CONTENTS
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FUNDS AT A GLANCE
Brief description of each Fund .............................................. 1
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EXPENSE INFORMATION
Each Fund's annual
operating expenses ....................................................... 3
Financial Highlights-a summary
of financial data ........................................................ 4
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THE FUNDS IN DETAIL
The Funds' Investment
Objectives and Policies .................................................. 6
General Portfolio Policies .................................................. 8
Additional Risk Factors ..................................................... 9
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SHAREHOLDER'S MANUAL
Types of Account Ownership .................................................. 12
How to Open Your Janus Account .............................................. 13
Minimum Investment Policies ................................................. 13
How to Purchase Shares ...................................................... 13
How to Exchange Shares ...................................................... 14
How to Redeem Shares ........................................................ 14
Shareholder Services
and Account Policies
JETS(R ...................................................................... 16
Transactions Through
Processing Organizations ................................................. 16
Taxpayer Identification Number .............................................. 16
Share Certificates .......................................................... 16
Involuntary Redemption ...................................................... 16
Telephone Transactions ...................................................... 16
Making Changes to Your Account .............................................. 16
Statements and Reports ...................................................... 16
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MANAGEMENT OF THE FUNDS
Investment Adviser and
Investment Personnel ..................................................... 17
Management Expenses ......................................................... 17
Portfolio Transactions ...................................................... 18
Other Service Providers ..................................................... 18
Other Information ........................................................... 18
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DISTRIBUTIONS AND TAXES
Distributions ............................................................... 19
Taxes ....................................................................... 20
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PERFORMANCE TERMS
An Explanation of Performance Terms ......................................... 20
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APPENDIX A
Glossary of Investment Terms ................................................ 21
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APPENDIX B
Explanation of Rating Categories ............................................ 24
[LOGO]
Janus Investment Fund
JANUS INCOME FUNDS
100 Fillmore Street
Denver, CO 80206-4923
(800) 525-3713
February 18, 1996 as supplemented September 30, 1996
A FAMILY OF NO-LOAD MUTUAL FUNDS
All Janus Funds are no-load investments. This means you may purchase and sell
shares in any of our mutual funds without incurring any sales charges. If you
enroll in our low minimum initial investment program, you can open your account
for as little as $500 and a $100 subsequent purchase per month. Otherwise, the
minimum initial investment is $2,500. For complete information on how to
purchase, exchange and sell shares, please see the Shareholder's Manual
beginning on page 12.
This Prospectus describes four income mutual funds that emphasize
income-producing securities (the "Funds"). Janus Capital Corporation ("Janus
Capital") serves as investment adviser to each Fund. Janus Capital has been in
the investment advisory business for over 25 years and currently manages more
than $30 billion in assets.
EFFECTIVE OCTOBER 10, 1996, IN ANTICIPATION OF THE PROPOSED LIQUIDATION OF JANUS
INTERMEDIATE GOVERNMENT SECURITIES FUND, THAT FUND WILL DISCONTINUE PUBLIC SALES
OF ITS SHARES TO NEW INVESTORS. SHAREHOLDERS WHO MAINTAIN OPEN FUND ACCOUNTS ARE
STILL ABLE TO MAKE INVESTMENTS IN THE FUND AND REINVEST ANY DIVIDENDS AND
CAPITAL GAINS DISTRIBUTIONS.
Each Fund is a series of Janus Investment Fund (the "Trust"). The Trust is
registered with the Securities and Exchange Commission ("SEC") as an open-end
management investment company. This Prospectus contains information about the
Funds that you should consider before investing. Please read it carefully and
keep it for future reference.
Additional information about the Funds is contained in a Statement of Additional
Information ("SAI") filed with the SEC. The SAI dated February 18, 1996, is
incorporated by reference into this Prospectus. For a copy of the SAI, write or
call the Funds at the address or phone number listed above.
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SEC OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE OR
OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN
SUCH STATE OR OTHER JURISDICTION.
JANUS INCOME FUNDS COMBINED PROSPECTUS
<PAGE>
FUNDS AT A GLANCE
This section is designed to provide you with a brief overview of the Funds and
their investment emphasis. A more detailed discussion of the Funds' investment
objectives and policies begins on page 6 and complete information on how to
purchase, redeem and exchange shares begins on pages 13-14.
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FIXED-INCOME FUNDS
Janus Flexible Income Fund
Fund Focus: A diversified fund that seeks to maximize total return from a
combination of income and capital appreciation by investing in income-producing
securities. THIS FUND MAY HAVE SUBSTANTIAL HOLDINGS OF LOWER RATED DEBT
SECURITIES OR "JUNK" BONDS.
Fund Inception: July 1987
Fund Managers: Ronald V. Speaker
Sandy R. Rufenacht
Janus Intermediate
Government Securities Fund
Fund Focus: A diversified fund that seeks a high level of income while
minimizing credit risk by investing primarily in obligations of the U.S.
government and its agencies. Its average-weighted maturity is normally greater
than three years and less than ten years.
Fund Inception: July 1991
Fund Manager: Sandy R. Rufenacht
Janus Short-Term Bond Fund
Fund Focus: A diversified fund that seeks a high level of current income while
minimizing interest rate risk by investing in shorter term fixed-income
securities. Its average-weighted maturity is normally less than three years.
Fund Inception: September 1992
Fund Manager: Sandy R. Rufenacht
Janus Federal Tax-Exempt Fund
Fund Focus: A diversified fund that seeks a high level of current income exempt
from federal income tax by normally investing at least 80% of its assets in
municipal obligations.
Fund Inception: May 1993
Fund Manager: Darrell W. Watters
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
1 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
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JANUS SPECTRUM
The spectrum below shows Janus Capital's assessment of the potential overall
risk of the Janus Funds relative to one another and should not be used to
compare the Funds to other mutual funds or other types of investments. The
spectrum was determined based on a number of factors such as selected historic
volatility measurements, the types of securities in which the Funds intend to
invest, the degree of diversification intended and/or permitted, and the sizes
of the Funds and, in addition, was significantly affected by the portfolio
managers' investment styles. These factors were considered as of the date of
this prospectus and will be reassessed with each new prospectus. Specific risks
of certain types of instruments in which some of the Funds may invest, including
foreign securities, junk bonds and derivative instruments such as futures
contracts and options, are described under "Additional Risk Factors" on pages
9-11. THE SPECTRUM IS NOT INDICATIVE OF THE FUTURE VOLATILITY OR PERFORMANCE OF
A FUND AND RELATIVE POSITIONS OF FUNDS WITHIN THE SPECTRUM MAY CHANGE IN THE
FUTURE.
[SPECTRUM CHART]
The spectrum illustrates the potential overall risk of the Janus funds relative
to one another. The funds' risk ranges from conservative to aggressive. The
Growth Funds are illustrated as follows: Janus Fund* is shown as moderate; Janus
Twenty Fund* is shown as aggressive; Janus Enterprise Fund* is shown as
aggressive; Janus Mercury Fund* is shown as aggressive; Janus Worldwide Fund* is
shown as moderate-aggressive; Janus Overseas Fund* is shown as
moderate-aggressive (but more aggressive than Janus Worldwide Fund); Janus
Olympus Fund* is shown as aggressive; and Janus Venture Fund+ is shown as
moderate-aggressive. The Combination Funds are illustrated as follows: Janus
Growth and Income Fund* is shown as moderate-aggressive and Janus Balanced Fund*
is shown as moderate. The Fixed-Income Funds are illustrated as follows: Janus
High-Yield Fund* is shown as moderate-aggressive; Janus Flexible-Income Fund is
shown as conservative-moderate; Janus Federal Tax-Exempt Fund is shown as
conservative-moderate (but more conservative than Janus Flexible Income Fund);
Janus Intermediate Government Securities Fund is shown as conservative-moderate
(but more conservative than Janus Federal Tax-Exempt Fund); and Janus Short-Term
Bond Fund is shown as conservative.
*These funds are offered by separate prospectuses.
+This fund is closed to new investors and is offered by a separate prospectus.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
2 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
EXPENSE INFORMATION
The tables and example below are designed to assist you in understanding the
various costs and expenses that you will bear directly or indirectly as an
investor in the Funds. Shareholder Transaction Expenses are fees charged
directly to your individual account when you buy, sell or exchange shares. The
table below shows that you pay no such fees. Annual Fund Operating Expenses are
paid out of each Fund's assets and include fees for portfolio management,
maintenance of shareholder accounts, shareholder servicing, accounting and other
services.
SHAREHOLDER TRANSACTION EXPENSES (applicable to each Fund)
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales charges on redemptions None
Redemption fee* None
Exchange fee** None
* There is an $8 service fee for redemptions by wire.
**You may be charged a $5 transaction fee for excessive exchanges. See "How to
Exchange Shares" on page 14.
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WHY DO EXPENSES VARY ACROSS THE FUNDS? EXPENSES VARY FOR A NUMBER OF REASONS
INCLUDING DIFFERENCES IN MANAGEMENT FEES, AVERAGE SHAREHOLDER ACCOUNT SIZE, THE
FREQUENCY OF DIVIDEND PAYMENTS, AND THE EXTENT OF FOREIGN INVESTMENTS WHICH
ENTAIL GREATER TRANSACTION COSTS.
ANNUAL FUND OPERATING EXPENSES(1)
(expressed as a percentage of average net assets)
<TABLE>
Management Fee Other Expenses Total Fund Operating Expenses
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<S> <C> <C> <C>
Janus Flexible Income Fund 0.62% 0.34% 0.96%
Janus Intermediate Government Securities Fund -- 0.65% 0.65%
Janus Short-Term Bond Fund 0.08% 0.58% 0.66%
Janus Federal Tax-Exempt Fund -- 0.70% 0.70%
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</TABLE>
(1) The information in the table above is based on expenses before expense
offset arrangements for the fiscal period ended October 31, 1995. When
applicable, all expenses are stated net of waivers by Janus Capital.
Waivers are first applied against the management fee and then against other
expenses.
(2) Net of waivers. Without such waivers, the Management Fee, Other Expenses
and Total Fund Operating Expenses would have been 0.50%, 0.72% and 1.22%,
respectively, for Janus Intermediate Government Securities Fund; 0.65%,
0.58% and 1.23%, respectively, for Janus Short-Term Bond Fund; and 0.60%,
0.71% and 1.31%, respectively, for Janus Federal Tax-Exempt Fund. Janus
Capital may modify or terminate the waivers at any time upon 90 days'
notice to the Trustees.
EXAMPLE
Assume you invest $1,000, the Funds return 5% annually and each Fund's expense
ratios remain as listed above. The example below shows the operating expenses
that you would indirectly bear as an investor in the Funds.
<TABLE>
1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
Janus Flexible Income Fund $10 $31 $53 $118
Janus Intermediate Government Securities Fund $ 7 $21 $36 $ 81
Janus Short-Term Bond Fund $ 7 $21 $37 $ 82
Janus Federal Tax-Exempt Fund $ 7 $22 $39 $ 87
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</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE RETURNS
OR EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
3 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
FINANCIAL HIGHLIGHTS
Unless otherwise noted, the information below is for fiscal periods ending on
October 31 of each year. The accounting firm of Price Waterhouse LLP has audited
the Funds' financial statements since October 1, 1990. Their report is included
in the Funds' Annual Reports, which is incorporated by reference into the SAI.
The Funds' financial statements for fiscal periods prior to October 1, 1990 were
audited by other independent accountants whose reports are not included in the
Annual Report. Expense and income ratios and portfolio turnover rates have been
annualized for periods of less than one year. Total returns for periods of less
than one year are not annualized. A DETAILED EXPLANATION OF THE FINANCIAL
HIGHLIGHTS CAN BE FOUND ON PAGE 5.
