Registration No. 2-34393
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. /__/
Post-Effective Amendment No. 75 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940
Amendment No. 58 /X/
(Check appropriate box or boxes.)
JANUS INVESTMENT FUND
(Exact Name of Registrant as Specified in Charter)
100 Fillmore Street, Denver, Colorado 80206-4923
Address of Principal Executive Offices (Zip Code)
Registrant's Telephone No., including Area Code: 303-333-3863
David C. Tucker - 100 Fillmore Street, Denver, Colorado 80206-4923
(Name and Address of Agent for Service)
Approximate Date of Proposed Offering: December 31, 1996
It is proposed that this filing will become effective (check appropriate line):
______ immediately upon filing pursuant to paragraph (b) of Rule 485.
______ on (date) pursuant to paragraph (b) of Rule 485.
______ 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
______ on (date) pursuant to paragraph (a)(1) of Rule 485.
______ 75 days after filing pursuant to paragraph (a)(2) of Rule 485.
__X___ on November 29, 1996, pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following line:
______ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
Registrant has registered an indefinite number of shares of beneficial interest
under the Securities Act of 1933 pursuant to Rule 24f-2(a) and filed a Rule
24f-2 Notice on November 17, 1995, for the fiscal year ended October 31, 1995,
with respect to all of its series in existence as of October 31, 1995.
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JANUS INVESTMENT FUND
(Janus Special Situations Fund)
Cross Reference Sheet
Between each Prospectus and Statement of
Additional Information and Form N-1A Item
(Cross Reference Sheets for other series of Janus Investment Fund are
included in previous post-effective amendments related to those series)
FORM N-1A ITEM CAPTION IN PROSPECTUS
PART A
1. Cover Page Cover Page
2. Synopsis Cover Page; The Fund at a Glance;
Expense Information
3. Condensed Financial Performance Terms
Information
4. General Description of The Fund in Detail - The Fund's
Investment Objective and Policies; The
Fund in Detail - General Portfolio
Policies; The Fund in Detail -
Additional Risk Factors; Other
Information; Appendix A - Glossary of
Investment Terms; Appendix B -
Explanation of Ratings Categories
5. Management of the Fund Management of the Fund
5A. Management's Discussion of Not Applicable
6. Capital Stock and Other Distributions and Taxes; Shareholder's
Securities Manual
7. Purchase of Securities Being Shareholder's Manual
Offered
8. Redemption or Repurchase Shareholder's Manual
9. Pending Legal Proceedings Not Applicable
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FORM N-1A ITEM CAPTION IN STATEMENT OF
ADDITIONAL INFORMATION
PART B
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Miscellaneous Information
History
13. Investment Objectives and Investment Policies, Restrictions and
Policies Techniques
14. Management of the Fund Investment Adviser; Officers and
Trustees
15. Control Persons and Principal Not Applicable
Holders of Securities
16. Investment Advisory and Investment Adviser; Custodian, Transfer
Other Services Agent and Certain Affiliations;
Portfolio Transactions and Brokerage;
Officers and Trustees; Miscellaneous
Information
17. Brokerage Allocation and Portfolio Transactions and Brokerage
18. Capital Stock and Other Purchase of Shares; Redemption of
Securities Shares; Miscellaneous Information
19. Purchase, Redemption and Purchase of Shares; Redemption of
Pricing of Securities Being Shares; Shareholder Accounts
Offered
20. Tax Status Income Dividends, Capital Gains
Distributions and Tax Status
21. Underwriters Custodian, Transfer Agent and Certain
Affiliations
22. Calculation of Performance Performance Information
Data
23. Financial Statements Not Applicable
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JANUS SPECIAL SITUATIONS FUND
100 Fillmore Street
Denver, CO 80206-4923
1-800-525-3713
PROSPECTUS
November 29, 1996
Janus Special Situations Fund (the "Fund") is a no-load, nondiversified mutual
fund that seeks capital appreciation by investing primarily in common stocks.
The Fund seeks investments in companies that its portfolio manager believes have
been overlooked or undervalued by other investors. The Fund is recently
organized and has a limited operating history.
For complete information on how to purchase, exchange and sell shares, please
see the Shareholder's Manual beginning on page __.
The Fund is a portfolio of Janus Investment Fund (the "Trust"), which is
registered with the Securities and Exchange Commission ("SEC") as an open-end
management investment company. This Prospectus contains information about the
Fund that you should consider before investing. Please read it carefully and
keep it for future reference.
Additional information about the Fund is contained in a Statement of Additional
Information ("SAI") filed with the SEC. The SAI dated November 29, 1996, is
incorporated by reference into this Prospectus. For a copy of the SAI, write or
call the Fund 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.
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CONTENTS
THE FUND AT A GLANCE
Brief description of the Fund...........................................3
EXPENSE INFORMATION
The Fund's annual operating expenses....................................4
THE FUND IN DETAIL
Investment Objective and Strategy.......................................5
Types of Investments ...................................................5
General Portfolio Policies..............................................7
Additional Risk Factors.................................................9
PERFORMANCE TERMS
An explanation of performance terms....................................12
SHAREHOLDER'S MANUAL
Types of Account Ownership.............................................13
How to Open Your Janus Account.........................................14
How to Purchase Shares.................................................15
How to Exchange Shares.................................................16
How to Redeem Shares...................................................18
Shareholder Services and Account Policies..............................21
MANAGEMENT OF THE FUND
Investment Adviser and Portfolio Manager...............................24
Portfolio Transactions.................................................25
Other Service Providers................................................26
Other Information......................................................26
DISTRIBUTIONS AND TAXES
Distributions..........................................................27
Taxes..................................................................28
APPENDIX A
Glossary of Investment Terms...............................................30
APPENDIX B
Explanation of Ratings Categories......................................34
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THE FUND AT A GLANCE
Investment Objective:
The investment objective of the Fund is capital appreciation.
Primary Holdings:
A nondiversified fund that pursues its investment objective by investing
primarily in common stocks. The Fund seeks investments in companies that its
portfolio manager believes have been overlooked or undervalued by other
investors.
Shareholder's Investment Horizon:
The Fund is designed for long-term investors who seek capital appreciation and
who can tolerate the greater risks associated with investments in common stocks
and a moderately aggressive investment strategy which seeks to identify unique
investment opportunities. The Fund is not designed as a short-term trading
vehicle and should not be relied upon for short-term financial needs.
Fund Adviser:
Janus Capital Corporation ("Janus Capital") serves as the Fund's investment
adviser. Janus Capital has been in the investment advisory business for over 25
years and currently manages approximately $40 billion in assets.
Fund Manager:
David C. Decker
Fund Inception:
December 1996
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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 Fund. 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 the Fund's assets and include fees for portfolio management, maintenance
of shareholder accounts, shareholder servicing, accounting and other services.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales charges on redemptions None
Redemption fees* None
Exchange Fee None
*There is an $8 service fee for redemptions by wire.
Annual Fund Operating Expenses(1)
(expressed as a percentage of average net assets)
Management Fee .82%
Other Expenses .40%
Total Fund Operating Expenses 1.22%
(1) The information in the table above is based on the estimated fees and
expenses that the Fund expects to incur in its initial fiscal year before
expense offset arrangements.
Example
1 Year 3 Years
Assume you invest $1,000, the Fund returns
5% annually and its expense ratio remains
as listed above. This example shows the
operating expenses that you would indirectly
bear as an investor in the Fund. $12 $39
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE RETURNS
OR EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
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THE FUND IN DETAIL
This section takes a closer look at the Fund's investment objective, policies
and the securities in which it invests. Please carefully review the "Additional
Risk Factors" section of this Prospectus for a more detailed discussion of the
risks associated with certain investment techniques and refer to Appendix A for
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 the Fund.
Policies that are noted as "fundamental" cannot be changed without a shareholder
vote. All other policies, including the Fund's investment objective, are not
fundamental and may be changed by the Fund's Trustees without a shareholder
vote. You will be notified of any such changes that are material. If there is a
material change in the Fund's objective or policies, you should consider whether
the Fund remains an appropriate investment for you.
Investment Objective and Strategy
The investment objective of the Fund is capital appreciation. It is a
nondiversified fund that pursues its objective by investing primarily in common
stocks of domestic and foreign companies. The Fund seeks investments in
companies that its portfolio manager believes have been overlooked or
undervalued by other investors in connection with a significant change or
development affecting the issuer's business ("special situations"). Although the
Fund emphasizes these types of companies, it may invest in other companies that
the portfolio manager believes have the potential for significant capital
appreciation.
Types of Investments
The Fund invests primarily in common stocks selected for their capital
appreciation potential. The Fund may invest to a lesser degree in other types of
securities, including preferred stock, warrants, convertible securities and debt
securities. Debt securities that the Fund may purchase include corporate bonds
and debentures (less than 35% of net assets in high-yield/high-risk securities);
government securities; mortgage- and asset-backed securities (not to exceed 25%
of assets); zero-coupon bonds (not to exceed 10% of assets); indexed/structured
notes; high-grade commercial paper; certificates of deposit; and repurchase
agreements. Such securities may offer appreciation or income potential because
of anticipated changes in interest rates, credit standing, currency
relationships or other factors. The Fund may also invest in short-term debt
securities, including money market funds managed by Janus Capital, as a means of
receiving a return on idle cash.
When the 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, the Fund's investments may
be hedged to a greater degree and/or its cash or similar investments may
increase. In other words, the Fund does not always stay fully invested in stocks
and bonds. Cash or similar investments are a residual - they represent the
assets that remain after the portfolio manager has committed available assets to
desirable investment opportunities. When
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the Fund's cash position increases, it may not participate in stock market
advances or declines to the extent that it would if it remained more fully
invested in common stocks.
The Fund may invest without limit in foreign equity and debt securities. The
Fund may use options, futures and other types of derivatives for hedging
purposes or as a means of enhancing return. See "Additional Risk Factors" on
page __. The Fund may purchase securities on a when-issued, delayed delivery or
forward commitment basis.
[SIDEBAR] THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN
INVESTMENT IN THE FUND.
WHAT IS THE FUND'S OVERALL INVESTMENT APPROACH?
The portfolio manager generally takes a "bottom up" approach to building the
portfolio. In other words, the manager generally seeks to identify individual
companies whose potential value is not recognized by the market at large in
connection with a significant change or development affecting the issuer's
business. Although themes may emerge in the Fund, securities are generally
selected without regard to any defined industry sector or other similarly
defined selection procedure. Realization of income is not a significant
investment consideration. Any income realized on the Fund's investments will be
incidental to its objective.
WHAT ARE THE SELECTION CRITERIA FOR COMMON STOCKS?
The Fund emphasizes common stocks of "special situation" companies which its
portfolio manager believes are undervalued by the investment community. A
special situation arises when, in the opinion of the 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. Special situations
include, but are not limited to, significant changes in a company's allocation
of its existing capital, a restructuring of assets, or a redirection of positive
cash flows. Issuers undergoing significant capital changes include companies
involved in spin-offs, sales of divisions, mergers or acquisitions; companies
emerging from bankruptcy; or companies initiating large changes in their debt to
equity ratio such as through leveraging. Companies that are redirecting cash
flows may be reducing debt, repurchasing shares or paying dividends. The
portfolio manager places particular emphasis on companies with high cash flows
relative to share price. Special situations may also result from i) significant
changes in industry structure through regulatory developments or shifts in
competition; ii) a new or improved product, service, operation or technological
advance; iii) changes in senior management; or iv) significant changes in cost
structure.
ARE THE SAME CRITERIA USED TO SELECT FOREIGN SECURITIES?
Generally, yes. The portfolio manager seeks companies that meet his selection
criteria regardless of country of organization or place of principal business
activity. Foreign securities are generally selected on a stock-by-stock basis
without regard to any defined allocation among countries or geographic regions.
However, certain factors such as expected levels of inflation, government
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policies influencing business conditions, the outlook for currency relationships
and prospects for economic growth among countries, regions or geographic areas
may warrant greater consideration in selecting foreign securities. See
"Additional Risk Factors" on page __.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
The fundamental risk associated with any common stock fund is the risk that the
value of the stocks it holds might decrease. Stock values may fluctuate in
response to the activities of an individual company or in response to general
market and/or economic conditions. Historically, common stocks have provided
greater long-term returns and have entailed greater short-term risks than other
investment choices. Although investing in securities of special situation
companies and/or other undervalued companies offers the potential for
above-average returns if the companies are successful, such investments may
carry an additional risk of loss in the event that the anticipated development
does not occur or does not attract the expected attention.
HOW DOES A DIVERSIFIED FUND DIFFER FROM A NONDIVERSIFIED FUND?
A "nondiversified" fund, such as the Fund, has the ability to take larger
positions in a smaller number of issuers than a "diversified" fund. Because the
appreciation or depreciation of a single stock may have a greater impact on the
net asset value per share ("NAV") of a nondiversified fund, its share price can
be expected to fluctuate more than a comparable diversified fund.
HOW DOES THE FUND TRY TO REDUCE RISK?
Diversification of the Fund's assets reduces the effect of any single holding on
its overall portfolio value. The Fund may use futures, options and other
derivative instruments to protect the portfolio from movements in securities
prices and interest rates. The Fund may also use a variety of currency hedging
techniques, including forward currency contracts, to manage exchange rate risk
when investing directly in foreign markets. See "Additional Risk Factors" on
page __. In addition, to the extent that the Fund holds a larger cash position,
it may not participate in market declines to the same extent as if it had
remained more fully invested in common stocks.
General Portfolio Policies
In investing its portfolio assets, the Fund will follow the general policies
listed below. The percentage limitations included in these policies and
elsewhere in this Prospectus apply at the time of purchase of the security. For
example, if the 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.
