.70%, 9/1/14 1,800,000
1,200,000 Robbinsdale Industrial Development
Revenue, (Unicare Homes Inc., Project),
3.70%, 10/1/14 1,200,000
1,900,000 St. Paul Housing and Redevelopment
Authority Revenue, (District Heating),
3.70%, 12/1/12 1,900,000
_____________________________________________________________________________
4,900,000
_____________________________________________________________________________
Missouri - 4.0%
973,000 Kansas City Industrial Development
Authority, (AM Castle and Company
Project), 3.85%, 6/1/10 973,000
Missouri State Health and Education
Facilities Authority Revenue:
50
<PAGE>
100,000 (St. Louis University Project),
3.75%, 12/1/05 100,000
1,400,000 (The Washington University Project),
Series C, 3.55%, 9/1/30 1,400,000
600,000 West Plains Industrial Revenue Authority,
(West Plains Manor Project),
3.70%, 11/1/10 600,000
_____________________________________________________________________________
3,073,000
_____________________________________________________________________________
New York - 5.9%
$3,600,000 New York State Dormitory Authority
Revenue, (St. Francis Center at the Knolls
Project), 3.75%, 7/1/23 $ 3,600,000
900,000 Ontario County Industrial Development
Authority, (Eastman Kodak V Association
Project), 4.25%, 8/1/15 900,000
_____________________________________________________________________________
4,500,000
_____________________________________________________________________________
Ohio - 5.5%
3,600,000 Cuyahogo County Hospital District Revenue,
(University Hospital - Cleveland),
3.70%, 1/1/16 3,600,000
590,000 Ohio Industrial Development Revenue,
(AM Castle and Company Project),
3.85%, 12/1/06 590,000
_____________________________________________________________________________
4,190,000
_____________________________________________________________________________
Oklahoma - 5.4%
1,200,000 Claremore Redevelopment Authority
Industrial Development Revenue,
(Worthington Cylinder Corp. Project),
3.70%, 1/1/11 1,200,000
2,900,000 Tulsa Home Finance Authority, (Greenbriar
Project), Series B, 3.95%, 3/15/05 2,900,000
_____________________________________________________________________________
4,100,000
_____________________________________________________________________________
Pennsylvania - 6.2%
2,000,000 Northeastern Hospital and Education
Authority Revenue, (Allhealth Pooled
Financing Program), 3.70%, 7/1/26 2,000,000
1,450,000 Philadelphia Authority for Industrial
Development Multifamily Revenue,
(Harbor View Towers), 3.85%, 11/1/27 1,450,000
51
<PAGE>
1,300,000 Venango Industrial Development Authority,
(Pennzoil Company Project), Series A,
3.95%, 12/1/12 1,300,000
_____________________________________________________________________________
4,750,000
_____________________________________________________________________________
South Carolina - 3.9%
1,750,000 Lexington County, (Charter Rivers Hospital),
3.55%, 6/1/07 1,750,000
1,200,000 South Carolina Jobs Economic Development
Authority Revenue, (St. Francis Hospital
Project), 3.65%, 7/1/22 1,200,000
_____________________________________________________________________________
2,950,000
_____________________________________________________________________________
Tennessee - 0.9%
200,000 Hamilton County Industrial Development
Revenue, (Komatsu America
Manufacturing Project), 3.65%, 11/1/05 200,000
100,000 Metropolitan Nashville Airport Authority
Special Facilities Revenue,
(American Airlines Project), Series A,
3.65%, 10/1/12 100,000
400,000 Sullivan County Industrial Development
Board Pollution Control Revenue,
(Mead Corp. Project), 3.65%, 11/1/16 400,000
_____________________________________________________________________________
700,000
_____________________________________________________________________________
Texas - 1.7%
Grapevine Industrial Development Revenue,
(American Airlines, Inc. Project):
300,000 Series A1, 3.65%, 12/1/24 300,000
300,000 Series A3, 3.65%, 12/1/24 300,000
Lone Star Airport Improvement Authority,
(American Airlines, Inc. Project):
200,000 Series A3, 3.65%, 12/1/14 200,000
100,000 Series A4, 3.65%, 12/1/14 100,000
$ 200,000 Metropolitan Higher Education Authority
Revenue, (University of Dallas Project),
Series B, 3.90%, 12/1/04 $ 200,000
200,000 North Central Health Facilities Development
Revenue, (Presbyterian Medical Center),
Series D, 3.65%, 12/1/15 200,000
_____________________________________________________________________________
1,300,000
______________________________________________________________________________
Washington - 1.5%
52
<PAGE>
1,120,000 Washington State Housing Finance
Community Nonprofit Housing Revenue,
(YMCA of Greater Seattle), 3.60%, 7/1/11 1,120,000
_____________________________________________________________________________
Total Variable Rate Demand Notes
(amortized cost $63,829,570) 63,829,570
_____________________________________________________________________________
Bond Anticipation Notes - 3.9%
1,000,000 New Bedford, Massachusetts Bond
Anticipation Notes, 4.25%, 10/10/97 1,003,163
Springfield, Massachusetts Bond
Anticipation Notes:
1,000,000 4.50%, 6/27/97 1,003,149
1,000,000 4.60%, 7/11/97 1,003,336
_____________________________________________________________________________
Total Bond Anticipation Notes (amortized cost $3,009,648) 3,009,648
_____________________________________________________________________________
General Obligation Notes - 2.6%
1,000,000 Clark County, Washington School District
No. 114 Evergreen, Series A,
4.00%, 12/1/96 1,000,224
1,000,000 South Dakota Housing Development
Authority (Homeownership Mortgage),
Series A, 4.30%, 5/1/97 1,002,801
_____________________________________________________________________________
Total General Obligation Notes (amortized cost $2,003,025) 2,003,025
_____________________________________________________________________________
Put Bonds - 2.6%
1,000,000 Dove Valley, Colorado Metropolitan District,
Arapahoe County, Series B,
3.90%, 11/1/25 1,000,000
1,000,000 Tyler, Texas Health Facilities Development
Revenue, (East Texas Regional Health
Medical Center), Series C, 3.80%, 11/1/25 1,000,000
_____________________________________________________________________________
Total Put Bonds (cost $2,000,000) 2,000,000
_____________________________________________________________________________
Tax and Revenue Anticipation Notes - 8.2%
1,000,000 Campbell County, Wyoming School District
No. 1 Gillette, Tax Anticipation Warrants,
4.50%, 6/30/97 1,003,196
1,200,000 Milwaukee, Wisconsin Revenue Anticipation
Notes, Series A, 3.50%, 2/27/97 1,200,925
1,000,000 New Bedford, Massachusetts Revenue
Anticipation Notes, 4.50%, 6/30/97 1,003,508
1,000,000 Oxnard, California Unified High School
District, Tax and Revenue Anticipation
53
<PAGE>