<TABLE>
Janus Flexible Income Fund
1995 1994 1993 1992(1) 1991(2) 1990(2) 1989(2) 1988(2) 1987(3)
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Net asset value, beginning of period $8.96 $10.03 $9.26 $9.09 $8.01 $9.35 $9.99 $9.92 $10.00
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Income from investment operations:
2. Net investment income 0.72 0.74 0.77 0.68 0.68 0.95 0.97 0.92 0.40
3. Net gains or (losses) on securities
(both realized and unrealized) 0.59 (0.86) 0.79 0.15 1.29 (1.38) (0.56) 0.09 (0.07)
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4. Total from investment operations 1.31 (0.12) 1.56 0.83 1.97 (0.43) 0.41 1.01 0.33
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Less distributions:
5. Dividends (from net investment income) (0.72) (0.72) (0.77) (0.66) (0.72) (0.91) (0.97) (0.92) (.40)
6. Distributions (from capital gains) -- (0.23) (0.02) -- (0.17) -- (0.08) (0.02) (.01)
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7. Total distributions (0.72) (0.95) (0.79 (0.66) (0.89) (0.91) (1.05) (0.94) (0.41)
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8. Net asset value, end of period $9.55 $8.96 $10.03 $9.26 $9.09 $8.01 $9.35 $9.99 $9.92
9. Total return 15.35% (1.26%) 17.48% 9.43% 25.98% (4.62%) 4.12% 10.70% 3.40%
10. Net assets, end of period (in millions) $580 $377 $473 $205 $72 $14 $18 $10 $4
11. Ratio of expenses to average net assets 0.96%(5) 0.93% 1.00%(4) 1.00%(4) 1.00%(4) 1.00%(4) 1.00%(4) 1.00%(4) 1.00%(4)
12. Ratio of net investment income
to average net assets 7.91% 7.75% 7.96% 8.98% 9.38% 11.24% 10.00% 9.32% 8.52%
13. Portfolio turnover rate 250% 137% 201% 210% 88% 96% 75% 76% 130%
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</TABLE>
(1) Fiscal period from January 1, 1992 to October 31, 1992.
(2) Fiscal year ended on December 31st of each year.
(3) Fiscal period from July 2, 1987 (inception) to December 31, 1987.
(4) The ratio of expenses to average net assets was 1.01% in 1993, 1.21% in
1992 and 1.74% in 1991 before waiver of certain Fund expenses. The ratio
was 2% in prior years.
(5) The Fund's expenses may be reduced through the use of brokerage commissions
and uninvested cash balances earning interest with the Fund's custodian.
The expense ratio for the fiscal period ended October 31, 1995, does not
reflect expense reductions, which had a de minimis effect on the expense
ratio (less than 0.01%).
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
4 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
<TABLE>
Janus Janus
Intermediate Government Short-Term
Securities Fund Bond Fund
1995 1994 1993 1992(1) 1991(2) 1995 1994 1993 1992(3)
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Net asset value, beginning
of period $4.81 $5.16 $5.36 $5.35 $5.00 $2.87 $3.02 $2.98 $3.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
2. Net investment income 0.30 0.25 0.22 0.22 0.13 0.18 0.18 0.14 0.01
3. Net gains or (losses) on
securities (both realized
and unrealized) 0.17 (0.35) (0.09) 0.01 0.35 (0.03) (0.15) 0.04 (0.02)
- ------------------------------------------------------------------------------------------------------------------------------------
4. Total from investment
operations 0.47 (0.10) 0.13 0.23 0.48 0.15 0.03 0.18 (0.01)
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Less distributions:
5. Dividends (from net
investment income) (0.30) (0.25) (0.22) (0.22) (0.13) (0.18) (0.17) (0.14) (0.01)
6. Distributions
(from capital gains) -- -- (0.11) -- -- -- (0.01) -- --
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7. Total distributions (0.30) (0.25) (0.33) (0.22) (0.13) (0.18) (0.18) (0.14) (0.01)
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8. Net asset value, end of period $4.98 $4.81 $5.16 $5.36 $5.35 $2.84 $2.87 $3.02 $2.98
9. Total return 0.19% (1.89%) 2.68% 4.48% 9.74% 5.55% 1.26% 6.17% (0.19%)
10. Net assets, end of period
(in millions) $38 $37 $65 $70 $15 $46 $54 $76 $3
11. Ratio of expenses to average
net assets 0.65%(5,9) 0.65%(5) 0.91%(5,8) 1.00%(5) 1.00%(5) 0.66%(6,9) 0.65%(6) 0.83%(6,8) 1.00%(6)
12. Ratio of net investment
income to average net assets 6.24% 4.97% 4.27% 4.95% 5.93% 6.67% 6.08% 4.86% 3.22%
13. Portfolio turnover rate 252% 304% 371% 270% 0% 337% 346% 372% 7%
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</TABLE>
TABLE (Continued)
Janus
Federal
Tax-Exempt Fund
1995 1994 1993(4)
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1. Net asset value, beginning
of period $6.45 $7.30 $7.00
- --------------------------------------------------------------------------------
Income from investment
operations:
2. Net investment income 0.36 0.36 0.14
3. Net gains or (losses) on
securities (both realized
and unrealized) 0.43 (0.83) 0.30
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4. Total from investment
operations 0.79 (0.47) 0.44
- --------------------------------------------------------------------------------
Less distributions:
5. Dividends (from net
investment income) (0.36) (0.36) (0.14)
6. Distributions
(from capital gains) -- (0.02) --
- --------------------------------------------------------------------------------
7. Total distributions (0.36) (0.38) (0.14)
- --------------------------------------------------------------------------------
8. Net asset value, end of period $6.88 $6.45 $7.30
9. Total return 12.60% (6.62%) 6.33%
10. Net assets, end of period
(in millions) $33 $26 $27
11. Ratio of expenses to average
net assets 0.70%(7,9) 0.65%(7) 0.75%(7,8)
12. Ratio of net investment
income to average net assets 5.43% 5.20% 4.58%
13. Portfolio turnover rate 164% 160% 124%
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(1) Fiscal period from January 1, 1992 to October 31, 1992.
(2) Fiscal period from July 26, 1991 (inception) to December 31, 1991.
(3) Fiscal period from September 1, 1992 (inception) to October 31, 1992.
(4) Fiscal period from May 3, 1993 (inception) to October 31, 1993.
(5) The ratio of expenses to average net assets was 1.22% in 1995, 1.15% in
1994, 1.09% in 1993, 1.32% in 1992 and 1.39% in 1991 before waiver of
certain Fund expenses.
(6) The ratio of expenses to average net assets was 1.23% in 1995, 1.15% in
1994, 1.40% in 1993 and 2.50% in 1992 before waiver of certain Fund
expenses.
(7) The ratio of expenses to average net assets was 1.31% in 1995, 1.41% in
1994 and 1.60% in 1993 before waiver of certain Fund expenses.
(8) The ratio of expenses to average net assets reflects the Fund's previous
expense limit of 1.00%. This limit was reduced to .65% as of August 1,
1993.
(9) Expense ratios for the fiscal year ended October 31, 1995, do not reflect
expense reductions from interest earned on invested cash balances held with
the Funds' custodian, which reduced the expense ratio of each Fund to
0.65%.
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
This section is designed to help you better understand the information
summarized in the Financial Highlights tables. The tables contain important
historical operating information that may be useful in making your investment
decision or understanding how your investment has performed. The Funds' Annual
Reports contain additional information about each Fund's performance, including
a comparison to an appropriate securities index. For a copy of your Fund's
Annual Report, call 1-800-525-8983.
Net asset value ("NAV") is the value of a single share of a Fund. It is computed
by adding the value of all of a Fund's investments and other assets, subtracting
any liabilities and dividing the result by the number of shares outstanding. The
difference between line 1 and line 8 in the Financial Highlights tables
represents the change in value of a Fund's shares over the fiscal period, but
not its total return.
Net investment income is the per share amount of dividends and interest income
earned on securities held by a Fund, less Fund expenses. Dividends (from net
investment income) is the per share amount that a Fund paid from net investment
income.
Net gains or (losses) on securities is the per share increase or decrease in
value of the securities a Fund holds. A gain (or loss) is realized when
securities are sold. A gain (or loss) is unrealized when securities increase or
decrease in value but are not sold. Distributions (from capital gains) is the
per share amount that a Fund paid from net realized gains.
Total return is the percentage increase or decrease in the value of an
investment over a stated period of time. A total return percentage includes both
changes in NAV and income. For the purposes of calculating total return, it is
assumed that dividends and distributions are reinvested at the NAV on the day of
the distribution. A FUND'S TOTAL RETURN CANNOT BE COMPUTED DIRECTLY FROM THE
FINANCIAL HIGHLIGHTS TABLES.
Ratio of expenses to average net assets is the total of a Fund's operating
expenses divided by its average net assets for the stated period.
Ratio of net investment income to average net assets is a Fund's net investment
income divided by its average net assets for the stated period.
Portfolio turnover rate is a measure of the amount of a Fund's buying and
selling activity. It is computed by dividing total purchases or sales, whichever
is less, by the average monthly market value of a Fund's portfolio securities.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
5 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
THE FUNDS IN DETAIL
To help you decide which Fund is appropriate for you, this section takes a
closer look at the Funds' investment objectives, policies and the securities in
which they invest. Please carefully review the "Additional Risk Factors" section
of this Prospectus for a more detailed discussion of the risks associated with
certain investment techniques, as well as the risk spectrum on page 2. Appendix
A contains a more detailed description of investment terms used throughout this
Prospectus. You should carefully consider your own investment goals, time
horizon and risk tolerance before investing in a Fund.
Policies that are noted as "fundamental" cannot be changed without a shareholder
vote. All other policies, including each Fund's investment objective, are not
fundamental and may be changed by the Funds' Trustees without a shareholder
vote. You will be notified of any such changes that are material. If there is a
material change in a Fund's objective or policies, you should consider whether
that Fund remains an appropriate investment for you.
THE JANUS FIXED-INCOME FUNDS ARE DESIGNED FOR THOSE INVESTORS WHO PRIMARILY SEEK
CURRENT INCOME.
FIXED-INCOME FUNDS
Investment Objective:
Janus Flexible Income Fund ...................................... Total Return
Others ................................................................ Income
Primary Holdings: .................................. Income-Producing Securities
Shareholder's Investment Horizon:
Janus Short-Term Bond Fund ....................... Short- to Intermediate-Term
Others ............................................ Intermediate- to Long-Term
- --------------------------------------------------------------------------------
A SHAREHOLDER'S INVESTMENT HORIZON IS THE AMOUNT OF TIME YOU SHOULD PLAN TO HOLD
YOUR INVESTMENT IN A FIXED-INCOME FUND TO MAXIMIZE THE POTENTIAL FOR REALIZING
THE FUND'S OBJECTIVE.
- --------------------------------------------------------------------------------
Janus Flexible Income Fund
The investment objective of this Fund is to obtain maximum total return,
consistent with preservation of capital. This Fund pursues its objective
primarily through investments in income-producing securities. Total return is
expected to result from a combination of current income and capital
appreciation, although income will normally be the dominant component of total
return. As a fundamental policy, this Fund will invest at least 80% of its
assets in income-producing securities.
Janus Flexible Income Fund may invest in a wide variety of income-producing
securities including corporate bonds and notes, government securities, preferred
stock, income-producing common stocks, debt securities that are convertible or
exchangeable into equity securities, and debt securities that carry with them
the right to acquire equity securities as evidenced by warrants attached to or
acquired with the securities. The Fund may invest to a lesser degree in common
stocks, other equity securities or debt securities that are not currently paying
dividends or interest. The Fund may purchase securities of any maturity and
quality and the average maturity and quality of its portfolio may vary
substantially.