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Diversification
The Investment Company Act of 1940 (the "1940 Act") classifies investment
companies as either diversified or nondiversified. The Fund qualifies as a
nondiversified fund under the 1940 Act and is subject to the following
requirements:
o As a fundamental policy, the Fund may not own more than 10% of the
outstanding voting shares of any issuer.
o As a fundamental policy, with respect to 50% of its total assets, the Fund
will not 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 the Fund's holdings of that issuer to amount to more than 5% of the
Fund's total assets.es, as defined in the 1940 Act) if such purchase would
cause the Fund's holdings of that issuer to amount to more than 5% of the
Fund's total assets.
o The Fund will invest no more than 25% of its assets in a single issuer
(other than U.S. government securities).
o The Fund reserves the right to become a diversified company by limiting the
investments in which more than 5% of its total assets are invested.
Industry Concentration
As a fundamental policy, the Fund will not invest more than 25% of its total
assets in any particular industry. This policy does not apply to U.S. government
securities.
Portfolio Turnover
The 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 investment decision.
Changes are made in the 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, the Fund may purchase securities in anticipation of
relatively short-term price gains. The Fund may also sell one security and
simultaneously purchase the same or a 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 Fund's ability to engage in short-term
trading if the security has been held for less than three months.
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Illiquid Investments
The 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 other securities, including
privately placed commercial paper.
Borrowing and Lending
The Fund may borrow money and lend securities or other assets, as follows:
o The Fund may borrow money for temporary or emergency purposes in amounts up
to 25% of its total assets.
o The Fund may mortgage or pledge securities as security for borrowings in
amounts up to 15% of its net assets.
o As a fundamental policy, the 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.
The Fund intends to seek permission from the SEC to borrow money from or lend
money to 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
[SIDEBAR] 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 most foreign securities are traded primarily in foreign markets. The
risks of foreign investing include:
o Currency Risk. The 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 the Fund holds a foreign security, its value will be
affected by the value of the local currency relative to the U.S. dollar.
When the Fund sells a foreign security, its value may be worth
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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
the 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.
Futures, Options and Other Derivative Instruments
The 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 Fund intends to use most derivative
instruments primarily to hedge the value of its portfolio against potential
adverse movements in securities prices, foreign currency markets or interest
rates. To a limited extent, the Fund may also use derivative instruments for
non-hedging purposes such as seeking to increase the 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 Fund 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 directions that the portfolio manager anticipates;
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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 the 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
the Fund worse off than if it had not entered into the position.
Although the Fund believes the use of derivative instruments will benefit the
Fund, the Fund's performance could be worse than if the Fund had not used such
instruments if the portfolio manager's judgement proves incorrect.
When the 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
[SIDEBAR] HIGH-YIELD/HIGH-RISK SECURITIES (OR "JUNK" BONDS) ARE DEBT SECURITIES
RATED BELOW INVESTMENT GRADE BY THE PRIMARY RATING AGENCIES (SUCH AS STANDARD &
POOR'S AND MOODY'S). PLEASE REFER TO APPENDIX B FOR A DESCRIPTION OF RATING
CATEGORIES.
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.
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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. 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.
See Appendix A for risks associated with certain other investments.
PERFORMANCE TERMS
This section will help you understand various terms that are commonly used to
describe the 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. The Fund generally measures performance in terms of total
return.
Cumulative Total Return represents the actual rate of return on an investment
for a specified 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 the Fund's return and are not the
same as actual annual results.
THE FUND IMPOSES NO SALES OR OTHER CHARGES THAT WOULD AFFECT TOTAL RETURN
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.
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
or policies may be modified or discontinued without shareholder approval.
How to Get in Touch with Janus
If you have any questions while reading this 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.
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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 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 retirement plans are generally
subject to income tax and may be subject to an additional tax if withdrawn prior
to age 59 1/2.
Investors Fiduciary Trust Company serves as custodian for the Retirement Plans
offered by the Fund. There is an annual $12 fee per account to maintain your
retirement account. The maximum
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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 ("IRA"): An IRA allows individuals under the
age of 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.
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 Express or Certified Mail
Janus Funds Janus Funds
P.O. Box 173375 100 Fillmore Street
Denver, CO 80217-3375 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
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HOW TO PURCHASE SHARES
Paying for Shares
When you purchase shares, your request will be processed at the next net asset
value per share ("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 a U.S. bank and made payable to Janus Funds.
o If a check does not clear your bank, the Fund reserves the right to cancel
the purchase.
o If the Fund is unable to debit your predesignated bank account on the day
of purchase, it may make additional attempts or cancel the purchase.
o The Fund reserves 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 Fund (or its agents) has the
authority to redeem shares in your account(s) to cover any such 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
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already established, call 1-800-525-3713 to request the appropriate form. This
option will become effective ten 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 programs to help investors achieve
their 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 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 ($100 minimum) 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 noted on page __.
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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.
Exchange Policies
o Except for Systematic Exchanges, new accounts established by exchange must
be opened with $2,500 or the total account value if the account you are
exchanging from is less than $2,500.
o Exchanges between existing accounts must meet the $100 subsequent
investment requirement.
o You may make four exchanges out of the Fund during a calendar year
(exclusive of Systematic Exchanges) free of charge.
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 Fund reserves the right to reject any exchange request and to modify or
terminate the exchange privilege at any time. For example, the Fund may
reject exchanges from accounts engaged in excessive trading (including
market timing transactions) that are believed to be detrimental to the
Fund.
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.
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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, Suite 300
Denver, CO 80206-4923
Janus Internet Address
http:/www.JanusFunds.com
Janus Investor Services 1-800-525-3713
To speak to a service representative.
Janus Quoteline(R) 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.
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 noted on page __.
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 Redemption Option
Systematic Redemption Options allow you to redeem a specific dollar amount from
your account on a regular basis. For more information on Systematic Redemption
Options or to request the appropriate form, please call 1-800-525-3713.
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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.
o Electronic Transfer
If you have established this option, your redemption proceeds can 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 Fund 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 __ and must include the following
information:
o the name of the Fund,
o the account number,
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, and
o your daytime telephone number.
o Signature Requirements Based on Account Type
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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 on 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(s) 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 59
1/2) 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. The 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 the 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.
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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 FUND RESERVES 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.
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, to exchange your shares or
to purchase shares. JETS can be accessed by calling 1-800-525-6125. Calls on
JETS are limited to seven minutes.
Account Minimums
Minimum account sizes are noted on page __. 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 in September. The $10 fee will be assessed
on the second Friday of September of each year. You will receive notice before
we charge
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the $10 fee or close your account so that you may increase your account balance
to the required minimum.
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
Fund. The Processing Organization may also impose other charges or restrictions
different from those applicable to shareholders who invest in the Fund directly.
The Processing Organization, rather than its customer, may be the shareholder of
record of your shares. The Fund is 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 Fund 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 Fund 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 Fund 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 Fund. The Fund 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 Redemptions
The Fund reserves the right to close an account if the shareholder is deemed to
engage in activities which are illegal or otherwise believed to be detrimental
to the Fund.
Telephone Transactions
You may initiate many transactions by telephone. The Fund and its agents will
not be responsible for any losses resulting from unauthorized transactions when
procedures designed to verify the identity of the caller are followed.
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It may be difficult to reach the Fund 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 Fund or its 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 the Fund, 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 Fund 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. 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 Fund, which include a list of the Fund's 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.
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MANAGEMENT OF THE FUND
Trustees
The Trustees oversee the business affairs of the Trust and are responsible for
major decisions relating to the Fund's investment objective and policies. The
Trustees delegate the day-to-day management of the Fund to the officers of the
Trust and meet at least quarterly to review the Fund's investment policies,
performance, expenses and other business affairs.
Investment Adviser
Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4923, is the
investment adviser to the Fund and is responsible for the day-to-day management
of its investment portfolio and other business affairs.
Janus Capital has served as investment adviser to the Fund since 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 the
Fund's investments. Janus Capital also furnishes certain administrative,
compliance and accounting services for the Fund, and may be reimbursed by the
Fund 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 Fund and pays the salaries, fees and expenses of all Fund officers and
those Trustees who are affiliated with Janus Capital.
Portfolio Manager
David C. Decker is Executive Vice President and portfolio manager of the Fund.
He joined Janus in 1992 as a research analyst and has recently focused on
companies in the automotive and defense industries prior to assuming management
responsibility for the Fund. He also assists manager James P. Craig with the
management of Janus Fund. He holds an M.B.A. in finance from the Fuqua School of
Business at Duke University and a bachelor's degree in economics and political
science from Tufts University. He is also a Chartered Financial Analyst.
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Personal Investing
Janus Capital does not permit portfolio managers 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 Fund or Janus Capital's other advisory
clients.
See the SAI for more detailed information.
Breakdown of Management Expenses and Expense Limits
The Fund pays Janus Capital a management fee which is accrued daily and paid
monthly. The advisory agreement with the Fund spells out the management fee and
other expenses that the Fund must pay. The Fund's management fee schedule
(expressed as an annual rate) is set out in the chart below.
Average Daily Net Annual Rate
Assets of Fund Percentage (%)
First $ 30 Million 1.00%
Next $270 Million .75%
Next $200 Million .70%
Over $500 Million .65%
The 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. Janus Capital will reduce its
management fee to the extent that Fund expenses exceed regulatory limits imposed
by state securities regulators.
Portfolio Transactions
Purchases and sales of securities on behalf of the 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 the 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 the Fund i) to the Fund or ii) to other
persons on behalf of the Fund for services provided to the Fund for which it
would be obligated to pay. Janus Capital may also consider sales of shares of
the Fund as a factor in the selection of broker-dealers. The Fund's Trustees
have authorized Janus Capital to place portfolio transactions on an agency basis
with a broker-dealer affiliated with Janus Capital. When transactions for the
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.
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Other Service Providers
The following parties provide the Fund with administrative and other services.
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.
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 20 separate series, three of
which currently offer two classes of shares. The Trust offers the other 19
series by other prospectuses.
Shareholder Meetings
The Trust does not intend to hold annual shareholder meetings. However, special
meetings may be called specifically for the 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 the Fund only
if a matter affects or requires the vote of just the Fund or the 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.
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Size of the Fund
The Fund has no present plans to limit its size. However, the 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 the Fund are discontinued, it is expected that existing shareholders of
the 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 the Fund's investment objective by
investing all of the Fund's assets in another investment company having the same
investment objective and substantially the same investment policies and
restrictions as those applicable to the Fund. It is expected that any such
investment company would be managed by Janus Capital in substantially the same
manner as the Fund. The shareholders of the Trust of record on April 30, 1992,
and the initial shareholder(s) of the Fund, 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 Fund 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 the 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 the Fund believes that 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.
DISTRIBUTIONS AND TAXES
[SIDEBAR - BOLD] DISTRIBUTIONS
TO AVOID TAXATION, THE INTERNAL REVENUE CODE REQUIRES THE FUND TO DISTRIBUTE NET
INCOME AND ANY NET GAINS REALIZED BY ITS INVESTMENTS ANNUALLY. THE 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. DIVIDENDS ARE DECLARED
AND PAID QUARTERLY, WHILE CAPITAL GAINS DISTRIBUTIONS ARE DECLARED AND PAID IN
DECEMBER.
How Distributions Affect A Fund's NAV
Distributions are paid to shareholders as of the record date of the distribution
of the Fund, regardless of how long the shares have been held. Dividends and
capital gains awaiting distribution are included in the Fund's daily NAV. The
share price of the Fund drops by the amount of the distribution, net of any
subsequent market fluctuations. As an example, assume that on December 31, the
Fund declared a dividend in the amount of $0.25 per share. If the 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. Shareholders should be aware that
distributions from a mutual fund are a taxable event and not a value-enhancing
event.
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"Buying A Dividend"
If you purchase shares of the 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 Fund offers 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 Fund reserves the right to reinvest into your account undeliverable and
uncashed dividend and distribution checks that remain outstanding for six months
in shares of the Fund at the NAV next computed after the check is cancelled.
Subsequent distributions may also be reinvested.
Taxes
As with any investment, you should consider the tax consequences of investing in
the Fund. 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 Fund. 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.
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Taxes on Distributions
Distributions by the Fund are subject to federal income tax, regardless of
whether the distribution is made in cash or reinvested in additional shares of
the Fund. In certain states, a portion of the dividends and distributions
(depending on the source of the 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 Fund
Dividends, interest and some capital gains received by the Fund on foreign
securities may be subject to tax withholding or other foreign taxes. Any foreign
taxes paid by the Fund will be treated as an expense to the 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 Fund does not expect to pay any federal income or excise taxes because it
intends to meet certain requirements of the Internal Revenue Code. It is
important that the Fund meet these requirements so that any earnings on your
investment will not be taxed twice.
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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 Fund may invest. The Fund may
invest in these instruments to the extent permitted by its investment objective
and policies. The Fund is 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.
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 Fund 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 (e.g., 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."
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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, the 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.
Passive foreign investment companies (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
Fund to recognize income associated with the 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 the 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
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, the 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 the 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 will be used to provide cash to satisfy unusually heavy 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 the Fund from a dealer
that give the Fund the option to sell a security to the dealer at a specified
price.
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
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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 stocks 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 Fund does not earn interest on such
securities until settlement and bears 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 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 Fund 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. It 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 Fund 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 Fund may
also buy options on futures contracts. An option on a futures contract gives the
buyer the right, but not the
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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 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. The 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).
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 Fund 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
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
CCC, CC, C issuer's capacity to meet required interest and
principal payments. BB - lowest degree of
speculation; C - the highest degree of
speculation. Quality and protective
characteristics outweighed by large uncertainties
or major risk exposure to adverse conditions. D In
default.
Moody's Investors Service, Inc.
Investment Grade
Aaa Highest quality, smallest degree of investment
risk.
Aa High quality; together with Aaa bonds, they
compose the high-grade bond group.
A Upper-medium grade obligations; many favorable
investment attributes.