Notes, 4.50%, 8/7/97 1,003,314
1,000,000 South Coast, California Local Education
Agencies Partnership Pooled Tax and
Revenue Anticipation Notes, Series A,
4.75%, 6/30/97 1,004,333
1,000,000 Texas State Tax and Revenue Anticipation
Notes, 4.75%, 8/29/97 1,006,342
_____________________________________________________________________________
Total Tax and Revenue Anticipation Notes
(amortized cost $6,221,618) 6,221,618
_____________________________________________________________________________
Total Investments - 101.0% (total cost $77,063,861) 77,063,861
_____________________________________________________________________________
Liabilities, Net of Cash, Receivables and Other
_____________________________________________________________________________
Assets - (1.0%) (478,925)
_____________________________________________________________________________
Net Assets - 100% $76,584,936
_____________________________________________________________________________
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1996 ANNUAL REPORT
54
<PAGE>
STATEMENTS OF OPERATIONS - BOND FUNDS
Janus Janus Janus
For the fiscal year or period Flexible Janus Federal Short-Term
ended October 31, 1996 Income High-Yield Tax-Exempt Bond
(all numbers in thousands) Fund Fund(1) Fund Fund
_____________________________________________________________________________
Investment Income:
Interest 50,370 7,414 $2,119 $2,627
Dividends 717 -- -- --
_____________________________________________________________________________
51,087 7,414 2,119 2,627
_____________________________________________________________________________
Expenses:
Advisory fees 3,620 556 218 274
Transfer agent fees and expenses 1,263 159 108 141
Registration fees 25 89 31 35
Postage and mailing expenses 176 13 20 29
Custodian fees 94 30 11 18
Printing expenses 6 3 -- --
Audit fees 26 8 12 8
Trustees' fees and expenses 7 1 -- 1
Other expenses 68 13 13 13
_____________________________________________________________________________
Total expenses 5,285 872 413 519
_____________________________________________________________________________
Expense and fee offsets (62) (8) (9) (7)
_____________________________________________________________________________
Net expenses 5,223 864 404 512
_____________________________________________________________________________
Less: Excess expense reimbursement -- (122) (168) (238)
_____________________________________________________________________________
5,223 742 236 274
_____________________________________________________________________________
Net investment income 45,864 6,672 1,883 2,353
_____________________________________________________________________________
Net Realized and Unrealized
Gain/(Loss) on Investments:
Net realized gain/(loss) from
securities transactions 9,515 2,424 153 281
Net realized gain/(loss) from
foreign currency (13) (29) -- --
Net realized gain/(loss) from
futures contracts 2,676 -- 107 (143)
Change in net unrealized appreciation
or depreciation of investments (7,554) 3,565 (110) 118
_____________________________________________________________________________
Net gain/(loss) on investments 4,624 5,960 150 256
_____________________________________________________________________________
Net increase/(decrease) in net
55
<PAGE>
assets resulting from operations $50,488 $12,632 $2,033 $2,609
_____________________________________________________________________________
1) Period December 29, 1995 (inception) to October 31, 1996
An Explanation of the Statement of Operations
This financial statement details the Funds' income, expenses, gains and
losses on securities and currency transactions and from appreciation or
depreciation of portfolio holdings. The first section in this statement,
called "Investment Income," reports the dividends earned from stocks and
interest earned from interest-bearing securities in the portfolio.
The next section reports the expenses and expense offsets incurred by the
Funds, including the advisory fee paid to the investment advisor, the transfer
agent fees, shareholder servicing expenses, printing and postage for mailing
statements, financial reports, and prospectuses to investors.
The last section lists the increase or decrease in the value of securities
held in the Funds' portfolios. Funds realize a gain (or loss) when they sell
their position in a particular security. Unrealized gain (or loss) refers to
the change in net appreciation or depreciation of the Funds' portfolio during
the period. This figure is affected by both changes in the market value of
portfolio holdings and by gains (or losses) realized during the reporting
period.
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1996 ANNUAL REPORT
56
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES - BOND FUNDS
Janus
Janus Janus Janus Short
As of October 31, 1996 Flexible High- Federal Term
(all numbers in thousands Income Yield Tax-Exempt Bond
except net asset value per share) Fund Fund Fund Fund
_____________________________________________________________________________
Assets:
Investments at cost $575,618 $210,466 $43,799 $39,791
_____________________________________________________________________________
_____________________________________________________________________________
Investments at value $588,890 $214,031 $44,133 $40,071
Cash 255 2,054 87 213
Receivables:
Investments sold 16,215 5,305 2,375 6,092
Fund shares sold 784 674 236 87
Interest 11,796 5,036 654 550
Variation margin - futures contracts -- -- 2 --
Other assets 5 -- 7 1
_____________________________________________________________________________
Total Assets 617,945 227,100 47,494 47,014
_____________________________________________________________________________
Liabilities:
Payables:
Investments purchased 12,025 15,521 2,534 6,000
Fund shares repurchased 1,049 307 18 186
Dividends 635 149 30 7
Advisory fee 302 71 22 5
Transfer agent fee 138 36 10 13
Accrued expenses 66 83 22 19
Variation margin - futures contracts 75 -- -- --
_____________________________________________________________________________
Total Liabilities 14,290 16,167 2,636 6,230
_____________________________________________________________________________
Net Assets $603,655 $210,933 $44,858 $40,784
Shares Outstanding, $0.01 Par
Value (unlimited shares authorized) 62,580 18,965 6,481 14,239
_____________________________________________________________________________
Net Asset Value Per Share $9.65 $11.12 $6.92 $2.86
_____________________________________________________________________________
An Explanation of the Statement of Assets and Liabilities
This financial statement is often referred to as the "balance sheet." It
lists the assets and liabilities of the Fund on the last day of the fiscal
period.