Janus Flexible Income Fund may invest without limit in foreign securities,
including those of corporate and government issuers. The Fund may invest without
limit in high-yield/high-risk securities and may have substantial holdings of
such securities. The risks of foreign securities and high-yield securities are
described under "Additional Risk Factors" on pages 9-11.
Janus Intermediate Government Securities Fund
The investment objective of this Fund is to seek as high a level of current
income as is consistent with preservation of capital. This Fund pursues its
objective by investing primarily in obligations of the U.S. government and its
agencies and instrumentalities. Because of this emphasis, capital appreciation
is not a significant investment consideration. This Fund may invest up to 20% of
its net assets in commercial paper of U.S. issuers rated in the highest category
by a nationally recognized statistical rating agency. Under normal
circumstances, it is expected that this Fund's dollar-weighted average portfolio
maturity will be greater than three years and less than ten years.
Janus Short-Term Bond Fund
The investment objective of this Fund is to seek as high a level of current
income as is consistent with preservation of capital. This Fund pursues its
objective by investing primarily in short- and intermediate-term fixed-income
securities. Under normal circumstances, it is expected that this Fund's
dollar-weighted average portfolio maturity will not exceed three years .
Janus Short-Term Bond Fund will normally invest at least 65% of its assets in
debt securities. Subject to this policy and subject to its maturity limits, the
Fund may invest in the types of securities previously described under Janus
Flexible Income Fund except that its investments in high-yield/high-risk
securities will not exceed 35% of net assets.
- --------------------------------------------------------------------------------
JANUS FEDERAL TAX-EXEMPT FUND IS DESIGNED FOR INVESTORS WHO SEEK A HIGHER
AFTER-TAX YIELD THAN COMPARABLE INVESTING IN TAXABLE SECURITIES.
Janus Federal Tax-Exempt Fund
The investment objective of this Fund is to seek as high a level of current
income exempt from federal income tax as is consistent with preservation of
capital. This Fund pursues its objective by investing primarily in municipal
obligations of any
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
6 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
maturity whose interest is exempt from federal income tax. Because of this
emphasis, capital appreciation is not a significant investment consideration.
However, to the extent that capital gains are realized, they are subject to
federal income tax. As a fundamental policy, this Fund will normally invest at
least 80% of its net assets in securities whose interest is exempt from federal
income tax, including the federal alternative minimum tax.
Municipal securities in which the Fund may invest include general obligation
bonds, revenue bonds, industrial development bonds, municipal lease obligations,
certificates of participation (not to exceed 10% of assets), inverse floaters
(not to exceed 5% of assets), instruments with demand features, tender option
bonds and standby commitments.
At times, this Fund may invest more than 25% of its assets in tax-exempt
securities that are related in such a way that an economic, business, or
political development or change affecting one security could similarly affect
the other securities; for example, securities whose issuers are located in the
same state, or securities whose interest is derived from revenues of similar
type projects. The Fund may invest more than 25% of its assets in industrial
development bonds.
TYPES OF INVESTMENTS
Subject to the specific investment policies of each Fund discussed above, the
Fixed-Income Funds may also invest in mortgage- and asset-backed securities
(unlimited for Janus Flexible Income Fund and up to 25% of assets for the others
Funds); zero coupon bonds (up to 10% of assets for each Fund);
high-yield/high-risk securities (less than 35% of net assets for Janus
Short-Term Bond Fund and Janus Federal Tax-Exempt Fund; unlimited for Janus
Flexible Income Fund); securities purchased on a when-issued, delayed delivery
or forward commitment basis; and indexed/ structured securities. In addition,
each Fund may use futures, options and other derivatives for hedging purposes or
for other purposes, such as enhancing return. See "Additional Risk Factors" on
pages 9-11. When its portfolio manager is unable to locate investment
opportunities with favorable risk/reward characteristics, the cash position of
any Fund may increase and the Fund may have substantial holdings of cash or cash
equivalent short-term obligations. See "General Portfolio Policies" on page 8.
THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN INVESTMENT
IN THE JANUS FIXED-INCOME FUNDS.
HOW DO INTEREST RATES AFFECT THE VALUE OF MY INVESTMENT?
A fundamental risk associated with any fund that invests in fixed-income
securities (e.g., a bond fund) is the risk that the value of the securities it
holds will rise or fall as interest rates change. Generally, a fixed-income
security will increase in value when interest rates fall and decrease in value
when interest rates rise. Longer-term securities are generally more sensitive to
interest rate changes than shorter-term securities, but they generally offer
higher yields to compensate investors for the associated risks. A bond fund's
average-weighted maturity and its duration are measures of how the fund may
react to interest rate changes.
- --------------------------------------------------------------------------------
WHAT IS MEANT BY A FUND'S "AVERAGE-WEIGHTED MATURITY"?
The stated maturity of a bond is the date when the issuer must repay the bond's
entire principal value to an investor, such as a Fund. A bond's term to maturity
is the number of years remaining to maturity. A bond fund does not have a stated
maturity, but it does have an average-weighted maturity. This number is
calculated by averaging the terms to maturity of bonds held by a Fund with each
maturity "weighted" according to the percentage of net assets that it
represents.
WHAT IS MEANT BY A FUND'S "DURATION"?
A bond's duration indicates the time it will take an investor to recoup his or
her investment. Unlike average maturity, duration reflects both principal and
interest payments. Generally, the higher the coupon rate on a bond, the lower
its duration will be. The duration of a bond fund is calculated by averaging the
duration of bonds held by a fund with each duration "weighted" according to the
percentage of net assets that it represents. Because duration accounts for
interest payments, a Fund's duration is usually shorter than its average
maturity.
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HOW DO THE FIXED-INCOME FUNDS MANAGE INTEREST RATE RISK?
Each Fixed-Income Fund may vary the average-weighted maturity of its portfolio
to reflect its portfolio manager's analysis of interest rate trends and other
factors. A Fund's average-weighted maturity will tend to be shorter when its
portfolio manager expects interest rates to rise and longer when its portfolio
manager expects interest rates to fall. The Funds may also use futures, options
and other derivatives to manage interest rate risk. See "Additional Risk
Factors" on pages 9-11.
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WHAT IS MEANT BY "CREDIT QUALITY"?
Credit quality measures the likelihood that the issuer will meet its obligations
on a bond. One of the fundamental risks associated with all fixed-income funds
is credit risk, which is the risk that an issuer will be unable to make
principal and interest payments when due. U.S. government securities are
generally considered to be the safest type of investment in terms of credit
risk. Municipal obligations generally rank between U.S. government securities
and corporate debt securities in terms of credit safety. Corporate debt
securities, particularly those rated below investment grade, present the highest
credit risk.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
7 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
HOW IS CREDIT QUALITY MEASURED?
Ratings published by nationally recognized statistical rating agencies such as
Standard & Poor's Ratings Services ("Standard & Poor's") and Moody's Investors
Service, Inc. ("Moody's") are widely accepted measures of credit risk. The lower
a bond issue is rated by an agency, the more credit risk it is considered to
represent. Lower rated bonds generally pay higher yields to compensate investors
for the associated risk. Please refer to Appendix B for a description of rating
categories.
- --------------------------------------------------------------------------------
WHAT ARE THE TAX ADVANTAGES OF INVESTING IN JANUS FEDERAL TAX-EXEMPT FUND?
Most regular income dividends you receive from Janus Federal Tax-Exempt Fund
generally will not be subject to federal income tax. Additionally, your state
may not tax the portion of this Fund's income derived from obligations issued by
your state (if any). Capital gains distributed by this Fund are taxable to you.
See "Distributions" and "Taxes" on pages 19-20. The higher your income tax level
is, the more you will benefit from tax exempt investing.
- --------------------------------------------------------------------------------
HOW DO THE FIXED-INCOME FUNDS DIFFER FROM EACH OTHER?
The chart on this page shows that the Fixed-Income Funds differ substantially in
terms of the type, credit quality and average maturity of the securities in
which they invest.
GENERAL PORTFOLIO POLICIES
Unless otherwise stated, each of the following policies applies to all of the
Funds. The percentage limitations included in these policies and elsewhere in
this Prospectus apply at the time of purchase of the security. For example, if a
Fund exceeds a limit as a result of market fluctuations or the sale of other
securities, it will not be required to dispose of any securities.
<TABLE>
Primary Interest Rate
Investment Type Credit Risk Risk
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Flexible Income Fund Corporate Bonds High High
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Intermediate U.S. Government
Gov't Securities Fund Securities Low Moderate
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Short-Term
Bond Fund Corporate Bonds Moderate Low
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Federal Municipal
Tax-Exempt Fund Securities Moderate High
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CASH POSITION
When a Fund's portfolio manager believes that market conditions are not
favorable for profitable investing or when the portfolio manager is otherwise
unable to locate favorable investment opportunities, a Fund's investments may be
hedged to a greater degree and/or its cash or similar investments may increase.
In other words, the Funds do not always stay fully invested in stocks and bonds.
Cash or similar investments are a residual - they represent the assets that
remain after a portfolio manager has committed available assets to desirable
investment opportunities. Partly because the portfolio managers act
independently of each other, the cash positions of the Funds may vary
significantly. Larger hedged positions and/or larger cash positions may serve as
a means of preserving capital in unfavorable market conditions.
Securities that the Funds may invest in as means of receiving a return on idle
cash include high-grade commercial paper, certificates of deposit, repurchase
agreements or other short-term debt obligations. The Funds may also invest in
money market funds (including funds managed by Janus Capital). Janus Federal
Tax-Exempt Fund may invest in such securities even though they may be federally
taxable. When a Fund's investments in cash or similar investments increase, a
Fund may not participate in stock or bond market advances or declines to the
same extent that it would if the Fund remained more fully invested in stocks or
bonds.
DIVERSIFICATION
The Investment Company Act of 1940 (the "1940 Act") classifies investment
companies as either diversified or nondiversified. All of the Funds qualify as
diversified funds under the 1940 Act. The Funds are subject to the following
diversification requirements:
o As a fundamental policy, no Fund may own more than 10% of the outstanding
voting shares of any issuer.
o As a fundamental policy, with respect to 75% of the total assets of the
Funds, no Fund will purchase a security of any issuer (other than cash
items and U.S. government securities, as defined in the 1940 Act) if such
purchase would cause a Fund's holdings of that issuer to amount to more
than 5% of that Fund's total assets.
o No Fund will invest more than 25% of its assets in a single issuer.
INDUSTRY CONCENTRATION
As a fundamental policy, no Fund will invest more than 25% of its total assets
in any particular industry. This policy does not apply to U.S. government
securities and municipal obligations issued by governments or their subdivisions
because the issuers of those securities are not considered a part of any
industry.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
8 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
PORTFOLIO TURNOVER
Each Fund generally intends to purchase securities for long-term investment
rather than short-term gains. However, short-term transactions may result from
liquidity needs, securities having reached a price or yield objective, changes
in interest rates or the credit standing of an issuer, or by reason of economic
or other developments not foreseen at the time of the initial investment
decision. Changes are made in a Fund's portfolio whenever its portfolio manager
believes such changes are desirable. Portfolio turnover rates are generally not
a factor in making buy and sell decisions.
To a limited extent, a Fund may purchase securities in anticipation of
relatively short-term price gains. A Fund may also sell one security and
simultaneously purchase the same or comparable security to take advantage of
short-term differentials in bond yields or securities prices. Increased
portfolio turnover may result in higher costs for brokerage commissions, dealer
mark-ups and other transaction costs and may also result in taxable capital
gains. Certain tax rules may restrict the Funds' ability to engage in short-term
trading if a security has been held for less than three months.