Baa Medium-grade obligations; neither highly protected
nor poorly secured. Interest and principal appear
adequate for the present but
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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.
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.
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JANUS SPECIAL SITUATIONS FUND
100 Fillmore Street
Denver, CO 80206-4923
(800) 525-3713
STATEMENT OF ADDITIONAL INFORMATION
November 29, 1996
Janus Special Situations Fund (the "Fund") is a no-load mutual fund that
seeks capital appreciation by investing primarily in common stocks. The Fund
seeks investments in companies that its portfolio manager believes have been
overlooked or undervalued by other investors. Although the Fund emphasizes these
types of companies, it may invest in other companies that the portfolio manager
believes have the potential for significant capital appreciation.
The Fund is a separate series of Janus Investment Fund, a Massachusetts
business trust (the "Trust"). Each series of the Trust represents shares of
beneficial interest in a separate portfolio of securities and other assets with
its own objective and policies. The Fund is managed by Janus Capital Corporation
("Janus Capital").
This Statement of Additional Information ("SAI") is not a Prospectus and
should be read in conjunction with the Fund's Prospectus dated November 29,
1996, which is incorporated by reference into this SAI and may be obtained from
the Trust at the above phone number or address This SAI contains additional and
more detailed information about the Fund's operations and activities than the
Prospectus.
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JANUS SPECIAL SITUATIONS FUND
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
INVESTMENT POLICIES, RESTRICTIONS AND TECHNIQUES ............................. 3
Investment Objective................................................. 3
Portfolio Policies................................................... 3
Investment Restrictions.............................................. 3
Types of Securities and Investment Techniques........................ 6
Illiquid Investments........................................ 6
Zero Coupon, Pay-In-Kind and Step Coupon Securities......... 6
Pass-Through Securities..................................... 7
Depositary Receipts......................................... 9
Other Income-Producing Securities........................... 9
High-Yield/High-Risk Securities.............................10
Repurchase and Reverse Repurchase Agreements................10
Futures, Options and Other Derivative Instruments...........11
INVESTMENT ADVISER............................................................22
CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS............................24
PORTFOLIO TRANSACTIONS AND BROKERAGE..........................................25
OFFICERS AND TRUSTEES.........................................................27
PURCHASE OF SHARES............................................................30
Net Asset Value Determination........................................30
Reinvestment of Dividends and Distributions..........................31
REDEMPTION OF SHARES..........................................................31
SHAREHOLDER ACCOUNTS..........................................................32
Telephone Transactions...............................................32
Systematic Redemptions...............................................32
RETIREMENT PLANS..............................................................33
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS..................33
MISCELLANEOUS INFORMATION.....................................................34
Shares of the Trust.........................................34
Voting Rights...............................................35
Independent Accountants.....................................35
Registration Statement......................................35
PERFORMANCE INFORMATION.......................................................35
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INVESTMENT POLICIES, RESTRICTIONS AND TECHNIQUES
Investment Objective
As stated in the Prospectus, the Fund's investment objective is capital
appreciation. There can be no assurance that the Fund will, in fact, achieve its
objective. The investment objective of the Fund is not fundamental and may be
changed by the Trustees without shareholder approval.
Portfolio Policies
The Prospectus discusses the types of securities in which the Fund will
invest, portfolio policies of the Fund and the investment techniques of the
Fund. The Prospectus includes a discussion of portfolio turnover policies.
Portfolio turnover is calculated by dividing total long-term purchases or
sales, whichever is less, by the average monthly value of a fund's long-term
portfolio securities. The Fund anticipates that its portfolio turnover rate will
be in excess of 100%.
Investment Restrictions
As indicated in the Prospectus, the Fund is subject to certain fundamental
policies and restrictions that may not be changed without shareholder approval.
Shareholder approval means approval by the lesser of (i) more than 50% of the
outstanding voting securities of the Trust (or the Fund if a matter affects just
the Fund), or (ii) 67% or more of the voting securities present at a meeting if
the holders of more than 50% of the outstanding voting securities of the Trust
(or the Fund) are present or represented by proxy. As fundamental policies, the
Fund may not:
(1) Own more than 10% of the outstanding voting securities of any one
issuer and, as to fifty percent (50%) of the value of its total
assets, purchase the securities of any one issuer (except cash items
and "government securities" as defined under the Investment Company
Act of 1940, as amended (the "1940 Act")), if immediately after and as
a result of such purchase, the value of the holdings of the Fund in
the securities of such issuer exceeds 5% of the value of the Fund's
total assets.
(2) Invest 25% or more of the value of its total assets in any
particular industry (other than U.S. government securities).
(3) Invest directly in real estate or interests in real estate;
however, the Fund may own debt or equity securities issued by
companies engaged in those businesses.
(4) Purchase or sell physical commodities other than foreign
currencies unless acquired as a result of ownership of securities (but
this limitation shall not prevent the Fund from purchasing or selling
options, futures, swaps and forward contracts or from investing in
securities or other instruments backed by physical commodities).
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(5) Lend any security or make any other loan if, as a result, more
than 25% of its total assets would be lent to other parties (but this
limitation does not apply to purchases of commercial paper, debt
securities or repurchase agreements).
(6) Act as an underwriter of securities issued by others, except to
the extent that the Fund may be deemed an underwriter in connection
with the disposition of portfolio securities of the Fund.
As a fundamental policy, the Fund may, notwithstanding any other investment
policy or limitation (whether or not fundamental), invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies and
limitations as the Fund.
The Trustees have adopted additional investment restrictions for the Fund.
These restrictions are operating policies of the Fund and may be changed by the
Trustees without shareholder approval. The additional investment restrictions
adopted by the Trustees to date include the following:
(a) The Fund's investments in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included
within that amount, but not to exceed 2% of the value of the Fund's
net assets, may be warrants that are not listed on the New York or
American Stock Exchange. Warrants acquired by the Fund in units or
attached to securities shall be deemed to be without value for the
purpose of monitoring this policy.
(b) The Fund will not (i) enter into any futures contracts and related
options for purposes other than bona fide hedging transactions within
the meaning of Commodity Futures Trading Commission ("CFTC")
regulations if the aggregate initial margin and premiums required to
establish positions in futures contracts and related options that do
not fall within the definition of bona fide hedging transactions will
exceed 5% of the fair market value of the Fund's net assets, after
taking into account unrealized profits and unrealized losses on any
such contracts it has entered into; and (ii) enter into any futures
contracts if the aggregate amount of the Fund's commitments under
outstanding futures contracts positions would exceed the market value
of its total assets.
(c) The Fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short without the payment of
any additional consideration therefor, and provided that transactions
in futures, options, swaps and forward contracts are not deemed to
constitute selling securities short.
(d) The Fund does not currently intend to purchase securities on
margin, except that the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments and other deposits in connection with transactions in
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futures, options, swaps and forward contracts shall not be deemed to
constitute purchasing securities on margin.
(e) The Fund does not currently intend to (i) purchase securities of
other investment companies, except in the open market where no
commission except the ordinary broker's commission is paid, or (ii)
purchase or retain securities issued by other open-end investment
companies. Limitations (i) and (ii) do not apply to money market funds
or to securities received as dividends, through offers of exchange, or
as a result of a reorganization, consolidation, or merger. If the Fund
invests in a money market fund, Janus Capital will reduce its advisory
fee by the amount of any investment advisory and administrative
services fees paid to the investment manager of the money market fund.
(f) The Fund may not mortgage or pledge any securities owned or held
by the Fund in amounts that exceed, in the aggregate, 15% of the
Fund's net assets, provided that this limitation does not apply to
reverse repurchase agreements, deposits of assets to margin, guarantee
positions in futures, options, swaps or forward contracts, or the
segregation of assets in connection with such contracts.
(g) The Fund does not intend to purchase securities of any issuer
(other than U.S. government agencies and instrumentalities or
instruments guaranteed by an entity with a record of more than three
years' continuous operation, including that of predecessors) with a
record of less than three years' continuous operation (including that
of predecessors) if such purchase would cause the cost of the Fund's
investments in all such issuers to exceed 5% of the Fund's total
assets taken at market value at the time of such purchase.
(h) The Fund does not currently intend to invest directly in oil, gas,
or other mineral development or exploration programs or leases;
however, the Fund may own debt or equity securities of companies
engaged in those businesses.
(i) The Fund may borrow money for temporary or emergency purposes (not
for leveraging or investment) in an amount not exceeding 25% of the
value of its total assets (including the amount borrowed) less
liabilities (other than borrowings). If borrowings exceed 25% of the
value of the Fund's total assets by reason of a decline in net assets,
the Fund will reduce its borrowings within three business days to the
extent necessary to comply with the 25% limitation. This policy shall
not prohibit reverse repurchase agreements, deposits of assets to
margin or guarantee positions in futures, options, swaps or forward
contracts, or the segregation of assets in connection with such
contracts.
(j) The Fund does not currently intend to purchase any security or
enter into a repurchase agreement if, as a result, more than 15% of
its net assets would be invested in repurchase agreements not
entitling the holder to payment of principal and interest within seven
days and in securities that are illiquid by virtue of legal or
contractual restrictions on resale or the absence of a readily
available market. The Trustees, or the Fund's investment adviser
acting pursuant to authority delegated by the Trustees, may determine
that a readily
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available market exists for securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933 ("Rule 144A Securities"),
or any successor to such rule, Section 4(2) commercial paper and
municipal lease obligations. Accordingly, such securities may not be
subject to the foregoing limitation.
(k) The Fund may not invest in companies for the purpose of exercising
control of management.
For purposes of the Fund's restriction on investing in a particular
industry, the Fund will rely primarily on industry classifications as published
by Bloomberg L.P., provided that financial service companies will be classified
according to the end users of their services (for example, automobile finance,
bank finance and diversified finance are each considered to be a separate
industry). To the extent that Bloomberg L.P. classifications are so broad that
the primary economic characteristics in a single class are materially different,
the Fund may further classify issuers in accordance with industry
classifications as published by the Securities and Exchange Commission ("SEC").
Types of Securities and Investment Techniques
Illiquid Investments
The Fund may invest up to 15% of its net assets in illiquid investments
(i.e., securities that are not readily marketable). The Trustees of the Fund
have authorized Janus Capital to make liquidity determinations with respect to
its securities, including Rule 144A securities, commercial paper and municipal
lease obligations. Under the guidelines established by the Trustees, Janus
Capital will consider the following factors: 1) the frequency of trades and
quoted prices for the obligation; 2) the number of dealers willing to purchase
or sell the security and the number of other potential purchasers; 3) the
willingness of dealers to undertake to make a market in the security; and 4) the
nature of the security and the nature of marketplace trades, including the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer. In the case of commercial paper, Janus Capital will
also consider whether the paper is traded flat or in default as to principal and
interest and any ratings of the paper by a Nationally Recognized Statistical
Rating Organization.
Zero Coupon, Pay-In-Kind and Step Coupon Securities
The Fund may invest up to 10% of its assets in zero coupon, pay-in-kind and
step coupon securities. Zero coupon bonds are issued and traded at a discount
from their face value. They do not entitle the holder to any periodic payment of
interest prior to maturity. Step coupon bonds trade at a discount from their
face value and pay coupon interest. The coupon rate is low for an initial period
and then increases to a higher coupon rate thereafter. The discount from the
face amount or par value depends on the time remaining until cash payments
begin, prevailing interest rates, liquidity of the security and the perceived
credit quality of the issuer. Pay-in-kind bonds normally give the issuer an
option to pay cash at a coupon payment date or give the holder of the security a
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similar bond with the same coupon rate and a face value equal to the amount of
the coupon payment that would have been made.
Current federal income tax law requires holders of zero coupon securities
and step coupon securities to report the portion of the original issue discount
on such securities that accrues during a given year as interest income, even
though the holders receive no cash payments of interest during the year. In
order to qualify as a "regulated investment company" under the Internal Revenue
Code of 1986 and the regulations thereunder (the "Code"), the Fund must
distribute its investment company taxable income, including the original issue
discount accrued on zero coupon or step coupon bonds. Because the Fund will not
receive cash payments on a current basis in respect of accrued original-issue
discount on zero coupon bonds or step coupon bonds during the period before
interest payments begin, in some years the Fund may have to distribute cash
obtained from other sources in order to satisfy the distribution requirements
under the Code. The Fund might obtain such cash from selling other portfolio
holdings which might cause the Fund to incur capital gains or losses on the
sale. Additionally, these actions are likely to reduce the assets to which Fund
expenses could be allocated and to reduce the rate of return for the Fund. In
some circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might otherwise
make it undesirable for the Fund to sell the securities at the time.
Generally, the market prices of zero coupon, step coupon and pay-in-kind
securities are more volatile than the prices of securities that pay interest
periodically and in cash and are likely to respond to changes in interest rates
to a greater degree than other types of debt securities having similar
maturities and credit quality.
Pass-Through Securities
The Fund may invest in various types of pass-through securities, such as
mortgage-backed securities, asset-backed securities and participation interests.
A pass-through security is a share or certificate of interest in a pool of debt
obligations that have been repackaged by an intermediary, such as a bank or
broker-dealer. The purchaser of a pass-through security receives an undivided
interest in the underlying pool of securities. The issuers of the underlying
securities make interest and principal payments to the intermediary which are
passed through to purchasers, such as the Fund. The most common type of
pass-through securities are mortgage-backed securities. Government National
Mortgage Association ("GNMA") Certificates are mortgage-backed securities that
evidence an undivided interest in a pool of mortgage loans. GNMA Certificates
differ from bonds in that principal is paid back monthly by the borrowers over
the term of the loan rather than returned in a lump sum at maturity. The Fund
will generally purchase "modified pass-through" GNMA Certificates, which entitle
the holder to receive a share of all interest and principal payments paid and
owned on the mortgage pool, net of fees paid to the "issuer" and GNMA,
regardless of whether or not the mortgagor actually makes the payment. GNMA
Certificates are backed as to the timely payment of principal and interest by
the full faith and credit of the U.S. government.