The Funds' assets are calculated by adding the value of the securities
owned, the receivable for securities sold but not yet settled, the receivable
57
<PAGE>
for dividends declared on stocks owned but not yet received, and the
receivable for Fund shares sold to investors but not yet settled. The Funds'
liabilities include payables for securities purchased but not yet settled,
fund shares redeemed but not yet paid, and expenses owed but not yet paid.
The last line of this schedule reports the Funds' net asset value (NAV)
per share on the last day of the fiscal period. The NAV is calculated by
dividing the Funds' net assets (assets minus liabilities) by the number of
shares outstanding.
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1996 ANNUAL REPORT
58
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS - BOND FUNDS
<TABLE>
Janus Janus Janus Federal Janus
For the fiscal year or Flexible Income High-Yield Tax-Exempt Short-Term Bond
period ended October 31 Fund Fund Fund Fund
(all numbers in thousands)
________________________________________________________________________________________________
1996 1995 1996(1) 1996 1995 1996 1995
________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 45,864 $35,605 $ 6,672 $1,883 $1,591 $ 2,353 $3,158
Net realized gain/
(loss) from investment
transactions 12,178 (2,794) 2,395 260 (317) 138 (1,863)
Change in unrealized
net appreciation or
depreciation
of investments (7,554) 34,614 3,565 (110) 2,038 118 1,234
________________________________________________________________________________________________
Net increase/(decrease)
in net assets resulting from
operations 50,488 67,425 12,632 2,033 3,312 2,609 2,529
________________________________________________________________________________________________
Dividends and Distributions
to Shareholders:
Net investment income* (45,865) (35,571) (6,672) (1,884) (1,591) (2,352) (3,062)
Net realized gain from
investment transactions -- -- -- -- -- -- --
Net decrease from dividends
and distributions (45,865) (35,571) (6,672) (1,884) (1,591) (2,352) (3,062)
________________________________________________________________________________________________
Capital Share Transactions:
Shares sold 313,773 349,106 272,508 26,324 26,365 27,920 32,690
Reinvested dividends
and distributions 38,575 27,431 5,896 1,553 1,284 2,169 2,664
Shares repurchased (333,675) (205,377) (73,431) (15,761) (23,241) (37,679)(40,989)
________________________________________________________________________________________________
Net increase/(decrease)
from capital share
transactions 18,673 171,160 204,973 12,116 4,408 (7,590) (5,635)
Net increase/(decrease)
in net assets 23,296 203,014 210,933 12,265 6,129 (7,333) (6,168)
Net Assets:
Beginning of period 580,359 377,345 -- 32,593 26,464 48,117 54,285
________________________________________________________________________________________________
59
<PAGE>
End of Period $603,655 $580,359 $210,933 $44,858 $32,593 $40,784 $48,117
________________________________________________________________________________________________
Net Assets consist of:
Capital (par value and
paid-in surplus)* $589,076 $570,403 $204,973 $46,050 $33,935 $43,738 $51,328
Undistributed net
investment income* 394 454 -- -- -- 2 1
Undistributed net
realized gain/(loss)
from investments* 1,635 (10,601) 2,395 (1,648) (1,909) (3,236) (3,374)
Unrealized appreciation/
(depreciation) of
investments 12,550 20,103 3,565 456 567 280 162
________________________________________________________________________________________________
$603,655 $580,359 $210,933 $44,858 $32,593 $40,784 $48,117
________________________________________________________________________________________________
Transactions in Fund Shares:
Shares sold 32,701 38,305 25,145 3,784 3,916 9,842 11,546
Reinvested distributions 4,031 2,993 538 223 192 764 941
________________________________________________________________________________________________
Total 36,732 41,298 25,683 4,007 4,108 10,606 12,487
Shares repurchased (34,947) (22,614) (6,718) (2,263) (3,475) (13,292)(14,449)
Net increase/(decrease) 1,785 18,684 18,965 1,744 633 (2,686) (1,962)
________________________________________________________________________________________________
Shares outstanding beginning
of period 60,795 42,111 -- 4,737 4,104 16,925 18,887
Shares outstanding end
of period 62,580 60,795 18,965 6,481 4,737 14,239 16,925
________________________________________________________________________________________________
Purchases and Sales of
Investment Securities:
(excluding Short-Term
Securities) Purchases
of Securities $1,062,764 $1,000,286 $431,286 $87,631 $53,375 $118,608 $81,206
Proceeds from Sales
of Securities 1,075,417 901,698 239,819 79,890 46,184 127,584 90,036
Purchases of Long-Term
U.S. Government
Obligations 147,498 213,741 1,115 -- -- 54,851 74,963
Proceeds from Sales
of Long-Term U.S. Government
Obligations 155,967 152,266 1,141 -- -- 60,549 70,371
_______________________________________________________________________________________________
</TABLE>
(1) Fiscal period December 29, 1995 (inception) to October 31, 1996
*See Note 3 in Notes to Financial Statements
60
<PAGE>
An Explanation of the Statement of Changes in Net Assets
This financial statement reports the increase or decrease in the Funds'
net assets during the reporting period. Changes in the Funds' net assets are
attributable to investment operations, dividends, distributions, and capital
share transactions. This schedule is of importance to investors because it
shows exactly what caused the Funds' asset size to change during the period.
Investors can use this information to determine if the Funds' growth was a
result of operations or an increase in the number of shares being purchased.
The first section summarizes the information from the Statement of
Operations regarding changes in net assets due to the Funds' investment
performance. The Funds' net assets will also change as a result of dividend
and capital gain distributions to investors. If investors receive their
dividends in cash, money is taken out of the Fund to pay the distribution. If
investors reinvest their dividends, the Funds' net assets will not be
affected. If you compare each Fund's "Net decrease from dividends and
distributions" to the "Reinvested dividends and distributions," you'll notice
that dividend distributions had little effect on each Fund's net assets. This
is because the majority of Janus investors reinvest their distributions.
The reinvestment of dividends is included under "Capital Share
Transactions." "Capital Shares" refers to the money investors contribute to
the Fund through purchases or withdraw via redemptions. The Fund's net assets
will increase and decrease in value as investors purchase and redeem shares
from the Fund.
The section titled "Net Assets Consist of" breaks down the components of
the Funds' net assets. Since funds must distribute substantially all earnings,
you'll notice that a significant portion of net assets is shareholder capital.