ILLIQUID INVESTMENTS
Each Fund may invest up to 15% of its net assets in illiquid investments,
including restricted securities or private placements that are not deemed to be
liquid by Janus Capital. An illiquid investment is a security or other position
that cannot be disposed of quickly in the normal course of business. Some
securities cannot be sold to the U.S. public because of their terms or because
of SEC regulations. Janus Capital may determine that securities that cannot be
sold to the U.S. public but that can be sold to institutional investors (for
example, Rule 144A securities) are liquid. Janus Capital will follow guidelines
established by the Trustees of the Trust ("Trustees") in making liquidity
determinations for Rule 144A securities and certain other securities, including
privately placed commercial paper and municipal lease obligations.
BORROWING AND LENDING
Each Fund may borrow money and lend securities or other assets, as follows:
o Each Fund may borrow money for temporary or emergency purposes in amounts
up to 25% of its total assets.
o Each Fund may mortgage or pledge securities as security for borrowings in
amounts up to 15% of its net assets.
o As a fundamental policy, each Fund may lend securities or other assets if,
as a result, no more than 25% of its total assets would be lent to other
parties.
Each Fund intends to seek permission from the SEC to borrow money from or lend
money to each other and other funds that permit such transactions and for which
Janus Capital serves as investment adviser. All such borrowing and lending will
be subject to the above percentage limits. There is no assurance that such
permission will be granted.
ADDITIONAL RISK FACTORS
FOREIGN SECURITIES
INVESTMENTS IN FOREIGN SECURITIES, INCLUDING THOSE OF FOREIGN GOVERNMENTS,
INVOLVE GREATER RISKS THAN INVESTING IN COMPARABLE DOMESTIC SECURITIES.
Securities of some foreign companies and governments may be traded in the United
States, but many foreign securities are traded primarily in foreign markets. The
risks of foreign investing include:
o Currency Risk. A Fund may buy the local currency when it buys a foreign
currency denominated security and sell the local currency when it sells the
security. As long as a Fund holds a foreign security, its value will be
affected by the value of the local currency relative to the U.S. dollar.
When a Fund sells a foreign security, its value may be worth less in U.S.
dollars even though the security increases in value in its home country.
U.S. dollar denominated securities of foreign issuers may also be affected
by currency risk.
o Political and Economic Risk. Foreign investments may be subject to
heightened political and economic risks, particularly in underdeveloped or
developing countries which may have relatively unstable governments and
economies based on only a few industries. In some countries, there is the
risk that the government may take over the assets or operations of a
company or that the government may impose taxes or limits on the removal of
a Fund's assets from that country.
o Regulatory Risk. There may be less government supervision of foreign
markets. Foreign issuers may not be subject to the uniform accounting,
auditing and financial reporting standards and practices applicable to
domestic issuers. There may be less publicly available information about
foreign issuers than domestic issuers.
o Market Risk. Foreign securities markets, particularly those of
underdeveloped or developing countries, may be less liquid and more
volatile than domestic markets. Certain markets may require payment for
securities before delivery and delays may be encountered in settling
securities transactions. In some foreign markets, there may not be
protection against failure by other parties to complete transactions. There
may be limited legal recourse against an issuer in the event of a default
on a debt instrument.
o Transaction Costs. Transaction costs of buying and selling foreign
securities, including brokerage, tax and custody costs, are generally
higher than those involved in domestic transactions.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
9 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
Each Fund may enter into futures contracts on securities, financial indices and
foreign currencies and options on such contracts ("futures contracts") and may
invest in options on securities, financial indices and foreign currencies
("options"), forward contracts and interest rate swaps and swap-related products
(collectively "derivative instruments"). The Funds intend to use most derivative
instruments primarily to hedge the value of their portfolios against potential
adverse movements in securities prices, foreign currency markets or interest
rates. To a limited extent, the Funds may also use derivative instruments for
non-hedging purposes such as seeking to increase a Fund's income or otherwise
seeking to enhance return. Please refer to Appendix A to this Prospectus and the
SAI for a more detailed discussion of these instruments.
The use of derivative instruments exposes the Funds to additional investment
risks and transaction costs. Risks inherent in the use of derivative instruments
include:
o the risk that interest rates, securities prices and currency markets will
not move in the direction that a portfolio manager anticipates;
o imperfect correlation between the price of derivative instruments and
movements in the prices of the securities, interest rates or currencies
being hedged;
o the fact that skills needed to use these strategies are different from
those needed to select portfolio securities;
o inability to close out certain hedged positions to avoid adverse tax
consequences;
o the possible absence of a liquid secondary market for any particular
instrument and possible exchange-imposed price fluctuation limits, either
of which may make it difficult or impossible to close out a position when
desired;
o leverage risk, that is, the risk that adverse price movements in an
instrument can result in a loss substantially greater than a Fund's initial
investment in that instrument (in some cases, the potential loss is
unlimited); and
o particularly in the case of privately-negotiated instruments, the risk that
the counterparty will fail to perform its obligations, which could leave a
Fund worse off than if it had not entered into the position.
Although the Funds believe the use of derivative instruments will benefit the
Funds, a Fund's performance could be worse than if the Fund had not used such
instruments if a portfolio manager's judgement proves incorrect.
When a Fund invests in a derivative instrument, it may be required to segregate
cash and other high-grade liquid assets or certain portfolio securities with its
custodian to "cover" the Fund's position. Assets segregated or set aside
generally may not be disposed of so long as the Fund maintains the positions
requiring segregation or cover. Segregating assets could diminish the Fund's
return due to the opportunity losses of foregoing other potential investments
with the segregated assets.
HIGH-YIELD/HIGH-RISK SECURITIES
High-yield/high-risk securities (or "junk" bonds) are debt securities rated
below investment grade by the primary rating agencies (Standard & Poor's and
Moody's). Please refer to Appendix B for a description of bond rating
categories. The Funds expect that holdings of lower quality securities, if any,
will consist primarily of bonds rated in the highest two tiers of non-investment
grade securities.
The value of lower quality securities generally is more dependent on the ability
of the issuer to meet interest and principal payments (i.e., credit risk) than
is the case for higher quality securities. Conversely, the value of higher
quality securities may be more sensitive to interest rate movements than lower
quality securities. Issuers of high-yield securities may not be as strong
financially as those issuing bonds with higher credit ratings. Investments in
such companies are considered to be more speculative than higher quality
investments.
Issuers of high-yield securities are more vulnerable to real or perceived
economic changes (for instance, an economic downturn or prolonged period of
rising interest rates), political changes or adverse developments specific to
the issuer. Adverse economic, political or other developments may impair the
issuer's ability to service principal and interest obligations, to meet
projected business goals and to obtain additional financing, particularly if the
issuer is highly leveraged. In the event of a default, a Fund would experience a
reduction of its income and could expect a decline in the market value of the
defaulted securities.
The market for lower quality securities is generally less liquid than the market
for higher quality bonds. Adverse publicity and investor perceptions as well as
new or proposed laws may also have a greater negative impact on the market for
lower quality securities. Unrated debt, while not
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
10 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
necessarily of lower quality than rated securities, may not have as broad a
market as rated securities. The market prices of high-yield securities
structured as zero coupon or pay-in-kind securities are generally affected to a
greater extent by interest rate changes and tend to be more volatile than
securities which pay interest periodically. In addition, zero coupon,
pay-in-kind and delayed interest bonds often do not pay interest until maturity.
However, the Funds must recognize a computed amount of interest income and pay
dividends to shareholders even though it has received no cash. In some
instances, the Funds may have to sell securities to have sufficient cash to pay
the dividends.
SPECIAL SITUATIONS
Each Fund (except Janus Intermediate Government Securities Fund) may invest in
"special situations" from time to time. A special situation arises when, in the
opinion of a Fund's portfolio manager, the securities of a particular issuer
will be recognized and appreciate in value due to a specific development with
respect to that issuer. Developments creating a special situation might include,
among others, a new product or process, a technological breakthrough, a
management change or other extraordinary corporate event, or differences in
market supply of and demand for the security. Investment in special situations
may carry an additional risk of loss in the event that the anticipated
development does not occur or does not attract the expected attention.
See Appendix A for risks associated with certain other investments.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
11 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
SHAREHOLDER'S MANUAL
This section will help you become familiar with the different types of accounts
you can establish with Janus. This section also explains in detail the wide
array of services and features you can establish on your account. These services
may be modified or discontinued without shareholder approval.
HOW TO GET IN TOUCH WITH JANUS
If you have any questions while reading our Prospectus, please call one of our
Investor Service Representatives at 1-800-525-3713 Monday-Friday: 8:00
a.m.-10:00 p.m., and Saturday: 10:00 a.m.-7:00 p.m., New York time.
- --------------------------------------------------------------------------------
MINIMUM INVESTMENTS*
To open a new account $2,500
To open a new retirement or
UGMA/UTMA account $500
To open a new account with
an Automatic Investment Program $500**
To add to any type of an account $100
*The Fund reserves the right to change the amount of these minimums from time to
time or to waive them in whole or in part for certain types of accounts.
**There is a $100 minimum subsequent investment.
- --------------------------------------------------------------------------------
TYPES OF ACCOUNT OWNERSHIP
If you are investing in the Funds for the first time, you will need to establish
an account. You can establish the following types of accounts by completing the
New Account Application. To request an application, call 1-800-525-3713.
o Individual or Joint Ownership. Individual accounts are owned by one person.
Joint accounts have two or more owners.
o A Gift or Transfer to Minor (UGMA or UTMA). An UGMA/UTMA account is a
custodial account managed for the benefit of a minor. To open an UGMA or
UTMA account, you must include the minor's Social Security number on the
application.
o Trust. An established trust can open an account. The names of each trustee,
the name of the trust and the date of the trust agreement must be included
on the application.
o Business Accounts. Corporations and partnerships may also open an account.
The application must be signed by an authorized officer of the corporation
or a general partner of the partnership.
RETIREMENT ACCOUNTS
If you are eligible, you may set up your account under a tax-sheltered
retirement plan. A retirement plan allows you to shelter your investment income
and capital gains from current income taxes. A contribution to these plans may
also be tax deductible. Distributions from a retirement plan are generally
subject to income tax and may be subject to an additional tax if withdrawn prior
to age 591/2.
State Street Bank and Trust Company serves as custodian for the retirement plans
offered by the Funds. There is an annual $12 fee per account to maintain your
retirement account. The maximum annual fee is $24 per taxpayer identification
number. You may pay the fee by check or have it automatically deducted from your
account (usually in December).
The following plans require a special application. For an application and more
details about our Retirement Plans, call 1-800-525-3713.
o Individual Retirement Account: An IRA allows individuals under age 70 1/2
with earned income to contribute up to the lesser of $2,000 or 100% of
compensation annually. Please refer to the Janus Funds IRA booklet for
complete information regarding IRAs.
o Simplified Employee Pension Plan ("SEP"): This plan allows small business
owners (including sole proprietors) to make tax-deductible contributions
for themselves and any eligible employee(s). A SEP requires an IRA (a
SEP-IRA) to be set up for each SEP participant.
o Profit Sharing or Money Purchase Pension Plan: These plans are open to
corporations, partnerships and sole proprietors to benefit their employees
and themselves.
o Section 403(b)(7) Plan: Employees of educational organizations or other
qualifying, tax-exempt organizations may be eligible to participate in a
Section 403(b)(7) Plan.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
12 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
HOW TO OPEN YOUR JANUS ACCOUNT
Complete and sign the appropriate application. Please be sure to provide your
Social Security or taxpayer identification number on the application. Make your
check payable to Janus Funds. Send all items to one of the following addresses:
Regular Mail
Janus Funds
P.O. Box 173375
Denver, CO 80217-3375
Express or Certified Mail
Janus Funds
100 Fillmore Street
Denver, CO 80206-4923
Investor Service Centers
Janus Funds offers two Investor Service Centers for those individuals who would
like to conduct their investing in person. Our representatives will be happy to
assist you at either of the following locations:
100 Fillmore Street, Suite 100
Denver, CO 80206
3773 Cherry Creek North Drive, Suite 101
Denver, CO 80209
MINIMUM INVESTMENT POLICIES
ACCOUNTS ESTABLISHED
AFTER FEBRUARY 18, 1996
Any account opened after February 18, 1996, must meet minimum investment
requirements described at page 12.