The Federal Home Loan Mortgage Corporation ("FHLMC") issues two types of
mortgage pass-through securities: mortgage participation certificates ("PCs")
and guaranteed mortgage
7
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certificates ("GMCs"). PCs resemble GNMA Certificates in that each PC represents
a pro rata share of all interest and principal payments made and owned on the
underlying pool. FHLMC guarantees timely payments of interest on PCs and the
full return of principal. GMCs also represent a pro rata interest in a pool of
mortgages. However, these instruments pay interest semiannually and return
principal once a year in guaranteed minimum payments. This type of security is
guaranteed by FHLMC as to timely payment of principal and interest but it is not
guaranteed by the full faith and credit of the U.S. government.
The Federal National Mortgage Association ("FNMA") issues guaranteed
mortgage pass-through certificates ("FNMA Certificates"). FNMA Certificates
resemble GNMA Certificates in that each FNMA Certificate represents a pro rata
share of all interest and principal payments made and owned on the underlying
pool. This type of security is guaranteed by FNMA as to timely payment of
principal and interest but it is not guaranteed by the full faith and credit of
the U.S. government.
Except for GMCs, each of the mortgage-backed securities described above is
characterized by monthly payments to the holder, reflecting the monthly payments
made by the borrowers who received the underlying mortgage loans. The payments
to the security holders (such as the Fund), like the payments on the underlying
loans, represent both principal and interest. Although the underlying mortgage
loans are for specified periods of time, such as 20 or 30 years, the borrowers
can, and typically do, pay them off sooner. Thus, the security holders
frequently receive prepayments of principal in addition to the principal that is
part of the regular monthly payments. The Fund's portfolio managers will
consider estimated prepayment rates in calculating the average weighted maturity
of the Fund. A borrower is more likely to prepay a mortgage that bears a
relatively high rate of interest. This means that in times of declining interest
rates, higher yielding mortgage-backed securities held by the Fund might be
converted to cash and the Fund will be forced to accept lower interest rates
when that cash is used to purchase additional securities in the mortgage-backed
securities sector or in other investment sectors. Additionally, prepayments
during such periods will limit the Fund's ability to participate in as large a
market gain as may be experienced with a comparable security not subject to
prepayment.
Asset-backed securities represent interests in pools of consumer loans and
are backed by paper or accounts receivables originated by banks, credit card
companies or other providers of credit. Generally, the originating bank or
credit provider is neither the obligor or guarantor of the security and interest
and principal payments ultimately depend upon payment of the underlying loans by
individuals. Tax-exempt asset-backed securities include units of beneficial
interests in pools of purchase contracts, financing leases, and sales agreements
that may be created when a municipality enters into an installment purchase
contract or lease with a vendor. Such securities may be secured by the assets
purchased or leased by the municipality; however, if the municipality stops
making payments, there generally will be no recourse against the vendor. The
market for tax-exempt asset-backed securities is still relatively new. These
obligations are likely to involve unscheduled prepayments of principal.
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Depositary Receipts
The Fund may invest in sponsored and unsponsored American Depositary
Receipts ("ADRs"), which are receipts issued by an American bank or trust
company evidencing ownership of underlying securities issued by a foreign
issuer. ADRs, in registered form, are designed for use in U.S. securities
markets. Unsponsored ADRs may be created without the participation of the
foreign issuer. Holders of these ADRs generally bear all the costs of the ADR
facility, whereas foreign issuers typically bear certain costs in a sponsored
ADR. The bank or trust company depositary of an unsponsored ADR may be under no
obligation to distribute shareholder communications received from the foreign
issuer or to pass through voting rights. The Fund may also invest in European
Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") and in other
similar instruments representing securities of foreign companies. EDRs are
receipts issued by a European financial institution evidencing an arrangement
similar to that of ADRs. EDRs, in bearer form, are designed for use in European
securities markets.
Other Income-Producing Securities
Other types of income producing securities that the Fund may purchase
include, but are not limited to, the following types of securities:
Variable and floating rate obligations. These types of securities have
variable or floating rates of interest and, under certain limited circumstances,
may have varying principal amounts. Variable and floating rate securities pay
interest at rates that are adjusted periodically according to a specified
formula, usually with reference to some interest rate index or market interest
rate (the "underlying index"). See also "Inverse Floaters."
Standby commitments. These instruments, which are similar to a put, give
the Fund the option to obligate a broker, dealer or bank to repurchase a
security held by the Fund at a specified price.
Tender option bonds. Tender option bonds are generally long-term securities
that are coupled with the 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.
Inverse floaters. Inverse floaters are debt instruments whose interest
bears an inverse relationship to the interest rate on another security. Certain
inverse floaters may have an interest rate reset mechanism that multiplies the
effects of change in the underlying index. Such mechanism may increase the
volatility of the security's market value. Certain variable rate securities
(including certain mortgage-backed securities) pay interest at a rate that
varies inversely to prevailing short-term interest rates (sometimes referred to
as inverse floaters). For example, upon reset the interest rate payable on a
security may go down when the underlying index has risen. The Fund will not
invest more than 5% of its assets in inverse floaters.
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The Fund will purchase standby commitments, tender option bonds and
instruments with demand features primarily for the purpose of increasing the
liquidity of its portfolio.
High-Yield/High-Risk Securities
The Fund intends to invest less than 35% of its net assets in debt
securities that are rated below investment grade (e.g., securities rated BB or
lower by Standard & Poor's Ratings Services ("Standard & Poor's") or Ba or lower
by Moody's Investors Service, Inc. ("Moody's")). Lower rated bonds involve a
higher degree of credit risk, which is the risk that the issuer will not make
interest or principal payments when due. In the event of an unanticipated
default, the Fund would experience a reduction in its income, and could expect a
decline in the market value of the securities so affected.
The Fund may also invest in unrated debt securities of foreign and domestic
issuers. Unrated debt, while not necessarily of lower quality than rated
securities, may not have as broad a market. Sovereign debt of foreign
governments is generally rated by country. Because these ratings do not take
into account individual factors relevant to each issue and may not be updated
regularly, Janus Capital may treat such securities as unrated debt. Unrated debt
securities will be included in the 35% limit unless the portfolio managers deem
such securities to be the equivalent of investment grade securities.
Repurchase and Reverse Repurchase Agreements
In a repurchase agreement, the Fund purchases a security and simultaneously
commits to resell that security to the seller at an agreed upon price on an
agreed upon date within a number of days (usually not more than seven) from the
date of purchase. The resale price reflects the purchase price plus an agreed
upon incremental amount that is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of the seller
to pay the agreed upon price, which obligation is in effect secured by the value
(at least equal to the amount of the agreed upon resale price and
marked-to-market daily) of the underlying security or "collateral." The Fund may
engage in a repurchase agreement with respect to any security in which it is
authorized to invest. A risk associated with repurchase agreements is the
failure of the seller to repurchase the securities as agreed, which may cause
the Fund to suffer a loss if the market value of such securities declines before
they can be liquidated on the open market. In the event of bankruptcy or
insolvency of the seller, the Fund may encounter delays and incur costs in
liquidating the underlying security. Repurchase agreements that mature in more
than seven days will be subject to the 15% limit on illiquid investments. While
it is possible to eliminate all risks from these transactions, it is the policy
of the Fund to limit repurchase agreements to those parties whose
creditworthiness has been reviewed and found satisfactory by Janus Capital.
The Fund may use reverse repurchase agreements to provide cash to satisfy
unusually heavy redemption requests or for other temporary or emergency purposes
without the necessity of selling portfolio securities. In a reverse repurchase
agreement, the Fund sells a portfolio security to another party, such as a bank
or broker-dealer, in return for cash and agrees to repurchase the instrument at
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a particular price and time. While a reverse repurchase agreement is
outstanding, the Fund will maintain cash and appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement. The
Fund will enter into reverse repurchase agreements only with parties that Janus
Capital deems creditworthy.
Futures, Options and Other Derivative Instruments
Futures Contracts. The Fund may enter into contracts for the purchase or
sale for future delivery of fixed-income securities, foreign currencies or
contracts based on financial indices, including indices of U.S. government
securities, foreign government securities, equity or fixed-income securities.
U.S. futures contracts are traded on exchanges which have been designated
"contract markets" by the CFTC and must be executed through a futures commission
merchant ("FCM"), or brokerage firm, which is a member of the relevant contract
market. Through their clearing corporations, the exchanges guarantee performance
of the contracts as between the clearing members of the exchange.
The buyer or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, both the buyer and seller are required to deposit "initial
margin" for the benefit of the FCM when the contract is entered into. Initial
margin deposits are equal to a percentage of the contract's value, as set by the
exchange on which the contract is traded, and may be maintained in cash or
certain high-grade liquid assets by the Fund's custodian for the benefit of the
FCM. Initial margin payments are similar to good faith deposits or performance
bonds. Unlike margin extended by a securities broker, initial margin payments do
not constitute purchasing securities on margin for purposes of the Fund's
investment limitations. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments for the
benefit of the FCM to settle the change in value on a daily basis. The party
that has a gain may be entitled to receive all or a portion of this amount. In
the event of the bankruptcy of the FCM that holds margin on behalf of the Fund,
the Fund may be entitled to a return of margin owed to the Fund only in
proportion to the amount received by the FCM's other customers. Janus Capital
will attempt to minimize the risk by careful monitoring of the creditworthiness
of the FCMs with which the Fund does business and by depositing margin payments
in a segregated account with the Fund's custodian.
The Fund intends to comply with guidelines of eligibility for exclusion
from the definition of the term "commodity pool operator" adopted by the CFTC
and the National Futures Association, which regulate trading in the futures
markets. The Fund will use futures contracts and related options primarily for
bona fide hedging purposes within the meaning of CFTC regulations. To the extent
that the Fund holds positions in futures contracts and related options that do
not fall within the definition of bona fide hedging transactions, the aggregate
initial margin and premiums required to establish such positions will not exceed
5% of the fair market value of the Fund's net assets, after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into.
Although the Fund will segregate cash and liquid assets in an amount
sufficient to cover its open futures obligations, the segregated assets would be
available to the Fund immediately upon
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<PAGE>
closing out the futures position, while settlement of securities transactions
could take several days. However, because the Fund's cash that may otherwise be
invested would be held uninvested or invested in high-grade liquid assets so
long as the futures position remains open, the Fund's return could be diminished
due to the opportunity losses of foregoing other potential investments.
The Fund's primary purpose in entering into futures contracts is to protect
the Fund from fluctuations in the value of securities or interest rates without
actually buying or selling the underlying debt or equity security. For example,
if the Fund anticipates an increase in the price of stocks, and it intends to
purchase stocks at a later time, the Fund could enter into a futures contract to
purchase a stock index as a temporary substitute for stock purchases. If an
increase in the market occurs that influences the stock index as anticipated,
the value of the futures contracts will increase, thereby serving as a hedge
against the Fund not participating in a market advance. This technique is
sometimes known as an anticipatory hedge. To the extent the Fund enters into
futures contracts for this purpose, the segregated assets maintained to cover
the Fund's obligations with respect to the futures contracts will consist of
high-grade liquid assets from its portfolio in an amount equal to the difference
between the contract price and the aggregate value of the initial and variation
margin payments made by the Fund with respect to the futures contracts.
Conversely, if the Fund holds stocks and seeks to protect itself from a decrease
in stock prices, the Fund might sell stock index futures contracts, thereby
hoping to offset the potential decline in the value of its portfolio securities
by a corresponding increase in the value of the futures contract position The
Fund could protect against a decline in stock prices by selling portfolio
securities and investing in money market instruments, but the use of futures
contracts enables it to maintain a defensive position without having to sell
portfolio securities.
If the Fund owns Treasury bonds and the portfolio managers expect interest
rates to increase, the Fund may take a short position in interest rate futures
contracts. Taking such a position would have much the same effect as the Fund
selling Treasury bonds in its portfolio. If interest rates increase as
anticipated, the value of the Treasury bonds would decline, but the value of the
Fund's interest rate futures contract will increase, thereby keeping the net
asset value of the Fund from declining as much as it may have otherwise. If, on
the other hand, the portfolio managers expect interest rates to decline, the
Fund may take a long position in interest rate futures contracts in anticipation
of later closing out the futures position and purchasing bonds. Although the
Fund can accomplish similar results by buying securities with long maturities
and selling securities with short maturities, given the greater liquidity of the
futures market than the cash market, it may be possible to accomplish the same
result more easily and more quickly by using futures contracts as an investment
tool to reduce risk.
The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial margin and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal price relationship between the cash
and futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery of the instrument underlying a futures contract.
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<PAGE>
To the extent participants decide to make or take delivery, liquidity in the
futures market could be reduced and prices in the futures market distorted.
Third, from the point of view of speculators, the margin deposit requirements in
the futures market are less onerous than margin requirements in the securities
market. Therefore, increased participation by speculators in the futures market
may cause temporary price distortions. Due to the possibility of the foregoing
distortions, a correct forecast of general price trends by the portfolio
managers still may not result in a successful use of futures.
Futures Contracts Entail Risks. Although the Fund believes that use of such
contracts will benefit the Fund, the Fund's overall performance could be worse
than if the Fund had not entered into futures contracts if the portfolio
managers' investment judgement proves incorrect. For example, if the Fund has
hedged against the effects of a possible decrease in prices of securities held
in its portfolio and prices increase instead, the Fund will lose part or all of
the benefit of the increased value of these securities because of offsetting
losses in its futures positions. In addition, if the Fund has insufficient cash,
it may have to sell securities from its portfolio to meet daily variation margin
requirements. Those sales may be, but will not necessarily be, at increased
prices which reflect the rising market and may occur at a time when the sales
are disadvantageous to the Fund.