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1996 ANNUAL REPORT
61
<PAGE>
FINANCIAL HIGHLIGHTS - BOND FUNDS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
For a share outstanding Janus High-
throughout the fiscal year Janus Flexible Income Fund Yield Fund
for period ended October 31 1996 1995 1994 1993 1992 1996
_________________________________________________________________________________________________
Net asset value, beginning
of period $9.55 $8.96 $10.03 $9.26 $9.09 $10.00
_________________________________________________________________________________________________
Income from investment
operations
Net investment income .73 .72 .74 .77 .68 .80
Net gains or (losses) on
securities (both realized
and unrealized) .10 .59 (.86) .79 .15 1.12
_________________________________________________________________________________________________
Total from investment
operations .83 1.31 (.12) 1.56 .83 1.92
_________________________________________________________________________________________________
Less distributions
Dividends (from net
investment income) (.73) (.72) (.72) (.77) (.66) (.80)
Distributions (from capital
gains) -- -- (.23) (.02) -- --
_________________________________________________________________________________________________
Total distributions (.73) (.72) (.95) (.79) (.66) (.80)
_________________________________________________________________________________________________
Net asset value, end
of period $9.65 $9.55 $8.96 $10.03 $9.26 $11.12
_________________________________________________________________________________________________
Total return* 9.01% 15.35% (1.26%) 17.48% 9.43% 19.71%
_________________________________________________________________________________________________
Net assets, end of
period (in thousands) $603,655 $580,359 $377,345 $473,116 $205,371 $210,933
Average net assets for
the period (in thousands) $603,694 $450,001 $428,962 $337,568 $143,766 $88,126
Ratio of gross expenses
to average net assets** 0.88% 0.96% NA NA NA 1.01%(6)
Ratio of net expenses to
average net assets** 0.87% 0.96% 0.93% 1.00%(5) 1.00%(5) 1.00%
Ratio of net investment
income to average net assets** 7.60% 7.91% 7.75% 7.96% 8.98% 9.00%
Portfolio turnover rate** 214% 250% 137% 201% 210% 324%
_________________________________________________________________________________________________
For a share outstanding
throughout the fiscal year Janus Federal Tax-Exempt Fund
or period ended October 31 1996 1995 1994 1993
_________________________________________________________________________________________________
Net asset value, beginning
62
<PAGE>
period 6.88 6.45 7.30 7.00
_________________________________________________________________________________________________
Income from investment
operations
Net investment income .36 .36 .36 .14
Net gains or (losses) on
securities (both realized
and unrealized) .04 .43 (.83) .30
_________________________________________________________________________________________________
Total from investment
operations .40 .79 (.47) .44
_________________________________________________________________________________________________
Less distributions
Dividends (from net
investment income) (.36) (.36) (.36) (.14)
Distributions (from
capital gains) -- -- (.02) --
_________________________________________________________________________________________________
Total distributions (.36) (.36) (.38) (.14)
_________________________________________________________________________________________________
Net asset value, end
of period $6.92 $6.88 $6.45 $7.30
_________________________________________________________________________________________________
Total return* 5.94% 12.60% (6.62%) 6.33%*
_________________________________________________________________________________________________
Net assets, end of period
(in thousands) $44,858 $32,593 $26,464 $27,331
Average net assets for
the period (in thousands) $36,312 $29,318 $28,384 $16,038
Ratio of gross expenses
to average net assets** 0.68%(7) 0.70%(7) NA NA
Ratio of net expenses
to average net assets** 0.65% 0.65% 0.65%(7) 0.75%(7)
Ratio of net investment
income to average net
assets** 5.18% 5.43% 5.20% 4.58%
Portfolio turnover rate** 225% 164% 160% 124%
_________________________________________________________________________________________________
For a share outstanding
throughout the fiscal
year or period ended Janus Short-Term Bond Fund
October 31 1996 1995 1994 1993 1992
_________________________________________________________________________________________________
Net asset value,
beginning of period $2.84 $2.87 $3.02 $2.98 $3.00
_________________________________________________________________________________________________
Income from investment
operations
Net investment income .16 .18 .18 .14 .01
Net gains or (losses)
on securities (both
63
<PAGE>
realized and unrealized) .02 (.03) (.15) .04 (.02)
_________________________________________________________________________________________________
Total from investment
operations .18 .15 .03 .18 (.01)
_________________________________________________________________________________________________
Less distributions
Dividends (from net
investment income) (.16) (.18) (.17) (.14) (.01)
Distributions (from
capital gains) -- -- (.01) -- --
_________________________________________________________________________________________________
Total distributions (.16) (.18) (.18) (.14) (.01)
_________________________________________________________________________________________________
Net asset value, end
of period $2.86 $2.84 $2.87 $3.02 $2.98
_________________________________________________________________________________________________
Total return* 6.49% 5.55% 1.26% 6.17% (0.19%)*
_________________________________________________________________________________________________
Net assets, end of period
(in thousands) $40,784 $48,117 $54,285 $76,096 $3,472
Average net assets for the
period (in thousands) $42,203 $47,383 $59,584 $36,794 $779
$779 Ratio of gross
expenses to average
net assets** 0.67%(8) 0.66%(8) NA NA NA
NA Ratio of net expenses
to average net assets** 0.65% 0.65% 0.65%(8) 0.83%(8) 1.00%(8)
Ratio of net investment
income to average
net assets** 5.57% 6.67% 6.08% 4.86% 3.22%
Portfolio turnover rate** 486% 337% 346% 372% 7%
_________________________________________________________________________________________________
</TABLE>
(1) Fiscal period from January 1, 1992 to October 31, 1992
(2) Fiscal period from December 29, 1995 (inception) to October 31, 1996
(3) Fiscal period from May 3, 1993 (inception) to October 31, 1993
(4) Fiscal period from September 1, 1992 (inception) to October 31, 1992
(5) The ratio was 1.01% in 1993 and 1.21% in 1992 before voluntary waiver of
certain fees incurred by the Fund.
(6) The ratio was 1.18% in 1996 before voluntary waiver of certain fees
incurred by the Fund.
(7) The ratio was 1.14% in 1996, 1.31% in 1995, 1.41% in 1994 and 1.60% in
1993 before voluntary waiver of certain fees incurred by the Fund.
(8) The ratio was 1.23% in 1996, 1.23% in 1995, 1.15% in 1994, 1.40% in 1993
and 2.50% in 1992 before voluntary waiver of certain fees incurred by the
Fund.