ACCOUNTS ESTABLISHED ON
OR BEFORE FEBRUARY 18, 1996
o The minimum investment requirement remains at $1,000 ($250 for retirement
accounts and UGMA/UTMA accounts) for these accounts only.
o There is no minimum initial investment requirement for Automatic Monthly
Investment Program participants that continue to make subsequent automatic
investments of at least $50.
o Subsequent investments (other than automatic monthly investments) must meet
the $100 minimum.
ALL ACCOUNTS
Due to the proportionately higher costs of maintaining small accounts, Janus
reserves the right to deduct a $10 annual maintenance fee (or the value of the
account if less than $10) from accounts with values below the minimums described
above or to close such accounts. This policy will apply to accounts
participating in the Automatic Monthly Investment Program only if your account
balance does not reach the required minimum initial investment or falls below
such minimum and you have discontinued monthly investments. This policy does not
apply to accounts that fall below the minimums solely as a result of market
value fluctuations. It is expected that accounts will be valued and the $10 fee
assessed on the second Friday of September of each year. You will receive notice
before we charge the $10 fee or close your account so that you may increase your
account balance to the required minimum.
HOW TO PURCHASE SHARES
PAYING FOR SHARES
When you purchase shares, your request will be processed at the next NAV
calculated after your order is received and accepted. Please note the following:
o Cash, credit cards, third party checks and credit card checks will not be
accepted.
o All purchases must be made in U.S. dollars.
o Checks must be drawn on U.S. banks and made payable to Janus Funds.
o If a check does not clear your bank, the Funds reserve the right to cancel
the purchase.
o If the Funds are unable to debit your predesignated bank account on the day
of purchase, they may make additional attempts or cancel the purchase.
o The Funds reserve the right to reject any specific purchase request.
If your purchase is cancelled, you will be responsible for any losses or fees
imposed by your bank and losses that may be incurred as a result of any decline
in the value of the cancelled purchase. The Funds (or their agents) have the
authority to redeem shares in your account(s) to cover any losses due to
fluctuations in share price. Any profit on such cancellation will accrue to the
Fund.
ONCE YOU HAVE OPENED YOUR JANUS ACCOUNT, THE MINIMUM AMOUNT FOR AN ADDITIONAL
INVESTMENT IS $100. You may add to your account at any time through any of the
following options:
BY MAIL
Complete the remittance slip attached at the bottom of your confirmation
statement. If you are making a purchase into a retirement account, please
indicate whether the purchase is a rollover or a current or prior year
contribution. Send your check and remittance slip or written instructions to one
of the addresses listed previously. You may also request a booklet of remittance
slips for non-retirement accounts.
BY TELEPHONE
This service allows you to purchase additional shares quickly and conveniently
through an electronic transfer of money. When you make an additional purchase by
telephone, Janus will automatically debit your predesignated bank account for
the desired amount. To establish the telephone purchase option on your new
account, complete the "Telephone Purchase of Shares Option" section on the
application and attach a "voided" check or deposit slip from your bank account.
If your account is already established, call 1-800-525-3713 to request the
appropriate form. This option will become effective ten business days after the
form is received.
BY WIRE
Purchases may also be made by wiring money from your bank account to your Janus
account. Call 1-800-525-3713 to receive wiring instructions.
AUTOMATIC INVESTMENT PROGRAMS
Janus offers several automatic investment plans to help you achieve your
financial goals as simply and conveniently as possible. You may open a new
account with a $500 initial purchase and $100 automatic subsequent investments.
o AUTOMATIC MONTHLY
INVESTMENT PROGRAM
You select the day each month that your money ($100 minimum) will be
electronically transferred from your bank account to your Fund account. To
establish this
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
13 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
option, complete the "Automatic Monthly Investment Program" section on the
application and attach a "voided" check or deposit slip from your bank
account. If your Fund account is already established, call 1-800-525-3713
to request the appropriate form.
o PAYROLL DEDUCTION
If your employer can initiate an automatic payroll deduction, you may have
all or a portion of your paycheck invested directly into your Fund account.
To obtain information on establishing this option, call 1-800-525-3713.
o BY SYSTEMATIC EXCHANGE
With a Systematic Exchange you determine the amount of money ($100 minimum)
you would like automatically exchanged from one Janus account to another on
any day of the month. For more information on how to establish this option,
call 1-800-525-3713.
HOW TO EXCHANGE SHARES
On any business day, you may exchange all or a portion of your shares into any
other available Janus fund.
IN WRITING
To request an exchange in writing, please follow the instructions for written
requests on page 15.
BY TELEPHONE
All accounts are automatically eligible for the telephone exchange option. To
exchange shares by telephone, call an Investor Service Representative at
1-800-525-3713 during normal business hours or call the Janus Electronic
Telephone Service (JETS(R)) line at 1-800-525-6125.
BY SYSTEMATIC EXCHANGE
As noted above, you may establish a Systematic Exchange for as little as a $100
subsequent purchase per month on established accounts. You may establish a new
account with a $500 initial purchase and subsequent $100 systematic exchanges.
If the balance in the account you are exchanging from falls below the systematic
exchange amount, all remaining shares will be exchanged and the program will be
discontinued.
QUICK ADDRESS AND TELEPHONE REFERENCE
Regular Mail
Janus Funds
P.O. Box 173375
Denver, CO 80217-3375
Express or Certified Mail
Janus Funds
100 Fillmore Street
Denver, CO 80206-4923
Janus Investor Services 1-800-525-3713
To speak to a service representative
Janus QuotelineSM 1-800-525-0024 For automated daily quotes on Fund share
prices, yields and total returns.
JETS(R) 1-800-525-6125
For 24-hour access to account and
Fund information.
Janus Literature Line 1-800-525-8983
To request a prospectus, shareholder
reports or marketing materials.
TDD 1-800-525-0056 A telecommunications device for our hearing-and
speech-impaired shareholders.
EXCHANGE POLICIES
o Except for Systematic Exchanges, new accounts established by exchange must
meet the $2,500 minimum, or be for the total account value if less than
$2,500.
o Exchanges between existing accounts must meet the $100 subsequent
investment requirement.
o You may make four exchanges out of each Fund during a calendar year
(exclusive of Systematic Exchanges) free of charge. The Funds reserve the
right to have a $5 transaction fee automatically deducted from your account
for each additional exchange.
o Exchanges between accounts will be accepted only if the registrations are
identical.
o If the shares you are exchanging are held in certificate form, you must
return the certificate to your Fund prior to making any exchanges.
o Be sure that you read the prospectus for the Fund into which you are
exchanging.
o The Funds reserve the right to reject any exchange request and to modify or
terminate the exchange privilege at any time. For example, the Funds may
reject exchanges from accounts engaged in excessive trading (including
market timing transactions) that are detrimental to the Funds.
o An exchange represents the sale of shares from one Fund and the purchase of
shares of another Fund, which may produce a taxable gain or loss in a
non-tax deferred account.
HOW TO REDEEM SHARES
On any business day, you may redeem all or a portion of your shares. If the
shares are held in certificate form, the certificate must be returned with or
before your redemption request. Your transaction will be processed at the next
NAV calculated after your order is received and accepted.
IN WRITING
To request a redemption in writing, please follow the instructions for written
requests on page 15.
BY TELEPHONE
Most accounts have the telephone redemption option, unless this option was
specifically declined on the application or in writing. This option enables you
to redeem up to $100,000 daily from your account by simply calling
1-800-525-3713 by 4:00 p.m. New York time.
SYSTEMATIC WITHDRAWAL PLAN ("SWP")
SWPs allow you to redeem a specific dollar amount from your account on a regular
basis. For more information on SWPs or to request the appropriate form, please
call 1-800-525-3713.
PAYMENT OF REDEMPTION PROCEEDS
o BY CHECK
Redemption proceeds will be sent to the shareholder(s) of record at the
address of record within seven days after receipt of a valid redemption
request.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
14 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
o ELECTRONIC TRANSFER
If you have established this option, your redemption proceeds will be
electronically transferred to your predesignated bank account on the second
business day after receipt of your redemption request. To establish this
option, call 1-800-525-3713. There is no fee for this option.
o BY WIRE
If you are authorized for the wire redemption service, your redemption
proceeds will be wired directly into your designated bank account on the
next business day after receipt of your redemption request. There is no
limitation on redemptions by wire; however, there is an $8 fee for each
wire and your bank may charge an additional fee to receive the wire. If you
would like to establish this option on an existing account, please call
1-800-525-3713 to request the appropriate form. Wire redemptions are not
available for retirement accounts.
IF THE SHARES BEING REDEEMED WERE PURCHASED BY CHECK, TELEPHONE OR THROUGH THE
AUTOMATIC MONTHLY INVESTMENT PROGRAM, THE FUNDS MAY DELAY THE PAYMENT OF YOUR
REDEMPTION PROCEEDS FOR UP TO 15 DAYS FROM THE DAY OF PURCHASE TO ALLOW THE
PURCHASE TO CLEAR. Unless you provide alternate instructions, your proceeds will
be invested in Janus Money Market Fund - Investor Shares during the 15 day hold
period.
WRITTEN INSTRUCTIONS
To redeem or exchange all or part of your shares in writing, your request should
be sent to one of the addresses listed on page 13 and must include the following
information:
o the name of the Fund(s)
o the account number(s)
o the amount of money or number of shares being redeemed
o the name(s) on the account
o the signature(s) of all registered account owners
o your daytime telephone number
SIGNATURE REQUIREMENTS
BASED ON ACCOUNT TYPE
o Individual, Joint Tenants, Tenants in Common: Written instructions must be
signed by each shareholder, exactly as the names appear in the account
registration.
o UGMA or UTMA: Written instructions must be signed by the custodian in his/
her capacity as it appears in the account registration.
o Sole Proprietor, General Partner: Written instructions must be signed by an
authorized individual in his/her capacity as it appears in the account
registration.
o Corporation, Association: Written instructions must be signed by the
person(s) authorized to act on the account. In addition, a certified copy
of the corporate resolution authorizing the signer to act must accompany
the request.
o Trust: Written instructions must be signed by the trustee(s). If the name
of the current trustee(s) does not appear in the account registration, a
certificate of incumbency dated within 60 days must also be submitted.
o IRA: Written instructions must be signed by the account owner. If you do
not want federal income tax withheld from your redemption, you must state
that you elect not to have such withholding apply. In addition, your
instructions must state whether the distribution is normal (after age
591/2) or premature (before age 59 1/2) and, if premature, whether any
exceptions such as death or disability apply with regard to the 10%
additional tax on early distributions.