The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of futures
contracts, it is possible that the standardized futures contracts available to
the Fund will not match exactly the Fund's current or potential investments. The
Fund may buy and sell futures contracts based on underlying instruments with
different characteristics from the securities in which it typically invests -
- -for example, by hedging investments in portfolio securities with a futures
contract based on a broad index of securities which involves a risk that the
futures position will not correlate precisely with the performance of the Fund's
investments.
Futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments closely correlate with the
Fund's investments. Futures prices are affected by factors such as current and
anticipated short-term interest rates, changes in volatility of the underlying
instruments and the time remaining until expiration of the contract. Those
factors may affect securities prices differently from futures prices. Imperfect
correlations between the Fund's investments and its futures positions also may
result from differing levels of demand in the futures markets and the securities
markets, from structural differences in how futures and securities are traded,
and from imposition of daily price fluctuation limits for futures contracts. The
Fund may buy or sell futures contracts with a greater or lesser value than the
securities it wishes to hedge or is considering purchasing in order to attempt
to compensate for differences in historical volatility between the futures
contract and the securities, although this may not be successful in all cases.
If price changes in the Fund's futures positions are poorly correlated with its
other investments, its futures positions may fail to produce desired gains or
result in losses that are not offset by the gains in the Fund's other
investments.
Because futures contracts are generally settled within a day from the date
they are closed out, compared with a settlement period of three days for some
types of securities, the futures markets can
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provide superior liquidity to the securities markets. Nevertheless, there is no
assurance that a liquid secondary market will exist for any particular futures
contract at any particular time. In addition, futures exchanges may establish
daily price fluctuation limits for futures contracts and may halt trading if a
contract's price moves upward or downward more than the limit in a given day. On
volatile trading days when the price fluctuation limit is reached, it may be
impossible for the Fund to enter into new positions or close out existing
positions. If the secondary market for a futures contract is not liquid because
of price fluctuation limits or otherwise, the Fund may not be able to promptly
liquidate unfavorable futures positions and potentially could be required to
continue to hold a futures position until the delivery date, regardless of
changes in its value. As a result, the Fund's access to other assets held to
cover its futures positions also could be impaired.
Options on Futures Contracts. The Fund may buy and write put and call
options on futures contracts. An option on a future gives the Fund the right
(but not the obligation) to buy or sell a futures contract at a specified price
on or before a specified date. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call option on an
individual security. Depending on the pricing of the option compared to either
the price of the futures contract upon which it is based or the price of the
underlying instrument, ownership of the option may or may not be less risky than
ownership of the futures contract or the underlying instrument. As with the
purchase of futures contracts, when the Fund is not fully invested it may buy a
call option on a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
future's price at the expiration of the option is below the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures' price at expiration of the option is higher than the exercise
price, the Fund will retain the full amount of the option premium which provides
a partial hedge against any increase in the price of securities which the Fund
is considering buying. If a call or put option the Fund has written is
exercised, the Fund will incur a loss which will be reduced by the amount of the
premium it received. Depending on the degree of correlation between the change
in the value of its portfolio securities and changes in the value of the futures
positions, the Fund's losses from existing options on futures may to some extent
be reduced or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, the Fund may buy a put option on a futures contract to hedge its
portfolio against the risk of falling prices or rising interest rates.
The amount of risk the Fund assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the options bought.
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Forward Contracts. A forward contract is an agreement between two parties
in which one party is obligated to deliver a stated amount of a stated asset at
a specified time in the future and the other party is obligated to pay a
specified amount for the assets at the time of delivery. The Fund may enter into
forward contracts to purchase and sell government securities, equity or income
securities, foreign currencies or other financial instruments. Forward contracts
generally are traded in an interbank market conducted directly between traders
(usually large commercial banks) and their customers. Unlike futures contracts,
which are standardized contracts, forward contracts can be specifically drawn to
meet the needs of the parties that enter into them. The parties to a forward
contract may agree to offset or terminate the contract before its maturity, or
may hold the contract to maturity and complete the contemplated exchange.
The following discussion summarizes the Fund's principal uses of forward
foreign currency exchange contracts ("forward currency contracts"). The Fund may
enter into forward currency contracts with stated contract values of up to the
value of the Fund's assets. A forward currency contract is an obligation to buy
or sell an amount of a specified currency for an agreed price (which may be in
U.S. dollars or a foreign currency). The Fund will exchange foreign currencies
for U.S. dollars and for other foreign currencies in the normal course of
business and may buy and sell currencies through forward currency contracts in
order to fix a price for securities it has agreed to buy or sell ("transaction
hedge"). The Fund also may hedge some or all of its investments denominated in a
foreign currency against a decline in the value of that currency relative to the
U.S. dollar by entering into forward currency contracts to sell an amount of
that currency (or a proxy currency whose performance is expected to replicate or
exceed the performance of that currency relative to the U.S. dollar)
approximating the value of some or all of its portfolio securities denominated
in that currency ("position hedge") or by participating in options or futures
contracts with respect to the currency. The Fund also may enter into a forward
currency contract with respect to a currency where the Fund is considering the
purchase or sale of investments denominated in that currency but has not yet
selected the specific investments ("anticipatory hedge"). In any of these
circumstances the Fund may, alternatively, enter into a forward currency
contract to purchase or sell one foreign currency for a second currency that is
expected to perform more favorably relative to the U.S. dollar if the portfolio
managers believe there is a reasonable degree of correlation between movements
in the two currencies ("cross-hedge").
These types of hedging minimize the effect of currency appreciation as well
as depreciation, but do not eliminate fluctuations in the underlying U.S. dollar
equivalent value of the proceeds of or rates of return on the Fund's foreign
currency denominated portfolio securities. The matching of the increase in value
of a forward contract and the decline in the U.S. dollar equivalent value of the
foreign currency denominated asset that is the subject of the hedge generally
will not be precise. Shifting the Fund's currency exposure from one foreign
currency to another removes the Fund's opportunity to profit from increases in
the value of the original currency and involves a risk of increased losses to
the Fund if its portfolio managers' projection of future exchange rates is
inaccurate. Proxy hedges and cross-hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which hedged
securities are denominated. Unforeseen changes in currency prices may result in
poorer overall performance for the Fund than if it had not entered into such
contracts.
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The Fund will cover outstanding forward currency contracts by maintaining
liquid portfolio securities denominated in the currency underlying the forward
contract or the currency being hedged. To the extent that the Fund is not able
to cover its forward currency positions with underlying portfolio securities,
the Fund's custodian will segregate cash or high-grade liquid assets having a
value equal to the aggregate amount of the Fund's commitments under forward
contracts entered into with respect to position hedges, cross-hedges and
anticipatory hedges. If the value of the securities used to cover a position or
the value of segregated assets declines, the Fund will find alternative cover or
segregate additional cash or high-grade liquid assets on a daily basis so that
the value of the covered and segregated assets will be equal to the amount of
the Fund's commitments with respect to such contracts. As an alternative to
segregating assets, the Fund may buy call options permitting the Fund to buy the
amount of foreign currency being hedged by a forward sale contract or the Fund
may buy put options permitting it to sell the amount of foreign currency subject
to a forward buy contract.
While forward contracts are not currently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward contacts. In such event,
the Fund's ability to utilize forward contracts may be restricted. In addition,
the Fund may not always be able to enter into forward contracts at attractive
prices and may be limited in its ability to use these contracts to hedge Fund
assets.
Options on Foreign Currencies. The Fund may buy and write options on
foreign currencies in a manner similar to that in which futures or forward
contracts on foreign currencies will be utilized. For example, a decline in the
U.S. dollar value of a foreign currency in which portfolio securities are
denominated will reduce the U.S. dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the Fund may buy put options
on the foreign currency. If the value of the currency declines, the Fund will
have the right to sell such currency for a fixed amount in U.S. dollars, thereby
offsetting, in whole or in part, the adverse effect on its portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Fund may buy call options on the foreign currency.
The purchase of such options could offset, at least partially, the effects of
the adverse movements in exchange rates. As in the case of other types of
options, however, the benefit to the Fund from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, if currency exchange rates do not move in the direction or
to the extent desired, the Fund could sustain losses on transactions in foreign
currency options that would require the Fund to forego a portion or all of the
benefits of advantageous changes in those rates.
The Fund may also write options on foreign currencies. For example, to
hedge against a potential decline in the U.S. dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange rates, the Fund
could, instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the option will most likely not be
exercised and the decline in value of portfolio securities will be offset by the
amount of the premium received.
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Similarly, instead of purchasing a call option to hedge against a potential
increase in the U.S. dollar cost of securities to be acquired, the Fund could
write a put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Fund to hedge the increased
cost up to the amount of the premium. As in the case of other types of options,
however, the writing of a foreign currency option will constitute only a partial
hedge up to the amount of the premium. If exchange rates do not move in the
expected direction, the option may be exercised and the Fund would be required
to buy or sell the underlying currency at a loss which may not be offset by the
amount of the premium. Through the writing of options on foreign currencies, the
Fund also may lose all or a portion of the benefits which might otherwise have
been obtained from favorable movements in exchange rates.
The Fund may write covered call options on foreign currencies. A call
option written on a foreign currency by the Fund is "covered" if the Fund owns
the foreign currency underlying the call or has an absolute and immediate right
to acquire that foreign currency without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other foreign currencies held in its portfolio. A
call option is also covered if the Fund has a call on the same foreign currency
in the same principal amount as the call written if the exercise price of the
call held (i) is equal to or less than the exercise price of the call written or
(ii) is greater than the exercise price of the call written, if the difference
is maintained by the Fund in cash or high-grade liquid assets in a segregated
account with the Fund's custodian.
The Fund also may write call options on foreign currencies for
cross-hedging purposes. A call option on a foreign currency is for cross-hedging
purposes if it is designed to provide a hedge against a decline due to an
adverse change in the exchange rate in the U.S. dollar value of a security which
the Fund owns or has the right to acquire and which is denominated in the
currency underlying the option. Call options on foreign currencies which are
entered into for cross-hedging purposes are not covered. However, in such
circumstances, the Fund will collateralize the option by segregating cash or
high-grade liquid assets in an amount not less than the value of the underlying
foreign currency in U.S. dollars marked-to-market daily.
Options on Securities. In an effort to increase current income and to
reduce fluctuations in net asset value, the Fund may write covered put and call
options and buy put and call options on securities that are traded on United
States and foreign securities exchanges and over-the-counter. The Fund may write
and buy options on the same types of securities that the Fund may purchase
directly.
A put option written by the Fund is "covered" if the Fund (i) segregates
cash not available for investment or high-grade liquid assets with a value equal
to the exercise price of the put with the Fund's custodian or (ii) holds a put
on the same security and in the same principal amount as the put written and the
exercise price of the put held is equal to or greater than the exercise price of
the put written. The premium paid by the buyer of an option will reflect, among
other things, the relationship of the exercise price to the market price and the
volatility of the underlying security, the remaining term of the option, supply
and demand and interest rates.
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A call option written by the Fund is "covered" if the Fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by the Fund's
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also deemed to be covered if the Fund holds a call
on the same security and in the same principal amount as the call written and
the exercise price of the call held (i) is equal to or less than the exercise
price of the call written or (ii) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash and high-grade
liquid assets in a segregated account with its custodian.
The Fund also may write call options that are not covered for cross-hedging
purposes. The Fund collateralizes its obligation under a written call option for
cross-hedging purposes by segregating cash or high-grade liquid assets in an
amount not less than the market value of the underlying security,
marked-to-market daily. The Fund would write a call option for cross-hedging
purposes, instead of writing a covered call option, when the premium to be
received from the cross-hedge transaction would exceed that which would be
received from writing a covered call option and its portfolio managers believe
that writing the option would achieve the desired hedge.
The writer of an option may have no control over when the underlying
securities must be sold, in the case of a call option, or bought, in the case of
a put option, since with regard to certain options, the writer may be assigned
an exercise notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains the amount of
the premium. This amount, of course, may, in the case of a covered call option,
be offset by a decline in the market value of the underlying security during the
option period. If a call option is exercised, the writer experiences a profit or
loss from the sale of the underlying security. If a put option is exercised, the
writer must fulfill the obligation to buy the underlying security at the
exercise price, which will usually exceed the then market value of the
underlying security.
The writer of an option that wishes to terminate its obligation may effect
a "closing purchase transaction." This is accomplished by buying an option of
the same series as the option previously written. The effect of the purchase is
that the writer's position will be canceled by the clearing corporation.
However, a writer may not effect a closing purchase transaction after being
notified of the exercise of an option. Likewise, an investor who is the holder
of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously bought. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.
In the case of a written call option, effecting a closing transaction will
permit the Fund to write another call option on the underlying security with
either a different exercise price or expiration date or both. In the case of a
written put option, such transaction will permit the Fund to write another put
option to the extent that the exercise price thereof is secured by deposited
high-grade liquid assets. Effecting a closing transaction also will permit the
Fund to use the cash or proceeds from the concurrent sale of any securities
subject to the option for other investments. If
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the Fund desires to sell a particular security from its portfolio on which it
has written a call option, the Fund will effect a closing transaction prior to
or concurrent with the sale of the security.
The Fund will realize a profit from a closing transaction if the price of
the purchase transaction is less than the premium received from writing the
option or the price received from a sale transaction is more than the premium
paid to buy the option. The Fund will realize a loss from a closing transaction
if the price of the purchase transaction is more than the premium received from
writing the option or the price received from a sale transaction is less than
the premium paid to buy the option. Because increases in the market of a call
option generally will reflect increases in the market price of the underlying
security, any loss resulting from the repurchase of a call option is likely to
be offset in whole or in part by appreciation of the underlying security owned
by the Fund.