*Total return not annualized for periods of less than one year
**Annualized for periods less than one year
NA - Disclosure not required for prior periods
64
<PAGE>
65
<PAGE>
FINANCIAL HIGHLIGHTS
An Explanation of the Financial Highlights
This schedule provides a per share breakdown of the components that affect
the Funds' NAV for the current and past reporting periods. Not only does this
table provide you with total return, it also reports total distributions,
asset size, expense ratios and portfolio turnover rate.
The first line in the table reflects the Funds' NAV per share at the
beginning of the fiscal period. The next line reports the Funds' net
investment income per share which is comprised of dividends and interest
income earned on securities held by the Fund. Following is the total of
gains, realized and unrealized. Dividends and distributions are then
subtracted to arrive at the NAV per share at the end of the fiscal period.
Also included in the Financial Highlights is the Funds' expense ratio, or
the percentage of net assets that was used to cover operating expenses during
the period. Expense ratios vary across the Funds for a number of reasons
including the differences in management fees, average shareholder account
size, the frequency of dividend payments, and the extent of foreign
investments, which entail greater transaction costs.
The Funds' expenses may be reduced through expense reduction arrangements.
Those arrangements include the use of broker commissions and cash balances
earning interest or balance credits with the Funds' custodian and transfer
agent bank accounts. The Statements of Operations reflect the total expenses
before any offset, the amount of offset and the net expenses. The expense
ratios listed in the Financial Highlights reflect total expenses both prior to
any expense offset and after the offsets, along with any expense
reimbursements. These changes are part of new disclosure requirements. Prior
years do not reflect these changes.
The next line reports the ratio of net investment income, which is the
income earned divided by the average net assets of the Funds during the
reporting period. Don't confuse this ratio with a Fund's yield. The net
investment income ratio is not a true measure of a Funds' yield because it
doesn't take into account the dividends distributed to the Funds' investors.
The next ratio provided in this table is the portfolio turnover rate, which
measures the amount of buying and selling activity in the Funds' portfolio.
Portfolio turnover is affected by market conditions, changes in the size of a
Fund, the nature of the Funds' investments, and the investment style of the
portfolio manager. A 100% rate implies that an amount equal to the value of
the entire portfolio is turned over in a year; a 50% rate means that an amount
equal to the value of half the portfolio is traded in a year; and a 200% rate
would mean that an amount equal to the value of the portfolio is sold in an
average of six months.
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1996 ANNUAL REPORT
66
<PAGE>
STATEMENTS OF OPERATIONS - MONEY MARKETS
<TABLE>
Janus Janus Government Janus Tax-Exempt
For the fiscal year ended October 31, 1996 Money Market Money Market Money Market
(all numbers in thousands) Fund Fund Fund
____________________________________________________________________________________________________
<S> <C> <C> <C>
Investment Income:
Interest $86,583 $9,111 $2,694
____________________________________________________________________________________________________
86,583 9,111 2,694
____________________________________________________________________________________________________
Expenses:
Advisory Fee for Investor Shares 676 112 69
Advisory Fee for Institutional Shares 875 54 2
Administrative Fee for Investor Shares 3,382 560 343
Administrative Fee for Institutional Shares 437 27 1
Interest Expense for Investor Shares 10 -- --
Interest Expense for Institutional Shares 8 -- --
Trustee Fee for Investor Shares 2 -- --
Trustee Fee for Institutional Shares 5 -- --
____________________________________________________________________________________________________
5,395 753 415
____________________________________________________________________________________________________
Net Investment Income: $81,188 $8,358 $2,279
____________________________________________________________________________________________________
Net Realized Gain/(Loss) on Investments:
Net realized gain/(loss) from securities
transactions 99 9 (1)
____________________________________________________________________________________________________
Net increase/(decrease) in net assets
resulting from operations $81,287 $8,367 $2,278
____________________________________________________________________________________________________
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - MONEY MARKETS
<TABLE>
Janus Janus Government Janus Tax-Exempt
As of October 31, 1996 (all numbers in Money Market Money Market Money Market
thousands except net asset value) Fund Fund Fund
____________________________________________________________________________________________________
<S> <C> <C> <C>
Assets:
Investments at amortized cost $2,553,898 $176,745 $77,064
Cash 172 97 98
Receivables:
Investments Sold 190,106 -- --
Fund Shares Sold 3,488 300 217
67
<PAGE>
Interest 9,019 400 375
____________________________________________________________________________________________________
Total Assets $2,756,683 $177,542 $77,754
____________________________________________________________________________________________________
Liabilities:
Payables
Investments Purchased 261,999 -- 1,000
Fund Shares Repurchased 9,180 554 120
Dividends and Distributions 5,362 23 12
Advisory Fee 233 15 6
Administrative Fee 406 52 31
Trustee's Expenses 6 -- --
____________________________________________________________________________________________________
Total Liabilities $277,186 $644 $1,169
____________________________________________________________________________________________________
Total Net Assets $2,479,497 $176,898 $76,585
Shares Outstanding, $0.01 Par Value
(unlimited shares authorized) 2,479,497 176,898 76,585
____________________________________________________________________________________________________
Net Asset Value Per Share $1.00 $1.00 $1.00
____________________________________________________________________________________________________
</TABLE>
68
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS - MONEY MARKET FUNDS
<TABLE>
Janus Janus Government Janus Tax-Exempt
For the fiscal year ended October 31, Money Market Money Market Money Market
1996 (all numbers in thousands) Fund Fund Fund
1996 1995(1) 1996 1995(1) 1996 1995 (1)
____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 81,188 $ 24,298 $ 8,358 $ 4,125 $ 2,279 $ 1,392
Net realized gain/(loss)
from investment transactions 99 9 9 8 (1) (3)
____________________________________________________________________________________________________
Net increase/(decrease) in net
assets resulting from operations $ 81,287 $ 24,307 $ 8,367 $ 4,133 $ 2,278 $ 1,389
____________________________________________________________________________________________________
Dividends and Distributions to
Shareholders:
Net investment income:
Investor Shares $ (33,875) $(17,868) $(5,507) $(3,353) $(2,211) $(1,366)
Institutional Shares (47,313) (6,430) (2,851) (772) (67) (23)
Net realized gain/(loss) from
investment transactions:
Investor Shares (39) (6) (6) (8) -- --
Institutional Shares (60) (3) (3) -- -- --
____________________________________________________________________________________________________
Net decrease from dividends
and distributions $ (81,287) $(24,307) $(8,367) $(4,133) $(2,278) $(1,389)
____________________________________________________________________________________________________
Capital Share Transactions:
Shares sold:
Investor Shares $ 1,457,473 $1,109,965 $121,998 $183,758 $89,300 $126,046
Institutional Shares 24,946,671 1,974,800 648,284 179,373 38,832 37,121
Reinvested dividends and
distributions:
Investor Shares 32,696 17,285 5,320 3,252 2,141 1,323
Institutional Shares 15,684 1,269 2,267 435 43 11
Shares repurchased:
Investor Shares (1,359,501) (484,031)(129,217) (67,703) (84,282) (59,890)
Institutional Shares (23,561,697)(1,671,117)(635,225)(135,644) (48,120) (25,940)
____________________________________________________________________________________________________
Net increase/(decrease) from
capital share transactions $ 1,531,326 $ 948,171 $ 13,427 $163,471 $ (2,086)$ 78,671
Net increase/(decrease) in net
assets $ 1,531,326 $ 948,171 $ 13,427 $163,471 $ (2,086)$ 78,671
69
<PAGE>
Net Assets beginning of period 948,171 -- 163,471 -- 78,671 --
Net Assets end of period $2,479,497 $ 948,171 $176,898 $163,471 $ 76,585 $ 78,671
____________________________________________________________________________________________________
Net Assets consist of:
Capital (par value and
paid-in surplus) $2,479,497 $ 948,171 $176,898 $163,471 $ 76,585 $ 78,671
Undistributed net realized
gain/(loss) from investments -- -- -- -- -- --
$2,479,497 $ 948,171 $176,898 $163,471 $ 76,585 $ 78,671
____________________________________________________________________________________________________
Transactions in Fund Shares -
Investor Shares
Shares Sold 1,457,473 1,109,965 121,998 183,758 89,300 126,046
Reinvested dividends and
distributions 32,696 17,285 5,320 3,252 2,141 1,323
____________________________________________________________________________________________________
Total 1,490,169 1,127,250 127,318 187,010 91,441 127,369
Shares repurchased (1,359,501) (484,031) (129,217)(67,703) (84,282) (59,890)
____________________________________________________________________________________________________
Net increase(decrease) in fund
shares 130,668 643,219 (1,899)119,307 7,159 67,479
Shares outstanding at beginning
of period 643,219 -- 119,307 -- 67,479 --
Shares outstanding at end of
period 773,887 643,219 117,408 119,307 74,638 67,479
____________________________________________________________________________________________________
Transactions in Fund Shares -
Institutional Shares
Shares Sold 24,946,671 1,974,800 648,284 179,373 38,832 37,121
Reinvested dividends and
distributions 15,684 1,269 2,267 435 43 11
____________________________________________________________________________________________________
Total 24,962,355 1,976,069 650,551 179,808 38,875 37,132
Shares repurchased (23,561,697)(1,671,117)(635,225)(135,644) (48,120) (25,940)
____________________________________________________________________________________________________
Net increase/(decrease) in fund
shares 1,400,658 304,952 15,326 44,164 (9,245) 11,192
Shares outstanding at beginning
of period 304,952 -- 44,164 -- 11,192 --
Shares outstanding at end of period 1,705,610 304,952 59,490 44,164 1,947 11,192
____________________________________________________________________________________________________
(1) Fiscal period February 15, 1995 (inception) to October 31, 1995
</TABLE>
70
<PAGE>
FINANCIAL HIGHLIGHTS - MONEY MARKET FUNDS
<TABLE>
For the share outstanding throughout Janus Janus Government Janus Tax-Exempt
the fiscal year or period ended Money Market Money Market Money Market
October 31 Fund Fund Fund
____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Investor Shares 1996 1995(1) 1996 1995(1) 1996 1995 (1)
____________________________________________________________________________________________________
Net asset value at beginning of
period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
____________________________________________________________________________________________________
Income from investment operations:
Net investment income .05 .04 .05 .04 .03 .02
____________________________________________________________________________________________________
Total from investment operations .05 .04 .05 .04 .03 .02
____________________________________________________________________________________________________
Less Dividends and Distributions:
Dividends (from net investment income) (.05) (.04) (.05) (.04) (.03) (.02)
____________________________________________________________________________________________________
Total dividends and distributions (.05) (.04) (.05) (.04) (.03) (.02)
____________________________________________________________________________________________________
Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
____________________________________________________________________________________________________
Total return* 5.13% 3.95% 5.03% 3.90% 3.27 2.40%
____________________________________________________________________________________________________
Net assets at end of period
(in thousands) $773,887 $643,219 $117,408 $119,307 $74,638 $67,479
____________________________________________________________________________________________________
Average net assets for the period
(in thousands) $676,334 $461,311 $112,059 $87,906 $68,695 $57,366
____________________________________________________________________________________________________
Ratio of expenses to average net
assets** 0.60%(3) 0.60%(3) 0.60%(3) 0.60%(3) 0.60%(3) 0.60%(3)
Ratio of net investment
income to average net assets** 5.01% 5.56% 4.91% 5.40% 3.22% 3.38%
____________________________________________________________________________________________________
</TABLE>
<TABLE>
For a share outstanding throughout Janus Janus Government Janus Tax-Exempt
the fiscal year or period ended Money Market Money Market Money Market
October 31 Fund Fund Fund
____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Institutional Shares 1996 1995(2) 1996 1995(2) 1996 1995 (2)
____________________________________________________________________________________________________
Net asset value at beginning
71
<PAGE>
of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
____________________________________________________________________________________________________
Income from investment operations:
Net investment income .05 .03 .05 .03 .04 .02
____________________________________________________________________________________________________
Total from investment operations .05 .03 .05 .03 .04 .02
____________________________________________________________________________________________________
Less Dividends and Distributions:
Dividends (from net investment income) (.05) (.03) (.05) (.03) (.04) (.02)
Total dividends and distributions (.05) (.03) (.05) (.03) (.04) (.02)
____________________________________________________________________________________________________
Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
____________________________________________________________________________________________________
Total return* 5.61% 3.25% 5.50% 3.20% 3.74% 2.09%
____________________________________________________________________________________________________
Net assets at end of period
(in thousands) $1,705,610 $304,952 $59,490 $44,164 $1,947 $11,192
Average net assets for the
period (in thousands) $874,431 $202,427 $53,398 $24,748 $1,754 $ 1,115
Ratio of expenses to average
net assets** 0.15%(4) 0.15%(4) 0.15%(4) 0.15%(4) 0.15%(4) 0.15%(4)
Ratio of net investment income
to average net assets** 5.41% 5.86% 5.34% 5.75% 3.82% 3.82%
____________________________________________________________________________________________________
* Total return is not annualized for periods of less than one year
**Annualized
(1) Fiscal period February 15, 1995 (inception) to October 31, 1995
(2) Fiscal period April 17, 1995 (inception) to October 31, 1995
(3) The ratio was .70% before voluntary reduction of fees.