PRICING OF FUND SHARES
All purchases, redemptions and exchanges will be processed at the NAV next
calculated after your request is received and approved. A Fund's NAV is
calculated at the close of the regular trading session of the New York Stock
Exchange (the "NYSE") (normally 4:00 p.m. New York time) each day that the NYSE
is open. In order to receive a day's price, your order must be received by the
close of the regular trading session of the NYSE. NAV per share is calculated by
dividing the total value of a Fund's securities and other assets, less
liabilities, by the total number of shares outstanding. Securities are valued at
market value or, if a market quotation is not readily available, at their fair
value determined in good faith under procedures established by and under the
supervision of the Trustees. Short-term instruments maturing within 60 days are
valued at amortized cost, which approximates market value. See the SAI for more
detailed information.
SIGNATURE GUARANTEE
In addition to the signature requirements, a signature guarantee is also
required if any of the following is applicable:
o The redemption exceeds $100,000.
o You would like the check made payable to anyone other than the
shareholder(s) of record.
o You would like the check mailed to an address which has been changed within
10 days of the redemption request.
o You would like the check mailed to an address other than the address of
record.
THE FUNDS RESERVE THE RIGHT TO REQUIRE A SIGNATURE GUARANTEE UNDER OTHER
CIRCUMSTANCES OR TO REJECT OR DELAY A REDEMPTION ON CERTAIN LEGAL GROUNDS. FOR
MORE INFORMATION PERTAINING TO SIGNATURE GUARANTEES, PLEASE CALL 1-800-525-3713.
HOW TO OBTAIN A
SIGNATURE GUARANTEE
A signature guarantee assures that a signature is genuine. The signature
guarantee protects shareholders from unauthorized account transfers. The
following financial institutions may guarantee signatures: banks, savings and
loan associations, trust companies, credit unions, broker-dealers, and member
firms of a national securities exchange. Call your financial institution to see
if they have the ability to guarantee a signature. A SIGNATURE GUARANTEE MAY NOT
BE PROVIDED BY A NOTARY PUBLIC.
If you live outside the United States, a foreign bank properly authorized to do
business in your country of residence or a U.S. consulate may be able to
authenticate your signature.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
15 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
SHAREHOLDER SERVICES
AND ACCOUNT POLICIES
JANUS ELECTRONIC TELEPHONE
SERVICE (JETS(R))
JETS, our electronic telephone service line, offers you 24-hour access by
TouchTone(TM) telephone to obtain your account balance, to confirm your last
transaction or dividend posted to your account, to order duplicate account or
tax statements, to reorder money market fund checks or to exchange your shares.
JETS can be accessed by calling 1-800-525-6125. Calls on JETS are limited to
seven minutes.
TRANSACTIONS THROUGH
PROCESSING ORGANIZATIONS
You may purchase or sell Fund shares through a broker-dealer, bank or other
financial institution, or an organization that provides recordkeeping and
consulting services to 401(k) plans or other qualified plans (a "Processing
Organization"). Processing Organizations may charge you a fee for this service
and may require different minimum initial and subsequent investments than the
Funds. The Processing Organization may also impose other charges or restrictions
different from those applicable to shareholders who invest in the Funds
directly. The Processing Organization, rather than its customers, may be the
shareholder of record of your shares. The Funds are not responsible for the
failure of any Processing Organization to carry out its obligations to its
customers. Certain Processing Organizations may receive compensation from Janus
Capital or its affiliates and certain Processing Organizations may receive
compensation from the Funds for shareholder recordkeeping and similar services.
TAXPAYER IDENTIFICATION NUMBER
On the application or other appropriate form, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that you
are not subject to backup withholding for failing to report income to the IRS.
If you are subject to the 31% backup withholding or you did not certify your
taxpayer identification, the IRS requires the Funds to withhold 31% of any
dividends paid and redemption or exchange proceeds. In addition to the 31%
backup withholding, you may be subject to a $50 fee to reimburse the Funds for
any penalty that the IRS may impose.
SHARE CERTIFICATES
Most shareholders choose not to hold their shares in certificate form because
account transactions such as exchanges and redemptions cannot be completed until
the certificate has been returned to the Funds. The Funds will issue share
certificates upon written request only. Share certificates will not be issued
until the shares have been held for at least 15 days and will not be issued for
accounts that do not meet the minimum investment requirements. Share
certificates cannot be issued for retirement accounts. In addition, if the
certificate is lost, there may be a replacement charge.
INVOLUNTARY REDEMPTION
The Funds reserve the right to close an account if the shareholder is deemed to
engage in activities which are illegal or otherwise detrimental to the Funds.
TELEPHONE TRANSACTIONS
You may initiate many transactions by telephone. The Funds and their agents will
not be responsible for any losses resulting from unauthorized transactions when
procedures designed to verify the identity of the caller are followed.
It may be difficult to reach the Funds by telephone during periods of unusual
market activity. If you are unable to reach a representative by telephone,
please consider sending written instructions, stopping by a Service Center or,
in the case of exchanges, calling the JETS line.
TEMPORARY SUSPENSION OF SERVICES
The Funds or their agents may, in case of emergency, temporarily suspend
telephone transactions and other shareholder services.
ADDRESS CHANGES
To change the address on your account, call 1-800-525-3713 or send a written
request signed by all account owners. Include the name of your Fund(s), the
account number(s), the name(s) on the account and both the old and new
addresses. Certain options may be suspended for 10 days following an address
change unless a signature guarantee is provided.
REGISTRATION CHANGES
To change the name on an account, the shares are generally transferred to a new
account. In some cases, legal documentation may be required. For more
information, call 1-800-525-3713.
STATEMENTS AND REPORTS
The Funds will send you a confirmation statement after every transaction that
affects your account balance or your account registration. If you are enrolled
in our Automatic Monthly Investment Program and invest on a monthly basis, you
will receive quarterly confirmation statements unless monthly statements are
requested. Fixed-Income Fund Investors will receive quarterly confirmations of
dividends. Information regarding the tax status of income dividends and capital
gains distributions will be mailed to shareholders on or before January 31st of
each year. Account tax information will also be sent to the IRS.
Financial reports for the Funds, which include a list of the Funds' portfolio
holdings, will be mailed semiannually to all shareholders. To reduce expenses,
only one copy of most financial reports will be mailed to accounts with the same
record address. Upon request, such reports will be mailed to all accounts in the
same household. Please call 1-800-525-3713 if you would like to receive
additional reports.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
16 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
MANAGEMENT OF THE FUNDS
TRUSTEES
The Trustees oversee the business affairs of the Trust and are responsible for
major decisions relating to each Fund's investment objective and policies. The
Trustees delegate the day-to-day management of the Funds to the officers of the
Trust and meet at least quarterly to review the Funds' investment policies,
performance, expenses and other business affairs.
INVESTMENT ADVISER
Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4923, is the
investment adviser to each of the Funds and is responsible for the day-to-day
management of the investment portfolios and other business affairs of the Funds.
Janus Capital began serving as investment adviser to Janus Fund at its inception
in 1970 and currently serves as investment adviser to all of the Janus funds, as
well as adviser or subadviser to other mutual funds and individual, corporate,
charitable and retirement accounts.
Kansas City Southern Industries, Inc. ("KCSI") owns approximately 83% of the
outstanding voting stock of Janus Capital, most of which it acquired in 1984.
KCSI is a publicly traded holding company whose primary subsidiaries are engaged
in transportation, information processing and financial services. Thomas H.
Bailey, President and Chairman of the Board of Janus Capital, owns approximately
12% of its voting stock and, by agreement with KCSI, selects a majority of Janus
Capital's Board.
Janus Capital furnishes continuous advice and recommendations concerning each
Fund's investments. Janus Capital also furnishes certain administrative,
compliance and accounting services for the Funds, and may be reimbursed by the
Funds for its costs in providing those services. In addition, Janus Capital
employees serve as officers of the Trust and Janus Capital provides office space
for the Funds and pays the salaries, fees and expenses of all Fund officers and
those Trustees who are affiliated with Janus Capital.
INVESTMENT PERSONNEL
Sandy R. Rufenacht is Executive Vice President and portfolio manager of Janus
Intermediate Government Securities Fund and Janus Short-Term Bond Fund. He is
co-manager of Janus High-Yield Fund+ and Janus Flexible Income Fund. Mr.
Rufenacht joined Janus Capital in 1990 and gained experience as a trader and
research analyst before assuming management of these funds. He holds a Bachelor
of Arts in Business from the University of Northern Colorado.
- --------------------------------------------------------------------------------
Ronald V. Speaker is Executive Vice President and co-manager of Janus Flexible
Income Fund, which he has managed since December 1991. Mr. Speaker joined Janus
Capital in 1986 and also co-manages Janus High-Yield Fund.+ He previously
managed Janus Intermediate Government Securities Fund, Janus Short-Term Bond
Fund and Janus Federal Tax-Exempt Fund from their inceptions through December
1995. He holds a Bachelor of Arts in Finance from the University of Colorado and
is a Chartered Financial Analyst.
- --------------------------------------------------------------------------------
Darrell W. Watters is Executive Vice President and portfolio manager of Janus
Federal Tax-Exempt Fund, which he has managed since January 1996. Mr. Watters
joined Janus Capital in 1993 as a municipal bond trader. He holds a Bachelor of
Arts in Economics from Colorado State University.
- --------------------------------------------------------------------------------
+Janus High-Yield Fund commenced operations on December 29, 1995, and is offered
by a separate prospectus.
BREAKDOWN OF MANAGEMENT EXPENSES AND EXPENSE LIMITS
Each Fund pays Janus Capital a management fee which is accrued daily and paid
monthly. The advisory agreement with each Fund spells out the management fee and
other expenses that the Funds must pay. Each of the Funds is subject to the
following management fee schedule (expressed as an annual rate):
<TABLE>
Average Daily Net Annual Rate Expense Limit
Fee Schedule Assets of Fund Percentage (%) Percentage (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Flexible Income Fund First $300 Million .65 1.00*
Over $300 Million .55
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Short-Term Bond Fund First $300 Million .65 .65*
Over $300 Million .55
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Intermediate Government
Securities Fund First $300 Million .50 .65*
Over $300 Million .40
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Federal Tax-Exempt Fund First $300 Million .60 .65*
Over $300 Million .55
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Janus Capital will waive certain fees and expenses to the extent that total
expenses exceed the stated limits. Janus Capital may modify or terminate
the waiver at any time upon 90 days' notice to the Trustees. You will be
notified of any changes in these limits.
Differences in the actual management fees incurred by the Funds are due
primarily to variances in the asset size of the Funds. As asset size increases,
the annual rate of the management fee rate declines in accordance with the above
schedules. In addition, each Fund incurs expenses not assumed by Janus Capital,
including transfer agent and custodian fees and expenses, legal and auditing
fees, printing and mailing costs of sending reports and other information to
existing shareholders, and independent Trustees' fees and expenses. The Annual
Fund Operating Expenses table on page 3 lists the management fees and total
operating expenses of each Fund for the most recent fiscal year.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
17 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
PERSONAL INVESTING
Janus Capital permits investment and other personnel to purchase and sell
securities for their own accounts, subject to Janus Capital's policy governing
personal investing. Janus Capital's policy requires investment and other
personnel to conduct their personal investment activities in a manner that Janus
Capital believes is not detrimental to the Funds or Janus Capital's other
advisory clients. See the SAI for more detailed information.
PORTFOLIO TRANSACTIONS
Purchases and sales of securities on behalf of each Fund are executed by
broker-dealers selected by Janus Capital. Broker-dealers are selected on the
basis of their ability to obtain best price and execution for a Fund's
transactions and recognizing brokerage, research and other services provided to
the Fund and to Janus Capital. Janus Capital may also consider payments made by
brokers effecting transactions for a Fund i) to the Fund or ii) to other persons
on behalf of the Fund for services provided to the Fund for which it would be
obligated to pay. Janus Capital may also consider sales of shares of a Fund as a
factor in the selection of broker-dealers. The Funds' Trustees have authorized
Janus Capital to place portfolio transactions on an agency basis with a
broker-dealer affiliated with Janus Capital. When transactions for a Fund are
effected with that broker-dealer, the commissions payable by the Fund are
credited against certain Fund operating expenses. The SAI further explains the
selection of broker-dealers.