An option position may be closed out only where a secondary market for an
option of the same series exists. If a secondary market does not exist, the Fund
may not be able to effect closing transactions in particular options and the
Fund would have to exercise the options in order to realize any profit. If the
Fund is unable to effect a closing purchase transaction in a secondary market,
it will not be able to sell the underlying security until the option expires or
it delivers the underlying security upon exercise. The absence of a liquid
secondary market may be due to the following: (i) insufficient trading interest
in certain options, (ii) restrictions imposed by a national securities exchange
("Exchange") on which the option is traded on opening or closing transactions or
both, (iii) trading halts, suspensions or other restrictions imposed with
respect to particular classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances that interrupt normal operations on an
Exchange, (v) the facilities of an Exchange or of the Options Clearing
Corporation ("OCC") may not at all times be adequate to handle current trading
volume, or (vi) one or more Exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that Exchange (or in that class or series of options) would cease to
exist, although outstanding options on that Exchange that had been issued by the
OCC as a result of trades on that Exchange would continue to be exercisable in
accordance with their terms.
The Fund may write options in connection with buy-and-write transactions.
In other words, the Fund may buy a security and then write a call option against
that security. The exercise price of such call will depend upon the expected
price movement of the underlying security. The exercise price of a call option
may be below ("in-the-money"), equal to ("at-the-money") or above
("out-of-the-money") the current value of the underlying security at the time
the option is written. Buy-and-write transactions using in-the-money call
options may be used when it is expected that the price of the underlying
security will remain flat or decline moderately during the option period.
Buy-and-write transactions using at-the-money call options may be used when it
is expected that the price of the underlying security will remain fixed or
advance moderately during the option period. Buy-and-write transactions using
out-of-the-money call options may be used when it is expected that the premiums
received from writing the call option plus the appreciation in the market price
of the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. If the call options
are exercised in such transactions, the Fund's maximum gain will be the premium
received by it for writing the option, adjusted upwards or
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<PAGE>
downwards by the difference between the Fund's purchase price of the security
and the exercise price. If the options are not exercised and the price of the
underlying security declines, the amount of such decline will be offset by the
amount of premium received.
The writing of covered put options is similar in terms of risk and return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the Fund's gain will be limited to the premium
received. If the market price of the underlying security declines or otherwise
is below the exercise price, the Fund may elect to close the position or take
delivery of the security at the exercise price and the Fund's return will be the
premium received from the put options minus the amount by which the market price
of the security is below the exercise price.
The Fund may buy put options to hedge against a decline in the value of its
portfolio. By using put options in this way, the Fund will reduce any profit it
might otherwise have realized in the underlying security by the amount of the
premium paid for the put option and by transaction costs.
The Fund may buy call options to hedge against an increase in the price of
securities that it may buy in the future. The premium paid for the call option
plus any transaction costs will reduce the benefit, if any, realized by the Fund
upon exercise of the option, and, unless the price of the underlying security
rises sufficiently, the option may expire worthless to the Fund.
Eurodollar Instruments. The Fund may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. The Fund might use Eurodollar futures contracts and options thereon
to hedge against changes in LIBOR, to which many interest rate swaps and
fixed-income instruments are linked.
Swaps and Swap-Related Products. The Fund may enter into interest rate
swaps, caps and floors on either an asset-based or liability-based basis,
depending upon whether it is hedging its assets or its liabilities, and will
usually enter into interest rate swaps on a net basis (i.e., the two payment
streams are netted out, with the Fund receiving or paying, as the case may be,
only the net amount of the two payments). The net amount of the excess, if any,
of the Fund's obligations over its entitlement with respect to each interest
rate swap will be calculated on a daily basis and an amount of cash or
high-grade liquid assets having an aggregate net asset value at least equal to
the accrued excess will be maintained in a segregated account by the Fund's
custodian. If the Fund enters into an interest rate swap on other than a net
basis, it would maintain a segregated account in the full amount accrued on a
daily basis of its obligations with respect to the swap. The Fund will not enter
into any interest rate swap, cap or floor transaction unless the unsecured
senior debt or the claims-paying ability of the other party thereto is rated in
one of the three highest rating categories of at least one nationally recognized
statistical rating organization at the time of entering into such transaction.
Janus Capital will monitor the creditworthiness of all counterparties on an
ongoing
20
<PAGE>
basis. If there is a default by the other party to such a transaction, the Fund
will have contractual remedies pursuant to the agreements related to the
transaction.
The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. Janus Capital has determined that, as
a result, the swap market has become relatively liquid. Caps and floors are more
recent innovations for which standardized documentation has not yet been
developed and, accordingly, they are less liquid than swaps. To the extent the
Fund sells (i.e., writes) caps and floors, it will segregate cash or high-grade
liquid assets having an aggregate net asset value at least equal to the full
amount, accrued on a daily basis, of its obligations with respect to any caps or
floors.
There is no limit on the amount of interest rate swap transactions that may
be entered into by the Fund. These transactions may in some instances involve
the delivery of securities or other underlying assets by the Fund or its
counterparty to collateralize obligations under the swap. Under the
documentation currently used in those markets, the risk of loss with respect to
interest rate swaps is limited to the net amount of the payments that the Fund
is contractually obligated to make. If the other party to an interest rate swap
that is not collateralized defaults, the Fund would risk the loss of the net
amount of the payments that it contractually is entitled to receive. The Fund
may buy and sell (i.e., write) caps and floors without limitation, subject to
the segregation requirement described above.
Additional Risks of Options on Foreign Currencies, Forward Contracts and
Foreign Instruments. Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the SEC. To the contrary, such instruments are traded
through financial institutions acting as market-makers, although foreign
currency options are also traded on certain Exchanges, such as the Philadelphia
Stock Exchange and the Chicago Board Options Exchange, subject to SEC
regulation. Similarly, options on currencies may be traded over-the-counter. In
an over-the-counter trading environment, many of the protections afforded to
Exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the buyer of an option
cannot lose more than the amount of the premium plus related transaction costs,
this entire amount could be lost. Moreover, an option writer and a buyer or
seller of futures or forward contracts could lose amounts substantially in
excess of any premium received or initial margin or collateral posted due to the
potential additional margin and collateral requirements associated with such
positions.
Options on foreign currencies traded on Exchanges are within the
jurisdiction of the SEC, as are other securities traded on Exchanges. As a
result, many of the protections provided to traders on organized Exchanges will
be available with respect to such transactions. In particular, all foreign
currency option positions entered into on an Exchange are cleared and guaranteed
by the OCC, thereby reducing the risk of counterparty default. Further, a liquid
secondary market in options traded on an Exchange may be more readily available
than in the over-the-counter market,
21
<PAGE>
potentially permitting the Fund to liquidate open positions at a profit prior to
exercise or expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on exercise.
In addition, options on U.S. government securities, futures contracts,
options on futures contracts, forward contracts and options on foreign
currencies may be traded on foreign exchanges and over-the-counter in foreign
countries. Such transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in the
Fund's ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) low trading volume.
INVESTMENT ADVISER
As stated in the Prospectus, the Fund has an Investment Advisory Agreement
with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4923. The
Advisory Agreement provides that Janus Capital will furnish continuous advice
and recommendations concerning the Fund's investments, provide office space for
the Fund, pay the salaries, fees and expenses of all Fund officers and of those
Trustees who are affiliated with Janus Capital, and pay all expenses of
promoting the sale of Fund shares other than the cost of complying with
applicable laws relating to the offer or sale of shares of the Fund. Janus
Capital also may make payments to selected broker-dealer firms or institutions
which perform recordkeeping or other services with respect to shareholder
accounts. The minimum aggregate size required for eligibility for such payments,
and the factors in selecting the broker-dealer firms and institutions to which
they will be made, are determined from time to time by Janus Capital. Janus
Capital is also authorized to perform the management and administrative services
necessary for the operation of the Fund.
The Fund pays custodian and transfer agent fees and expenses, brokerage
commissions and dealer spreads and other expenses in connection with the
execution of portfolio transactions, legal
22
<PAGE>
and accounting expenses, interest and taxes, registration fees, expenses of
shareholders' meetings and reports to shareholders, fees and expenses of
Trustees who are not affiliated with Janus Capital, costs of preparing, printing
and mailing the Fund's Prospectus and Statement of Additional Information to
current shareholders, and other costs of complying with applicable laws
regulating the sale of Fund shares. Pursuant to the Advisory Agreement, Janus
Capital furnishes certain other services, including net asset value
determination and Fund accounting, recordkeeping, and blue sky registration and
monitoring services, for which the Fund may reimburse Janus Capital for its
costs.
The Fund has agreed to compensate Janus Capital for its services by the
monthly payment of a fee at the annual rate of 1% of the first $30 million of
the Fund's average daily net assets, 0.75% of the next $270 million of the
Fund's average daily net assets, 0.70% of the next $200 million of the Fund's
average daily net assets, and 0.65% of the average daily net assets of the Fund
in excess of $500 million. However, Janus Capital has agreed to waive its fee by
an amount equal to the amount, if any, that the Fund's normal operating expenses
chargeable to its income account in any fiscal year, including the investment
advisory fee but excluding brokerage commissions, interest, taxes and
extraordinary expenses, exceed the most restrictive limitation imposed by any
state. The Fund believes that the most restrictive limitation applicable to the
Fund is 2.50% of the first $30 million of average daily net assets, plus 2.00%
of the next $70 million of average daily net assets, plus 1.50% of the balance
of the average daily net assets of the Fund for a fiscal year.
The current Advisory Agreement became effective on September 10, 1996, and
it will continue in effect until June 16, 1998, and thereafter from year to year
so long as such continuance is approved annually by a majority of the Fund's
Trustees who are not parties to the Advisory Agreement or interested persons of
any such party, and by either a majority of the outstanding voting shares or the
Trustees of the Fund. The Advisory Agreement i) may be terminated without the
payment of any penalty by the Fund or Janus Capital on 60 days' written notice;
ii) terminates automatically in the event of its assignment; and iii) generally,
may not be amended without the approval by vote of a majority of the Trustees of
the Fund, including the Trustees who are not interested persons of the Fund or
Janus Capital and, to the extent required by the 1940 Act, the vote of a
majority of the outstanding voting securities of the Fund.
Janus Capital also performs investment advisory services for other mutual
funds, and for individual, charitable, corporate and retirement accounts.
Investment decisions for each account managed by Janus Capital, including the
Fund, are made independently from those for any other account that is or may in
the future become managed by Janus Capital or its affiliates. If, however, a
number of accounts managed by Janus Capital are contemporaneously engaged in the
purchase or sale of the same security, the orders may be aggregated and/or the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by an account or the size of the position obtained or liquidated for an
account. Pursuant to an exemptive order granted by the SEC, the Fund and other
funds advised by Janus Capital may also transfer daily uninvested cash balances
into one or more joint trading accounts. Assets in the joint trading accounts
are invested in money market instruments and the proceeds are allocated to the
participating Funds on a pro rata basis.
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<PAGE>
Each account managed by Janus Capital has its own investment objective and
policies and is managed accordingly by a particular portfolio manager or team of
portfolio managers. As a result, from time to time two or more different managed
accounts may pursue divergent investment strategies with respect to investments
or categories of investments.
As indicated in the Prospectus, Janus Capital permits investment and other
personnel to purchase and sell securities for their own accounts in accordance
with a Janus Capital policy regarding personal investing by directors, officers
and employees of Janus Capital and the Fund. The policy requires investment
personnel and officers of Janus Capital, inside directors of Janus Capital and
the Fund and other designated persons deemed to have access to current trading
information to pre-clear all transactions in securities not otherwise exempt
under the policy. Requests for trading authority will be denied when, among
other reasons, the proposed personal transaction would be contrary to the
provisions of the policy or would be deemed to adversely affect any transaction
known to be under consideration for or to have been effected on behalf of any
client account, including the Fund.
In addition to the pre-clearance requirement described above, the policy
subjects investment personnel, officers and directors/Trustees of Janus Capital
and the Fund to various trading restrictions and reporting obligations. All
reportable transactions are reviewed for compliance with Janus Capital's policy.
Those persons also may be required under certain circumstances to forfeit their
profits made from personal trading.
The provisions of the policy are administered by and subject to exceptions
authorized by Janus Capital.
Kansas City Southern Industries, Inc., a publicly traded holding company
whose primary subsidiaries are engaged in transportation, information processing
and financial services ("KCSI"), owns approximately 83% of Janus Capital. Thomas
H. Bailey, the President and Chairman of the Board of Janus Capital, owns
approximately 12% of its voting stock and, by agreement with KCSI, selects a
majority of Janus Capital's Board.
CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS
State Street Bank and Trust Company ("State Street"), P.O. Box 351, Boston,
Massachusetts 02101, is the custodian for the securities and cash of the Fund.
State Street and the foreign subcustodians selected by it and approved by the
Trustees, have custody of the assets of the Fund held outside the U.S. and cash
incidental thereto. State Street may also have custody of certain domestic and
foreign securities held in connection with repurchase agreements. The custodians
and subcustodians hold the Fund's assets in safekeeping and collect and remit
the income thereon, subject to the instructions of the Fund.
Janus Service Corporation ("Janus Service"), P.O. Box 173375, Denver,
Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, is the Fund's
transfer agent. In addition, Janus Service provides certain other
administrative, recordkeeping and shareholder relations services to
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<PAGE>
the Fund. For transfer agency and other services, Janus Service receives a fee
calculated at an annual rate of .16% of average net assets and, in addition, $4
per open shareholder account. In addition, the Fund pays DST Systems, Inc.
("DST"), a subsidiary of KCSI, license fees for the use of DST's shareholder
accounting and portfolio and fund accounting systems, and postage and forms
costs of a DST affiliate incurred in mailing Fund shareholder transaction
confirmations.