(4) The ratio was .35% before voluntary reduction of fees.
</TABLE>
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1996 ANNUAL REPORT
NOTES TO SCHEDULE OF INVESTMENTS
NZD - New Zealand Dollar
Adjustable Rate Preferred Stock Dividend Rates are as of October 31, 1996.
*Non-Income producing security
**A portion of this security has been segregated by the custodian to cover
margin or segregation requirements on open futures contracts and/or forward
currency contracts.
+Securities are registered pursuant to Rule 144A and may be deemed to be
restricted for resale.
72
<PAGE>
1) Variable Rate Notes. The interest rate, which is based on specific, or an
index of, market interest rates, is subject to change. Rates in the security
description are as of October 31, 1996.
2) Money Market Funds may hold securities with stated maturities of greater
than one year, when those securities have features which allow the Fund to
"put" back the security to the issuer or to a third party within a year of
acquisition. The maturity date shown in the security descriptions are the
stated maturity dates.
3) Repurchase Agreements held by the Fund are fully collateralized and such
collateral is in the possession of the Fund's custodian. The collateral is
evaluated daily to ensure its market value exceeds the current market value of
the repurchase agreements including accrued interest.
NOTES TO FINANCIAL STATEMENTS
The following section describes the organization and significant accounting
policies of the funds and provides more detailed information about the
schedules and tables that appear throughout this report. In addition, the
Notes explain how the funds operate and the methods used in preparing and
presenting this report.
1. Organization and Significant Accounting Policies
Janus Investment Fund (the Trust) is registered under the Investment
Company Act of 1940 (the 1940 Act) as a no-load, open-end management
investment company. Four series of shares (the "Bond Funds") included in this
report invest primarily in income producing securities, and three series of
shares (the "Money Market Funds") invest exclusively in high-quality money
market instruments.
Janus High-Yield Fund began operations on December 29, 1995.
Organizational costs were borne by Janus Capital Corp. (Janus Capital).
"Investor Shares" are available to the general public and "Institutional
Shares" are available only to investors that meet the $250,000 minimum account
size, and allow wire transactions only.
The following policies have been consistently followed by the Funds and
are in conformity with accounting principles generally accepted in the
investment company industry.
Investment Valuation
Securities are valued at the closing price for securities traded on a
principal exchange (U.S. or foreign) and on the NASDAQ National Market.
Securities traded on over-the-counter markets and listed securities for which
no sales are reported are valued at the latest bid price (or yield equivalent
thereof) obtained from one or more dealers making a market for such securities
or by a pricing service approved by the Funds' Trustees. Short-term
73
<PAGE>
investments maturing within 60 days for the Bond Funds and all money market
securities in the Money Market Funds are valued at amortized cost, which
approximates market value. Foreign securities are converted to U.S. dollars
using exchange rates at the close of the New York Stock Exchange. When market
quotations are not readily available, securities are valued at fair value as
determined in good faith by the Funds' Trustees.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or
sold. Dividend income is recorded on the ex-dividend date. Certain dividends
from foreign securities will be recorded as soon as the Trust is informed of
the dividend if such information is obtained subsequent to the ex-dividend
date. Interest income is recorded on the accrual basis and includes
amortization of discounts and premiums. Gains and losses are determined on the
identified cost basis, which is the same basis used for federal income tax
purposes.
Forward Currency Transactions and Futures Contracts
The Funds enter into forward currency contracts in order to reduce their
exposure to changes in foreign currency exchange rates on their foreign
portfolio holdings and to lock in the U.S. dollar cost of firm purchase and
sale commitments for securities denominated in foreign currencies. A forward
currency contract is a commitment to purchase or sell a foreign currency at a
future date at a negotiated forward rate. The gain or loss arising from the
difference between the U.S. dollar cost of the original contract and the value
of the foreign currency in U.S. dollars upon closing of such contract is
included in net realized gain or loss on foreign currency transactions.
Forward currency contracts held by the Funds are fully collateralized by
other securities which are denoted in the accompanying schedule of
investments.
Such collateral is in the possession of the Fund's custodian. The
collateral is evaluated daily to ensure its market value equals or exceeds
the current market value of the corresponding forward currency contracts.
Currency gain and loss is also calculated on payables and receivables that
are denominated in foreign currencies. The payables and receivables are
generally related to security transactions and income.
Futures contracts are marked to market daily and the variation margin is
recorded as an unrealized gain or loss. When a contract is closed, a realized
gain or loss is recorded equal to the difference between the opening and
closing value of the contract. Generally, open forward and futures contracts
are marked to market for federal income tax purposes at fiscal year end.
Foreign denominated assets and forward currency contracts may involve more
risks than domestic transactions, including: currency risk, political and
economic risk, regulatory risk, and market risk. Risks may arise from the
74
<PAGE>
potential inability of a counterparty to meet the terms of a contract and from
unanticipated movements in the value of foreign currencies relative to the
U.S. dollar.
The Funds may enter into "futures contracts" and "options" on securities,
financial indices, and foreign currencies; forward contracts; and interest
rate swaps and swap-related products. The Funds intend to use such derivative
instruments primarily to hedge or protect from adverse movements in securities
prices, currency rates or interest rates. The use of futures contracts and
options may involve risks such as the possibility of illiquid markets or
imperfect correlation between the value of the contracts and the underlying
securities, or that the counterparty will fail to perform its obligations.
Additional Investment Risk
Janus High-Yield Fund and a portion of the Janus Flexible Income Fund may
be invested in lower-rated debt securities that have a higher risk of default
or loss of value due to changes in the economy or in their respective
industry.
Dividend Distributions and Expenses
Dividends are declared daily and distributed monthly. Each Bond Fund bears
expenses incurred specifically on its behalf as well as a portion of general
expenses.