OTHER SERVICE PROVIDERS
The following parties provide the Funds with administrative and other services.
DOMESTIC CUSTODIAN
Investors Fiduciary Trust Company
127 W. 10th Street
Kansas City, Missouri 64105
FOREIGN CUSTODIAN
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
TRANSFER AGENT
Janus Service Corporation
P.O. Box 173375
Denver, Colorado 80217
DISTRIBUTOR
Janus Distributors, Inc.
100 Fillmore Street
Denver, Colorado 80206
Janus Service Corporation and Janus Distributors, Inc. are wholly-owned
subsidiaries of Janus Capital. Investors Fiduciary Trust Company is a
wholly-owned subsidiary of State Street Bank and Trust Company.
OTHER INFORMATION
ORGANIZATION
The Trust is a "mutual fund" that was organized as a Massachusetts business
trust on February 11, 1986. A mutual fund is an investment vehicle that pools
money from numerous investors and invests the money to achieve a specified
objective.
As of the date of this Prospectus, the Trust offers 18 separate series, three of
which currently offer two classes of shares. Janus Flexible Income Fund and
Janus Intermediate Government Securities Fund became series of the Trust on
August 7, 1992. All other Funds have been series of the Trust since their
inceptions. This Prospectus describes four series of the Trust; the other series
are offered by separate prospectuses.
SHAREHOLDER MEETINGS
The Trust does not intend to hold annual shareholder meetings. However, special
meetings may be called for a specific Fund or for the Trust as a whole for
purposes such as electing or removing Trustees, terminating or reorganizing the
Trust, changing fundamental policies, or for any other purpose requiring a
shareholder vote under the 1940 Act. Separate votes are taken by each Fund only
if a matter affects or requires the vote of only that Fund or that Fund's
interest in the matter differs from the interest of other portfolios of the
Trust. As a shareholder, you are entitled to one vote for each share that you
own.
SIZE OF FUNDS
The Funds have no present plans to limit their size. However, any Fund may
discontinue sales of its shares if management believes that continued sales may
adversely affect the Fund's ability to achieve its investment objective. If
sales of a Fund are discontinued, it is expected that existing shareholders of
that Fund would be permitted to continue to purchase shares and to reinvest any
dividends or capital gains distributions, absent highly unusual circumstances.
MASTER/FEEDER OPTION
The Trust may in the future seek to achieve any Fund's investment objective by
investing all of that Fund's assets in another investment company having the
same investment objective and substantially the same investment policies and
restrictions as those applicable to that Fund. It is expected that any such
investment company would be managed by Janus Capital in substantially the same
manner as the existing Fund. The Trust's shareholders of record on April 30,
1992, and the initial shareholder(s) of all Funds created after April 30, 1992,
have voted to vest authority to use this investment structure in the sole
discretion of the Trustees. No further approval of the shareholders of the Funds
is required. You will receive at least 30 days' prior notice of any such
investment. Such investment would be made only if the Trustees determine it to
be in the best interests of a Fund and its shareholders. In making that
determination, the Trustees will consider, among other things, the benefits to
shareholders and/or the opportunity to reduce costs and achieve operational
efficiencies. Although management of the Funds believe the Trustees will not
approve an arrangement that is likely to result in higher costs, no assurance is
given that costs will be materially reduced if this option is implemented.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
18 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DISTRIBUTIONS
TO AVOID TAXATION, THE INTERNAL REVENUE CODE REQUIRES EACH FUND TO DISTRIBUTE
NET INCOME AND ANY NET GAINS REALIZED BY ITS INVESTMENTS ANNUALLY. A FUND'S
INCOME FROM DIVIDENDS AND INTEREST AND ANY NET REALIZED SHORT-TERM CAPITAL GAINS
ARE PAID TO SHAREHOLDERS AS ORDINARY INCOME DIVIDENDS. NET REALIZED LONG-TERM
GAINS ARE PAID TO SHAREHOLDERS AS CAPITAL GAINS DISTRIBUTIONS.
- --------------------------------------------------------------------------------
DISTRIBUTION SCHEDULE
Dividends Capital Gains
- --------------------------------------------------------------------------------
Fixed-Income Funds* Declared daily and paid as Declared and paid
of the last business day in December
of each month
- --------------------------------------------------------------------------------
* While distributions for these Funds are paid monthly, the income dividends
for these Funds are declared daily, Saturdays, Sundays and holidays
included, and are generally paid as of the last business day of each month.
If a month begins on a Saturday, Sunday or holiday, dividends for those
days are paid at the end of the preceding month. An investor will begin
accruing income dividends the day after the purchase is effective. If
shares are redeemed, the investor will receive all dividends accrued
through the day of the redemption.
HOW DISTRIBUTIONS
AFFECT A FUND'S NAV
Distributions are paid to shareholders as of the record date of a distribution
of a Fund, regardless of how long the shares have been held. Dividends and
capital gains awaiting distribution are included in each Fund's daily NAV. The
share price of a Fund drops by the amount of the distribution, net of any
subsequent market fluctuations. As an example, assume that on December 31, Janus
Fund declared a dividend in the amount of $0.25 per share. If Janus Fund's share
price was $10.00 on December 30, the Fund's share price on December 31 would be
$9.75, barring market fluctuations.
"BUYING A DIVIDEND"
If you purchase shares of a Fund just before the distribution, you will pay the
full price for the shares and receive a portion of the purchase price back as a
taxable distribution. This is referred to as "buying a dividend." In the above
example, if you bought shares on December 30, you would have paid $10.00 per
share. On December 31, the Fund would pay you $0.25 per share as a dividend and
your shares would now be worth $9.75 per share. Unless your account is set up as
a tax-deferred account, dividends paid to you would be included in your gross
income for tax purposes even though you may not have participated in the
increase in NAV of the Fund, whether or not you reinvested the dividends.
DISTRIBUTION OPTIONS
When you open an account, you must specify on your application how you want to
receive your distributions. You may change your distribution option at any time
by writing or calling 1-800-525-3713. The Funds offer the following options:
1. Reinvestment Option. You may reinvest your income dividends and capital
gains distributions in additional shares. This option is assigned
automatically if no other choice is made.
2. Cash Option. You may receive your income dividends and capital gains
distributions in cash.
3. Reinvest And Cash Option. You may receive either your income dividends or
capital gains distributions in cash and reinvest the other in additional
shares.
4. Redirect Option. You may direct your dividends or capital gains to purchase
shares of another Janus fund.
The Funds reserve the right to reinvest undeliverable and uncashed dividend and
distribution checks that remain outstanding for six months in shares of the
applicable Fund at the NAV next computed after the check is cancelled.
Subsequent distributions may also be reinvested.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
19 AS SUPPLEMENTED SEPTEMBER 30, 1996
<PAGE>
TAXES
As with any investment, you should consider the tax consequences of investing in
the Funds. The following discussion does not apply to tax-deferred retirement
accounts, nor is it a complete analysis of the federal tax implications of
investing in the Funds. You may wish to consult your own tax adviser.
Additionally, state or local taxes may apply to your investment, depending upon
the laws of your state of residence.
TAXES ON DISTRIBUTIONS
Janus Federal Tax-Exempt Fund anticipates that substantially all of its income
dividends will be exempt from federal income tax, although it may occasionally
earn income on taxable investments and dividends attributable to that income
would be taxable. In addition, interest from certain private activity bonds is a
preference item for purposes of the alternative minimum tax, and to the extent
the Fund earns such income shareholders subject to the alternative minimum tax
must include that income as a preference item. Distributions from capital gains,
if any, are subject to federal tax. The Fund will advise shareholders of the
percentage of dividends, if any, subject to any federal tax.
Dividends and distributions for all of the other Funds are subject to federal
income tax, regardless of whether the distribution is made in cash or reinvested
in additional shares of a Fund. In certain states, a portion of the dividends
and distributions (depending on the sources of a Fund's income) may be exempt
from state and local taxes. Information regarding the tax status of income
dividends and capital gains distributions will be mailed to shareholders on or
before January 31st of each year.
TAXATION OF THE FUNDS
Dividends, interest and some capital gains received by a Fund on foreign
securities may be subject to tax withholding or other foreign taxes. Any foreign
taxes paid by a Fund will be treated as an expense to the particular Fund or
passed through to shareholders as a foreign tax credit, depending on particular
facts and circumstances. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes.
The Funds do not expect to pay any federal income or excise taxes because they
intend to meet certain requirements of the Internal Revenue Code. It is
important that the Funds meet these requirements so that any earnings on your
investment will not be taxed twice.
- --------------------------------------------------------------------------------
PERFORMANCE TERMS
This section will help you understand various terms that are commonly used to
describe a Fund's performance. You may see references to these terms in our
newsletters, advertisements and in media articles. Our newsletters and
advertisements may include comparisons of the Fund's performance to the
performance of other mutual funds, mutual fund averages or recognized stock
market indices. Fixed-Income Funds generally use yield.
Cumulative total return represents the actual rate of return on an investment
for a specified period. The Financial Highlights tables beginning on page 4 show
total return for a single fiscal period. Cumulative total return is generally
quoted for more than one year (e.g., the life of the Fund). A cumulative total
return does not show interim fluctuations in the value of an investment.
Average annual total return represents the average annual percentage change of
an investment over a specified period. It is calculated by taking the cumulative
total return for the stated period and determining what constant annual return
would have produced the same cumulative return. Average annual returns for more
than one year tend to smooth out variations in a Fund's return and are not the
same as actual annual results.
Yield shows the rate of income a Fund earns on its investments as a percentage
of the Fund's share price. It is calculated by dividing a Fund's net investment
income for a 30-day period by the average number of shares entitled to receive
dividends and dividing the result by the Fund's NAV per share at the end of the
30-day period. Yield does not include changes in NAV.
Yields are calculated according to standardized SEC formulas and may not equal
the income on an investor's account. Yield is usually quoted on an annualized
basis. An annualized yield represents the amount you would earn if you remained
in a Fund for a year and that Fund continued to have the same yield for the
entire year.
Tax-equivalent yield or total return (for Janus Federal Tax-Exempt Fund) shows
the before-tax yield or total return that an investor would have to earn to
equal the Fund's tax-free yield or total return. It is calculated by dividing a
Fund's tax-free yield by the result of one minus a stated federal tax rate.
THE FUNDS IMPOSE NO SALES OR OTHER CHARGES THAT WOULD AFFECT TOTAL RETURN OR
YIELD COMPUTATIONS. FUND PERFORMANCE FIGURES ARE BASED UPON HISTORICAL RESULTS
AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. INVESTMENT RETURNS AND NET
ASSET VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 18, 1996
20 AS SUPPLEMENTED SEPTEMBER 30, 1996
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APPENDIX A
GLOSSARY OF INVESTMENT TERMS
This glossary provides a more detailed description of some of the types of
securities and other instruments in which the Funds may invest. The Funds may
invest in these instruments to the extent permitted by their investment
objectives and policies. The Funds are not limited by this discussion and may
invest in any other types of instruments not precluded by the policies discussed
elsewhere in this Prospectus. Please refer to the SAI for a more detailed
discussion of certain instruments.
I. EQUITY AND DEBT SECURITIES
Bonds are debt securities issued by a company, municipality, government or
government agency. The issuer of a bond is required to pay the holder the amount
of the loan (or par value) at a specified maturity and to make scheduled
interest payments.