The Trustees have authorized the Fund to use another affiliate of DST as
introducing broker for certain Fund portfolio transactions as a means to reduce
Fund expenses through a credit against the charges of DST and its affiliates
with regard to commissions earned by such affiliate. See "Portfolio Transactions
and Brokerage." DST charges shown above are net of such credits.
Janus Distributors, Inc. ("Janus Distributors"), 100 Fillmore Street,
Denver, Colorado 80206, a wholly-owned subsidiary of Janus Capital, is a
distributor of the Fund. Janus Distributors is registered as a broker-dealer
under the Securities Exchange Act of 1934 (the "Exchange Act") and is a member
of the National Association of Securities Dealers, Inc. Janus Distributors acts
as the agent of the Fund in connection with the sale of its shares in all states
in which the shares are registered and in which Janus Distributors is qualified
as a broker-dealer. Under the Distribution Agreement, Janus Distributors
continuously offers the Fund's shares and accepts orders at net asset value. No
sales charges are paid by investors. Promotional expenses in connection with
offers and sales of shares are paid by Janus Capital.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Decisions as to the assignment of portfolio business for the Fund and
negotiation of its commission rates are made by Janus Capital whose policy is to
obtain the "best execution" (prompt and reliable execution at the most favorable
security price) of all portfolio transactions. The Fund may trade foreign
securities in foreign countries because the best available market for these
securities is often on foreign exchanges. In transactions on foreign stock
exchanges, brokers' commissions are frequently fixed and are often higher than
in the United States, where commissions are negotiated.
In selecting brokers and dealers and in negotiating commissions, Janus
Capital considers a number of factors, including but not limited to: Janus
Capital's knowledge of currently available negotiated commission rates or prices
of securities currently available and other current transaction costs; the
nature of the security being traded; the size and type of the transaction; the
nature and character of the markets for the security to be purchased or sold;
the desired timing of the trade; the activity existing and expected in the
market for the particular security; confidentiality; the quality of the
execution, clearance and settlement services; financial stability of the broker
or dealer; the existence of actual or apparent operational problems of any
broker or dealer; rebates of commissions by a broker to the Fund or to a third
party service provider to the Fund to pay Fund expenses; and research products
or services provided. In recognition of the value of the foregoing factors,
Janus Capital may place portfolio transactions with a broker or dealer with whom
it has negotiated a commission that is in excess of the commission another
broker or dealer would have charged for effecting that transaction if Janus
Capital determines in good faith that such amount of commission
25
<PAGE>
was reasonable in relation to the value of the brokerage and research provided
by such broker or dealer viewed in terms of either that particular transaction
or of the overall responsibilities of Janus Capital. Research may include
furnishing advice, either directly or through publications or writings, as to
the value of securities, the advisability of purchasing or selling specific
securities and the availability of securities or purchasers or sellers of
securities; furnishing seminars, information, analyses and reports concerning
issuers, industries, securities, trading markets and methods, legislative
developments, changes in accounting practices, economic factors and trends and
portfolio strategy; access to research analysts, corporate management personnel,
industry experts, economists and government officials; comparative performance
evaluation and technical measurement services and quotation services, and
products and other services (such as third party publications, reports and
analyses, and computer and electronic access, equipment, software, information
and accessories that deliver, process or otherwise utilize information,
including the research described above) that assist Janus Capital in carrying
out its responsibilities. Most brokers and dealers used by Janus Capital provide
research and other services described above. Research received from brokers or
dealers is supplemental to Janus Capital's own research efforts.
Janus Capital may use research products and services in servicing other
accounts in addition to the Fund. If Janus Capital determines that any research
product or service has a mixed use, such that it also serves functions that do
not assist in the investment decision-making process, Janus Capital may allocate
the costs of such service or product accordingly. Only that portion of the
product or service that Janus Capital determines will assist it in the
investment decision-making process may be paid for in brokerage commission
dollars. Such allocation may create a conflict of interest for Janus Capital.
Janus Capital does not enter into agreements with any brokers regarding the
placement of securities transactions because of the research services they
provide. It does, however, have an internal procedure for allocating
transactions in a manner consistent with its execution policy to brokers that it
has identified as providing superior executions and research, research-related
products or services which benefit its advisory clients, including the Fund.
Research products and services incidental to effecting securities transactions
furnished by brokers or dealers may be used in servicing any or all of Janus
Capital's clients and such research may not necessarily be used by Janus Capital
in connection with the accounts which paid commissions to the broker-dealer
providing such research products and services.
Janus Capital may consider sales of Fund shares by a broker-dealer or the
recommendation of a broker-dealer to its customers that they purchase Fund
shares as a factor in the selection of broker-dealers to execute Fund portfolio
transactions. Janus Capital may also consider payments made by brokers effecting
transactions for the Fund i) to the Fund or ii) to other persons on behalf of
the Fund for services provided to the Fund for which it would be obligated to
pay. In placing portfolio business with such broker-dealers, Janus Capital will
seek the best execution of each transaction.
When the Fund purchases or sells a security in the over-the-counter market,
the transaction takes place directly with a principal market-maker, without the
use of a broker, except in those
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<PAGE>
circumstances where in the opinion of Janus Capital better prices and executions
will be achieved through the use of a broker.
The Fund's Trustees have authorized Janus Capital to place transactions
with DST Securities, Inc. ("DSTS"), a wholly-owned broker-dealer subsidiary of
DST. Janus Capital may do so if it reasonably believes that the quality of the
transaction and the associated commission are fair and reasonable and if,
overall, the associated transaction costs, net of any credits described above
under "Custodian, Transfer Agent and Certain Affiliations," are lower than those
that would otherwise be incurred.
OFFICERS AND TRUSTEES
The following are the names of the Trustees and officers of the Trust,
together with a brief description of their principal occupations during the last
five years. In August 1992, Janus Venture Fund, Inc. and Janus Twenty Fund, Inc.
(both separate Maryland corporations) and the Janus Income Series (a
Massachusetts business trust comprised of the Janus Flexible Income Fund and
Janus Intermediate Government Securities Fund series) were reorganized into
separate series of the Trust. In general, all references to Trust offices in
this section include comparable offices with the respective predecessor funds,
unless a Trust office was filled subsequent to the reorganization.
Thomas H. Bailey*# - Trustee, Chairman and President
100 Fillmore Street
Denver, CO 80206-4923
Trustee, Chairman and President of Janus Aspen Series. Chairman and
President of Janus Capital. Chairman and Director of IDEX Management, Inc.,
Largo, Florida (50% subsidiary of Janus Capital and investment adviser to a
group of mutual funds) ("IDEX").
James P. Craig, III*# - Trustee and Executive Vice President
100 Fillmore Street
Denver, CO 80206-4923
Trustee and Executive Vice President of Janus Aspen Series. Chief
Investment Officer, Vice President and Director of Janus Capital. Executive
Vice President and Portfolio Manager of Janus Fund series of the Trust.
David C. Decker* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4923
Executive Vice President and Portfolio Manager of Janus Special Situations
Fund series of the Trust. Formerly, research analyst at Janus Capital
(1992-1996). Obtained an M.B.A. in finance from the Fuqua School of
Business at Duke University (1990-1992).
_________________________________________
* Interested person of the Trust and of Janus Capital.
# Member of the Executive Committee.
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David C. Tucker* - Vice President and General Counsel
100 Fillmore Street
Denver, CO 80206-4923
Vice President and General Counsel of Janus Aspen Series. Vice President,
Secretary and General Counsel of Janus Capital. Vice President, General
Counsel and Director of Janus Service and Janus Distributors. Director,
Vice President and Secretary of Janus Capital International Ltd.
Steven R. Goodbarn* - Vice President and Chief Financial Officer
100 Fillmore Street
Denver, CO 80206-4923
Vice President and Chief Financial Officer of Janus Aspen Series. Vice
President of Finance, Treasurer and Chief Financial Officer of Janus
Service, Janus Distributors and Janus Capital Director of IDEX and Janus
Distributors. Director, Treasurer and Vice President of Finance of Janus
Capital International Ltd. Formerly (1979 to 1992), with the accounting
firm of Price Waterhouse LLP, Denver, Colorado.
Glenn P. O'Flaherty - Treasurer and Chief Accounting Officer
100 Fillmore Street
Denver, CO 80206-4923
Treasurer and Chief Accounting Officer of Janus Aspen Series. Director of
Fund Accounting of Janus Capital.
Kelley Abbott Howes - Secretary
100 Fillmore Street
Denver, CO 80206-4923
Secretary of Janus Aspen Series. Associate Counsel of Janus Capital.
Formerly (1990 to 1994), with The Boston Company Advisors, Inc., Boston,
Massachusetts (mutual fund administration services.
John W. Shepardson# - Trustee
P.O. Box 9591
Denver, CO 80209
Trustee of Janus Aspen Series. Historian.
_________________________________________
* Interested person of the Trust and of Janus Capital.
# Member of the Executive Committee.
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William D. Stewart# - Trustee
5330 Sterling Drive
Boulder, CO 80302
Trustee of Janus Aspen Series. President of HPS Corporation, Boulder,
Colorado (manufacturer of vacuum fittings and valves).
Gary O. Loo - Trustee
102 N. Cascade, Suite 500
Colorado Springs, CO 80903
Trustee of Janus Aspen Series. President and a Director of High Valley
Group, Inc., Colorado Springs, Colorado (investments) since 1987.
Dennis B. Mullen - Trustee
1601 114th Avenue, SE
Alderwood Building, Suite 130
Bellevue, WA 98004
Trustee of Janus Aspen Series. President and Chief Executive Officer of BC
Northwest, L.P., a franchise of Boston Chicken, Inc., Bellevue, Washington
(restaurant chain). Formerly (1982 to 1993), Chairman, President and Chief
Executive Officer of Famous Restaurants, Inc., Scottsdale, Arizona
(restaurant chain).
Martin H. Waldinger - Trustee
4940 Sandshore Court
San Diego, CA 92130
Trustee of Janus Aspen Series. Private Consultant and Director of Run
Technologies, Inc., a software development firm, San Carlos, California.
Formerly (1989 to 1993), President and Chief Executive Officer of
Bridgecliff Management Services, Campbell, California (a condominium
association management company).
_________________________________________
# Member of the Executive Committee.
The Trustees are responsible for major decisions relating to the Fund's
objective, policies and techniques. The Trustees also supervise the operation of
the Fund by its officers and review the investment decisions of the officers
although they do not actively participate on a regular basis in making such
decisions.
The Executive Committee of the Trustees shall have and may exercise all the
powers and authority of the Board except for matters requiring action by the
whole Board pursuant to the Trust's Bylaws or Agreement and Declaration of Trust
("Declaration of Trust"), Massachusetts law or the 1940 Act.
29
<PAGE>
The following table shows the aggregate compensation paid to each Trustee
by the Fund described in this SAI and all funds advised and sponsored by Janus
Capital (collectively, the "Janus Funds") for the periods indicated. None of the
Trustees receive any pension or retirement from the Fund or the Janus Funds.
<TABLE>
Aggregate Compensation Total Compensation from the
from the Fund for fiscal year Janus Funds for calendar year
Name of Person, Position ended October 31,1996** ended December 31, 1995***
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey, Chairman* $0 --
James P. Craig, III, Trustee* $0 --
John W. Shepardson, Trustee $0 $56,101
William D. Stewart, Trustee $0 $53,228
Gary O. Loo, Trustee $0 $50,365
Dennis B. Mullen, Trustee $0 $53,228
Martin H. Waldinger, Trustee $0 $53,228
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*An interested person of the Fund and of Janus Capital. Compensated by Janus
Capital and not the Fund.
**The Fund had not commenced operations as of October 31, 1996.
***As of December 31, 1995, Janus Funds consisted of two registered investment
companies comprised of a total of 26 funds.
PURCHASE OF SHARES
As stated in the Prospectus, Janus Distributors is a distributor of the
Fund's shares. Shares of the Fund are sold at the net asset value per share as
determined at the close of the regular trading session of the New York Stock
Exchange (the "NYSE") next occurring after a purchase order is received and
accepted by the Fund. The Shareholder's Manual Section of the Prospectus
contains detailed information about the purchase of shares.
Net Asset Value Determination
As stated in the Prospectus, the net asset value ("NAV") of Fund shares is
determined once each day on which the New York Stock Exchange ("NYSE") is open,
at the close of its regular trading session (normally 4:00 p.m., New York time,
Monday through Friday). The NAV of Fund shares is not determined on days the
NYSE is closed (generally, New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas). The per
share NAV of the Fund is determined by dividing the total value of the Fund's
securities and other assets, less liabilities, by the total number of shares
outstanding. In determining NAV, securities listed on an Exchange, the NASDAQ
National Market and foreign markets are valued at the closing prices on such
markets, or if such price is lacking for the trading period immediately
preceding the time of determination, such securities are valued at their current
bid price. Municipal securities held by the Fund are traded primarily in the
over-the-counter market. Valuations of such securities are furnished by one or
more pricing services employed by the Fund and are based upon a computerized
matrix system or appraisals obtained by a pricing service, in each case in
reliance upon information concerning market transactions and quotations from
recognized municipal securities dealers. Other securities that are traded on the
over-the-counter market are valued at their closing bid prices. Foreign
securities and currencies are converted to U.S. dollars using the
30
<PAGE>
exchange rate in effect at the close of the NYSE. The Fund will determine the
market value of individual securities held by it, by using prices provided by
one or more professional pricing services which may provide market prices to
other funds, or, as needed, by obtaining market quotations from independent
broker-dealers. Short-term securities maturing within 60 days are valued on the
amortized cost basis. Securities for which quotations are not readily available,
and other assets, are valued at fair values determined in good faith under
procedures established by and under the supervision of the Trustees.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York (i.e., a day on which the NYSE is open). In
addition, European or Far Eastern securities trading generally or in a
particular country or countries may not take place on all business days in New
York. Furthermore, trading takes place in Japanese markets on certain Saturdays
and in various foreign markets on days which are not business days in New York
and on which the Fund's NAV is not calculated. The Fund calculates its NAV per
share, and therefore effects sales, redemptions and repurchases of its shares,
as of the close of the NYSE once on each day on which the NYSE is open. Such
calculation may not take place contemporaneously with the determination of the
prices of the foreign portfolio securities used in such calculation.