Federal Income Taxes
The Funds intend to distribute to shareholders all taxable investment
income and realized gains and otherwise comply with the Internal Revenue Code
applicable to regulated investment companies. Of the ordinary income
distributions declared for the year ended October 31, 1996, 100% were exempt
from federal income taxes for Janus Federal Tax-Exempt Fund and Janus Tax-
Exempt Money Market Fund.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
2. Investment Advisory Agreement and Other
Transactions with Affiliates
The advisory agreement with the Bond Funds spells out the expenses that
the Funds must pay. Each of the Funds are subject to the following schedule:
75
<PAGE>
Average Daily Net Annual Rate Expense Limit
Fee Schedule Assets of Fund Percentage (%) Percentage (%)
Janus Flexible Income
Fund First $300 Million .65 1.00*
Over $300 Million .55
_____________________________________________________________________________
Janus High-Yield Fund First $300 Million .75 1.00*
Over $300 Million .65
_____________________________________________________________________________
Janus Federal First $300 Million .60 .65*
Tax-Exempt Fund Over $300 Million .55
_____________________________________________________________________________
Janus Short-Term
Bond Fund First $300 Million .65 .65*
Over $300 Million .55
_____________________________________________________________________________
*Janus Capital will waive certain fees and expenses to the extent that net
expenses exceed the stated limits.
Each of the Money Market Funds pays Janus Capital .20% of average daily
net assets as an investment advisory fee. In addition, each class of shares of
each Fund pays Janus Capital an administrative fee. This fee is .50% and .15%
of average daily net assets for the investor shares and institutional shares,
respectively. Janus Capital has voluntarily agreed to reduce its advisory fee
for the Janus Money Market Funds to .10%. In addition, Janus Capital has
voluntarily agreed to reduce the administrative fee on the institutional
shares to .05%. All other expenses of the Money Market Funds, except Trustees
fees and expenses, audit fees and interest expenses, are paid by Janus
Capital. However, Janus Capital has agreed to reduce its fees to the extent of
the Trustees fees and expenses for the period ending April 30, 1996, and the
audit fees for the period ended October 31, 1996.
Janus Capital will reduce advisory fees to the extent that a Fund's normal
operating expenses (exclusive of brokerage commissions, interest and taxes)
exceed the most restrictive state limitation, which is believed by the Funds
to be 2.50% of the first $30 million, 2% of the next $70 million and 1.50% of
the balance of a Fund's average net assets for a fiscal year. Janus Service
Corporation (Janus Service), a wholly owned subsidiary of Janus Capital,
receives an annual fee of 0.16% of average net assets per fund plus $4.00 per
shareholder account from each Bond Fund for transfer agent services plus
reimbursement of certain out of pocket expenses.
Officers and certain trustees of the Funds are also officers and/ or
directors of Janus Capital; however, they receive no compensation from the
Funds.
DST Systems Inc. (DST), an affiliate of Janus Capital through a degree of
common ownership, provides fund accounting and shareholder accounting systems
to the Funds through Janus Capital and Janus Service. Fees paid to DST for the
period ended October 31, 1996 are noted below.
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<PAGE>
DST Fees
_____________________________________________________________________________
Janus Flexible Income Fund $285,026
_____________________________________________________________________________
Janus High-Yield Fund 26,661
_____________________________________________________________________________
Janus Federal Tax-Exempt Fund 39,886
_____________________________________________________________________________
Janus Short-Term Bond Fund 49,480
_____________________________________________________________________________
NOTES TO FINANCIAL STATEMENTS
3. Federal Income Tax
Gains and losses on forward currency contracts and foreign currency gains
and losses on debt instruments are treated as ordinary income for federal
income tax purposes pursuant to Section 988 of the Internal Revenue Code.
Listed below are such currency gains or losses for the period ended
October 31, 1996.
Net capital loss carryovers noted below as of October 31, 1996, are
available to offset future realized capital gains and thereby reduce future
taxable gains distributions. These carryovers expire between October 31, 2001,
and October 31, 2003. The aggregate cost of investments and the composition of
unrealized appreciation and depreciation of investment securities for federal
income tax purposes as of October 31, 1996, are as follows:
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<PAGE>
<TABLE>
at October 31, 1996 at October 31, 1996
Net
Currency Capital Federal Net
Gains/ loss Tax Unrealized Unrealized Appreciation/
(Losses) Carryovers Cost Appreciation (Depreciation) Depreciation
_____________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Janus Flexible
Income Fund ($58,536) -- $575,760,992 $15,478,752 ($2,349,846) $13,128,906
_____________________________________________________________________________________
Janus High-
Yield Fun (28,556) -- 210,466,250 4,149,081 (583,868) 3,565,213
_____________________________________________________________________________________
Janus Federal
Tax-Exempt
Fund -- ($1,524,504) 43,800,536 593,306 (260,356) 332,950
_____________________________________________________________________________________
Janus Short-
Term Bond
Fund -- (3,229,981) 39,796,499 274,669 (68) 274,601
_____________________________________________________________________________________
</TABLE>
Net investment income distributions and capital gains distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are due to
differing treatments for items such as deferral of wash sales, foreign
currency transactions, net operating losses and capital loss carryforwards.
Permanent items identified in the period ended October 31, 1996, have been
reclassified among the components of net assets as follows:
Undistributed Undistributed
Net Investment Net Realized Paid-In
Income Gains and Losses Capital
_____________________________________________________________________________
Janus Flexible Income Fund ($58,535) $58,535 --
_____________________________________________________________________________
Janus High-Yield Fund -- -- --
_____________________________________________________________________________
Janus Federal Tax-Exempt
Fund 1,043 -- ($1,043)
_____________________________________________________________________________
Janus Short-Term Bond Fund -- -- --
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of Janus Investment Fund
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Janus Flexible
Income Fund, Janus High-Yield Fund, Janus Federal Tax-Exempt Fund, Janus
Short-Term Bond Fund, Janus Money Market Fund, Janus Government Money Market
Fund, and Janus Tax-Exempt Money Market Fund (seven of the portfolios
constituting the Janus Investment Fund, hereafter referred to as the "Funds")
at October 31, 1996, the results of each of their operations, the changes in
each of their net assets and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
for unsettled security transactions, provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
/s/ Price Waterhouse LLP
Denver, Colorado
December 2, 1996
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______________________________________________________________________________
THIS SPACE AVAILABLE FOR YOUR NOTES AND COMPUTATIONS
______________________________________________________________________________
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00178001.AT4