Certificates of Participation ("COPs") are certificates representing an interest
in a pool of securities. Holders are entitled to a proportionate interest in the
underlying securities. Municipal lease obligations are often sold in the form of
COPs. See "Municipal lease obligations" below.
Commercial paper is a short-term debt obligation with a maturity ranging from 1
to 270 days issued by banks, corporations and other borrowers to investors
seeking to invest idle cash. The Funds may purchase commercial paper issued
under Section 4(2) of the Securities Act of 1933.
Common stock represents a share of ownership in a company and usually carries
voting rights and earns dividends. Unlike preferred stock, dividends on common
stock are not fixed but are declared at the discretion of the issuer's board of
directors.
Convertible securities are preferred stocks or bonds that pay a fixed dividend
or interest payment and are convertible into common stock at a specified price
or conversion ratio.
Depositary receipts are receipts for shares of a foreign-based corporation that
entitle the holder to dividends and capital gains on the underlying security.
Receipts include those issued by domestic banks (American Depositary Receipts),
foreign banks (Global or European Depositary Receipts) and broker-dealers
(depositary shares).
Fixed-income securities are securities that pay a specified rate of return. The
term generally includes short- and long-term government, corporate and municipal
obligations that pay a specified rate of interest or coupons for a specified
period of time and preferred stock, which pays fixed dividends. Coupon and
dividend rates may be fixed for the life of the issue or, in the case of
adjustable and floating rate securities, for a shorter period.
High-yield/High-risk securities are securities that are rated below investment
grade by the primary rating agencies (BB or lower by Standard &Poor's and Ba or
lower by Moody's). Other terms commonly used to describe such securities include
"lower rated bonds," "noninvestment grade bonds" and "junk bonds."
Industrial development bonds are revenue bonds that are issued by a public
authority but which may be backed only by the credit and security of a private
issuer and may involve greater credit risk. See "Municipal securities" below.
Mortgage- and asset-backed securities are shares in a pool of mortgages or other
debt. These securities are generally pass-through securities, which means that
principal and interest payments on the underlying securities (less servicing
fees) are passed through to shareholders on a pro rata basis. These securities
involve prepayment risk, which is the risk that the underlying mortgages or
other debt may be refinanced or paid off prior to their maturities during
periods of declining interest rates. In that case, a portfolio manager may have
to reinvest the proceeds from the securities at a lower rate. Potential market
gains on a security subject to prepayment risk may be more limited than
potential market gains on a comparable security that is not subject to
prepayment risk.
Municipal lease obligations are revenue bonds backed by leases or installment
purchase contracts for property or equipment. Lease obligations may not be
backed by the issuing municipality's credit and may involve risks not normally
associated with general obligation bonds and other revenue bonds. For example,
their interest may become taxable if the lease is assigned and the holders may
incur losses if the issuer does not appropriate funds for the lease payments on
an annual basis, which may result in termination of the lease and possible
default.
Municipal securities are bonds or notes issued by a U.S. state or political
subdivision. A municipal security may be a general obligation backed by the full
faith and credit (i.e., the borrowing and taxing power) of a municipality or a
revenue obligation paid out of the revenues of a designated project, facility or
revenue source.
Passive foreign investment compa- nies (PFICs) are any foreign corporations
which generate certain amounts of passive income or hold certain amounts of
assets for the production of passive income. Passive income includes dividends,
interest, royalties, rents and annuities. Income tax regulations may require the
Funds to recognize income associated with a PFIC prior to the actual receipt of
any such income.
Preferred stock is a class of stock that generally pays dividends at a specified
rate and has preference over common stock in the payment of dividends and
liquidation. Preferred stock generally does not carry voting rights.
Repurchase agreements involve the purchase of a security by a Fund and a
simultaneous agreement by the seller (generally a bank or dealer) to repurchase
the security from the Fund at a specified date or upon demand. This technique
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offers a method of earning income on idle cash. These securities involve the
risk that the seller will fail to repurchase the security, as agreed. In that
case, a Fund will bear the risk of market value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security.
Reverse repurchase agreements involve the sale of a security by a Fund to
another party (generally a bank or dealer) in return for cash and an agreement
by the Fund to buy the security back at a specified price and time. This
technique may be used to provide cash to satisfy unusually high redemption
requests or for other temporary or emergency purposes.
Rule 144A securities are securities that are not registered for sale to the
general public under the Securities Act of 1933, but that may be resold to
certain institutional investors.
Standby commitments are obligations purchased by a Fund from a dealer that give
the Fund the option to sell a security to the dealer at a specified price.
Tender option bonds are generally long-term securities that are coupled with an
option to tender the securities to a bank, broker-dealer or other financial
institution at periodic intervals and receive the face value of the bond. This
type of security is commonly used as a means of enhancing the security's
liquidity.
U.S. government securities include direct obligations of the U.S. government
that are supported by its full faith and credit. Treasury bills have initial
maturities of less than one year, Treasury notes have initial maturities of one
to ten years and Treasury bonds may be issued with any maturity but generally
have maturities of at least ten years. U.S. government securities also include
indirect obligations of the U.S. government that are issued by federal agencies
and government sponsored entities. Unlike Treasury securities, agency securities
generally are not backed by the full faith and credit of the U.S. government.
Some agency securities are supported by the right of the issuer to borrow from
the Treasury, others are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations and others are supported only by
the credit of the sponsoring agency.
Variable and floating rate securities have variable or floating rates of
interest and, under certain limited circumstances, may have varying principal
amounts. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate
index or market interest rate. The floating rate tends to decrease the
security's price sensitivity to changes in interest rates.
Warrants are securities, typically issued with preferred stock or bonds, that
give the holder the right to buy a proportionate amount of common stock at a
specified price, usually at a price that is higher than the market price at the
time of issuance of the warrant. The right may last for a period of years or
indefinitely.
When-issued, delayed delivery and forward transactions generally involve the
purchase of a security with payment and delivery at some time in the future -
i.e., beyond normal settlement. The Funds do not earn interest on such
securities until settlement and bear the risk of market value fluctuations in
between the purchase and settlement dates. New issues of stocks and bonds,
private placements and U.S. government securities may be sold in this manner.
Zero coupon bonds are debt securities that do not pay regular interest at
regular intervals, but are issued at a discount from face value. The discount
approximates the total amount of interest the security will accrue from the date
of issuance to maturity. Strips are debt securities that are stripped of their
interest (usually by a financial intermediary) after the securities are issued.
The market value of these securities generally fluctuates more in response to
changes in interest rates than interest-paying securities of comparable
maturity.
II. FUTURES, OPTIONS AND OTHER DERIVATIVES
Forward contracts are contracts to purchase or sell a specified amount of
property for an agreed upon price at a specified time. Forward contracts are not
currently exchange traded and are typically negotiated on an individual basis.
The Funds may enter into forward currency contracts to hedge against declines in
the value of non-dollar denominated securities or to reduce the impact of
currency appreciation on purchases of non-dollar denominated securities. They
may also enter into forward contracts to purchase or sell securities or other
financial indices.
Futures contracts are contracts that obligate the buyer to receive and the
seller to deliver an instrument or money at a specified price on a specified
date. The Funds may buy and sell futures contracts on foreign currencies,
securities and financial indices including interest rates or an index of U.S.
government, foreign government, equity or fixed-income securities. The Funds may
also buy options on futures contracts. An option on a futures contract gives the
buyer the right, but not the obligation, to buy or sell a futures contract at a
specified price on or before a specified date. Futures contracts and options on
futures are standardized and traded on designated exchanges.
Indexed/structured securities are typically short- to intermediate-term debt
securities whose value at maturity or interest rate is linked to currencies,
interest rates, equity securities, indices, commodity prices or other financial
indicators. Such
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securities may be positively or negatively indexed (i.e., their value may
increase or decrease if the reference index or instrument appreciates).
Indexed/structured securities may have return characteristics similar to direct
investments in the underlying instruments and may be more volatile than the
underlying instruments. A Fund bears the market risk of an investment in the
underlying instruments, as well as the credit risk of the issuer.
Interest rate swaps involve the exchange by two parties of their respective
commitments to pay or receive interest (e.g., an exchange of floating rate
payments for fixed rate payments).
Inverse floaters are debt instruments whose interest rate bears an inverse
relationship to the interest rate on another instrument or index. For example,
upon reset the interest rate payable on a security may go down when the
underlying index has risen. Certain inverse floaters may have an interest rate
reset mechanism that multiplies the effects of change in the underlying index.
Such mechanism may increase the volatility of the security's market value.
Options are the right, but not the obligation, to buy or sell a specified amount
of securities or other assets on or before a fixed date at a predetermined
price. The Funds may purchase and write put and call options on securities,
securities indices and foreign currencies.
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APPENDIX B
EXPLANATION OF RATING CATEGORIES
The following is a description of credit ratings issued by two of the major
credit ratings agencies. Credit ratings evaluate only the safety of principal
and interest payments, not the market value risk of lower quality securities.
Credit rating agencies may fail to change credit ratings to reflect subsequent
events on a timely basis. Although the adviser considers security ratings when
making investment decisions, it also performs its own investment analysis and
does not rely solely on the ratings assigned by credit agencies.
Standard & Poor's Ratings Services
Bond Rating Explanation
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Investment Grade
AAA Highest rating; extremely strong
capacity to pay principal and interest.
AA High quality; very strong capacity to
pay principal and interest.
A Strong capacity to pay principal and
interest; somewhat more susceptible to
the adverse effects of changing
circumstances and economic conditions.
BBB Adequate capacity to pay principal and
interest; normally exhibit adequate
protection parameters, but adverse
economic conditions or changing
circumstances more likely to lead to a
weakened capacity to pay principal and
interest than for higher rated bonds.
Non-Investment Grade
BB, B, Predominantly speculative with respect
to the issuer's capacity to meet
required interest and principal
payments.
CCC, CC, C BB - lowest degree of speculation; C -
the highest degree of speculation.
Quality and protective characteristics
outweighed by large uncertainties or
major risk exposure to adverse
conditions.
D In default.
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Moody's Investors Service, Inc.
Investment Grade
Aaa Highest quality, smallest degree of
investment risk.
Aa High quality; together with Aaa bonds,
they compose the high-grade bond group.
A Upper-medium grade obligations; many
favorable investment attributes.
Baa Medium-grade obligations; neither highly
protected nor poorly secured. Interest
and principal appear adequate for the
present but certain protective elements
may be lacking or may be unreliable over
any great length of time.
Non-Investment Grade
Ba More uncertain, with speculative
elements. Protection of interest and
principal payments not well safeguarded
during good and bad times.
B Lack characteristics of desirable
investment; potentially low assurance of
timely interest and principal payments
or maintenance of other contract terms
over time.
Caa Poor standing, may be in default;
elements of danger with respect to
principal or interest payments.
Ca Speculative in a high degree; could be
in default or have other marked
shortcomings.
C Lowest-rated; extremely poor prospects
of ever attaining investment standing.
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Unrated securities will be treated as noninvestment grade securities unless the
portfolio manager determines that such securities are the equivalent of
investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
SECURITIES HOLDINGS BY RATING CATEGORY
During the fiscal period ended October 31, 1995, the percentage of securities
holdings for Janus Flexible Income Fund by rating category based upon a weighted
monthly average was:
Bonds - S&P Rating Janus Flexible Income Fund
AAA 17%
AA 0%
A 15%
BBB 27%
BB 13%
B 23%
CCC 1%
CC 0%
C 0%
Preferred Stock 1%
Cash and Options 3%
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TOTAL 100%
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No other Fund held 5% or more of its assets in bonds
rated below investment grade for the fiscal period
ended October 31, 1995.
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