Reinvestment of Dividends and Distributions
If investors do not elect in writing or by phone to receive their dividends
and distributions in cash, all income dividends and capital gains distributions,
if any, on the Fund's shares are reinvested automatically in additional shares
of the Fund at the NAV determined on the first business day following the record
date. Checks for cash dividends and distributions and confirmations of
reinvestments are usually mailed to shareholders within ten days after the
record date. Any election of the manner in which a shareholder wishes to receive
dividends and distributions (which may be made on the New Account Application
form or by phone) will apply to dividends and distributions the record dates of
which fall on or after the date that the Fund receives such notice. Investors
receiving cash distributions and dividends may elect in writing or by phone to
change back to automatic reinvestment at any time.
REDEMPTION OF SHARES
Procedures for redemption of shares are set forth in the Shareholder's
Manual section of the Prospectus. Shares normally will be redeemed for cash,
although the Fund retains the right to redeem its shares in kind under unusual
circumstances, in order to protect the interests of remaining shareholders, by
delivery of securities selected from its assets at its discretion. However, the
Fund is governed by Rule 18f-1 under the 1940 Act, which requires the Fund to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the NAV of
the Fund during any 90-day period for any one shareholder. Should redemptions by
any shareholder exceed such limitation, the Fund will have the option of
redeeming the excess in cash or in kind. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage costs in converting the assets to
cash. The method of valuing securities used to make redemptions in kind will be
the same as the method of valuing portfolio
31
<PAGE>
securities described under "Purchase of Shares - Net Asset Value Determination"
and such valuation will be made as of the same time the redemption price is
determined. The shareholder has the ability to request a review of valuation
in-kind redemptions by the Trustee at their next regularly scheduled meeting.
The right to require the Fund to redeem its shares may be suspended, or the
date of payment may be postponed, whenever (1) trading on the NYSE is
restricted, as determined by the SEC, or the NYSE is closed except for holidays
and weekends, (2) the SEC permits such suspension and so orders, or (3) an
emergency exists as determined by the SEC so that disposal of securities or
determination of NAV is not reasonably practicable.
SHAREHOLDER ACCOUNTS
Detailed information about the general procedures for shareholder accounts
and specific types of accounts is set forth in the Prospectus. Applications for
specific types of accounts may be obtained by calling the Fund at 1-800-525-3713
or writing to the Fund at P.O. Box 173375, Denver, Colorado 80217-3375.
Telephone Transactions
As stated in the Prospectus, shareholders may initiate a number of
transactions by telephone. The Fund, its transfer agent and its distributor
disclaim responsibility for the authenticity of instructions received by
telephone. Such entities will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures may include,
among others, requiring personal identification prior to acting upon telephone
instructions, providing written confirmation of the transactions and tape
recording telephone conversations.
Systematic Redemptions
As stated in the Shareholder's Manual section of the Prospectus, if you
have a regular account or are eligible for normal distributions from a
retirement plan, you may establish a systematic redemption option. The payments
will be made from the proceeds of periodic redemptions of shares in the account
at the NAV. Depending on the size or frequency of the disbursements requested,
and the fluctuation in value of the Fund's portfolio, redemptions for the
purpose of making such disbursements may reduce or even exhaust the
shareholder's account. Either an investor or the Fund, by written notice to the
other, may terminate the investor's systematic redemption option without penalty
at any time.
Information about requirements to establish a systematic redemption option
may be obtained by writing or calling the Fund at the address or phone number
shown above.
32
<PAGE>
RETIREMENT PLANS
The Fund offers several different types of tax-deferred retirement plans
that an investor may establish to invest in Fund shares, depending on rules
prescribed by the Code. The Individual Retirement Account ("IRA") may be used by
most individuals who have taxable compensation. Simplified Employee Pension
Plans ("SEPs") and Defined Contribution Plans (Profit Sharing or Money Purchase
Pension Plans) may be used by most employers, including corporations,
partnerships and sole proprietors, for the benefit of business owners and their
employees. In addition, the Fund offers a Section 403(b)(7) Plan for employees
of educational organizations and other qualifying tax-exempt organizations.
Investors should consult their tax advisor or legal counsel before selecting a
retirement plan.
Contributions under IRAs, SEPs, Defined Contribution Plans and Section
403(b)(7) Plans are subject to specific contribution limitations. Generally,
such contributions may be invested at the direction of the participant. The
investment is then held by Investors Fiduciary Trust Company as custodian. Each
participant's account is charged an annual fee of $12. There is a maximum annual
fee of $24 per taxpayer identification number.
Distributions from retirement plans are generally subject to ordinary
income tax and may be subject to an additional 10% tax if withdrawn prior to age
59 1/2. Several exceptions to the general rule may apply. However, shareholders
must start withdrawing retirement plan assets no later than April 1 of the year
after they reach age 70 1/2. Several methods exist to determine the amount of
the minimum annual distribution. Shareholders should consult with their tax
advisor or legal counsel prior to receiving any distribution from any retirement
plan, in order to determine the income tax impact of any such distribution.
To receive additional information about IRAs, SEPs, Defined Contribution
Plans and Section 403(b)(7) Plans along with the necessary materials to
establish an account, please call the Fund at 1-800-525-3713 or write to the
Fund at P.O. Box 173375, Denver, Colorado 80217-3375. No contribution to an IRA,
SEP, Defined Contribution Plan or Section 403(b)(7) Plan can be made until the
appropriate forms to establish any such plan have been completed.
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS
It is a policy of the Fund to make distributions of substantially all of
its investment income and any net realized capital gains. The Fund declares and
makes quarterly distributions of income. Any capital gains realized during each
fiscal year of the Fund ended October 31, as defined by the Code, are normally
declared and payable to shareholders in December. The Fund intends to qualify as
a regulated investment company by satisfying certain requirements prescribed by
Subchapter M of the Code.
The Fund may purchase securities of certain foreign corporations considered
to be passive foreign investment companies by the IRS. In order to avoid taxes
and interest that must be paid by the Fund, if these instruments are profitable,
the Fund may make various elections permitted by the
33
<PAGE>
tax laws. However, these elections could require that the Fund recognize taxable
income, which in turn must be distributed.
Some foreign securities purchased by the Fund may be subject to foreign
taxes which could reduce the yield on such securities. The amount of such
foreign taxes is expected to be insignificant. Accordingly, the Fund does not
intend to make the election permitted under section 853 of the Code to pass
through such taxes to shareholders as a foreign tax credit. As a result, any
foreign taxes paid or accrued will represent an expense to the Fund which will
reduce its investment company taxable income as this would increase the taxable
income reported to shareholders and require shareholders to take the credit on
their tax returns, complicating the preparation of such returns.
MISCELLANEOUS INFORMATION
The Fund is a series of the Trust, a Massachusetts business trust which was
created on February 11, 1986. The Trust is an open-end management investment
company registered under the 1940 Act. As of the date of this SAI, the Trust
offers 19 other series by other prospectuses.
Janus Capital reserves the right to the name "Janus." In the event that
Janus Capital does not continue to provide investment advice to the Fund, the
Fund must cease to use the name "Janus" as soon as reasonably practicable.
Under Massachusetts law, shareholders of the Fund could, under certain
circumstances, be held liable for the obligations of the Fund. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Fund and requires that notice of this disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or the Trustees.
The Declaration of Trust also provides for indemnification from the assets of
the Fund for all losses and expenses of any Fund shareholder held liable for the
obligations of the Fund. Thus, the risk of a shareholder incurring a financial
loss on account of its liability as a shareholder of the Fund is limited to
circumstances in which the Fund would be unable to meet its obligations. The
possibility that these circumstances would occur is remote. The Trustees intend
to conduct the operations of the Fund to avoid, to the extent possible,
liability of shareholders for liabilities of the Fund.
Shares of the Trust
The Trust is authorized to issue an unlimited number of shares of
beneficial interest with a par value of one cent per share for each series of
the Trust. Shares of the Fund are fully paid and nonassessable when issued. All
shares of the Fund participate equally in dividends and other distributions by
the Fund, and in residual assets of the Fund in the event of liquidation. Shares
of the Fund have no preemptive, conversion or subscription rights. Shares of the
Fund may be transferred by endorsement or stock power as is customary, but the
Fund is not bound to recognize any transfer until it is recorded on its books.
34
<PAGE>
Voting Rights
The present Trustees were elected at a meeting of shareholders held on July
10, 1992, with the exception of Mr. Craig who was appointed by the Trustees as
of June 30, 1995. Under the Declaration of Trust, each Trustee will continue in
office until the termination of the Trust or his earlier death, resignation,
bankruptcy, incapacity or removal. Vacancies will be filled by a majority of the
remaining Trustees, subject to the 1940 Act. Therefore, no annual or regular
meetings of shareholders normally will be held, unless otherwise required by the
Declaration of Trust or the 1940 Act. Subject to the foregoing, shareholders
have the power to vote to elect or remove Trustees, to terminate or reorganize
the Fund, to amend the Declaration of Trust, to bring certain derivative actions
and on any other matters on which a shareholder vote is required by the 1940
Act, the Declaration of Trust, the Trust's Bylaws or the Trustees.
Each share of the Fund and of each other series of the Trust has one vote
(and fractional votes for fractional shares). Shares of all series of the Trust
have noncumulative voting rights, which means that the holders of more than 50%
of the shares of all series of the Trust voting for the election of Trustees can
elect 100% of the Trustees if they choose to do so and, in such event, the
holders of the remaining shares will not be able to elect any Trustees. The Fund
and each other series of the Trust will vote separately only with respect to
those matters that affect only that series or if a portfolio's interest in a
matter differs from the interests of other portfolios of the Trust.
Independent Accountants
Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado
80202, independent accountants for the Fund, audit the Fund's annual financial
statements and prepare its tax returns.
Registration Statement
The Trust has filed with the SEC, Washington, D.C., a Registration
Statement under the Securities Act of 1933, as amended, with respect to the
securities to which this SAI relates. If further information is desired with
respect to the Fund or such securities, reference is made to the Registration
Statement and the exhibits filed as a part thereof.
PERFORMANCE INFORMATION
The Prospectus contains a brief description of how performance is
calculated.
Quotations of average annual total return for the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5, and 10 years (up to the life of the
Fund). These are the annual total rates of return that would equate the initial
amount invested to the ending redeemable value. These rates of return are
calculated pursuant to the following formula: P(1 + T)n = ERV (where P = a
hypothetical initial payment of $1,000, T = the average annual total return, n =
the number of years and ERV = the
35
<PAGE>
ending redeemable value of a hypothetical $1,000 payment made at the beginning
of the period). All total return figures reflect the deduction of a proportional
share of Fund expenses on an annual basis, and assume that all dividends and
distributions are reinvested when paid.
Quotations of the Fund's yield are based on the investment income per share
earned during a particular 30-day period (including dividends, if any, and
interest), less expenses accrued during the period ("net investment income"),
and are computed by dividing net investment income by the net asset value per
share on the last day of the period, according to the following formula:
YIELD = 2 [(a-b + 1)6 - 1]
cd
where a = dividend and interest income
b = expenses accrued for the period
c = average daily number of shares outstanding during the period
that were entitled to receive dividends
d = maximum net asset value per share on the last day of the
period
From time to time in advertisements or sales material, the Fund may discuss
its performance ratings or other information as published by recognized mutual
fund statistical rating services, including, but not limited to, Lipper
Analytical Services, Inc., Ibbotson Associates, Micropal or Morningstar or by
publications of general interest such as Forbes or Money. The Fund may also
compare its performance to that of other selected mutual funds, mutual fund
averages or recognized stock market indicators, including, but not limited to,
the Standard & Poor's 500 Composite Stock Price Index, the Standard & Poor's
Midcap Index, the Dow Jones Industrial Average, the Lehman Brothers
Government/Corporate Bond Index, the Lehman Brothers Government/Corporate 1-3
Year Bond Index, the Lehman Brothers Long Government/Corporate Bond Index, the
Lehman Brothers Intermediate Government Bond Index, the Lehman Brothers
Municipal Bond Index, the Russell 2000 Index and the NASDAQ composite. In
addition, the Fund may compare its total return to the yield on U.S. Treasury
obligations and to the percentage change in the Consumer Price Index. Such
performance ratings or comparisons may be made with funds that may have
different investment restrictions, objectives, policies or techniques than the
Fund and such other funds or market indicators may be comprised of securities
that differ significantly from the Fund's investments.
36
<PAGE>
JANUS INVESTMENT FUND
PART C - OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
List all financial statements and exhibits filed as part of the
Registration Statement.
(a)(1) Financial Statements Included in the Prospectus:
Financial Highlights for each of the following Funds:
Not Applicable
(a)(2) Financial Statements included in the Statement of Additional
Information:
The Financial Statements for each of the following Funds,
included in the Semiannual Report dated April 30, 1996, are
incorporated by reference into the Statement of Additional
Information:
Not Applicable
(b) Exhibits:
Exhibit 1 (a) Agreement and Declaration of Trust,
dated February 11, 1986 is incorporated
herein by reference to Exhibit 1 to
Post-Effective Amendment No. 30.
(b) Certificate of Designation for Janus
Growth and Income Fund is incorporated
herein by reference to Exhibit 1(b) to
Post-Effective Amendment No. 42.
(c) Certificate of Designation for Janus
Worldwide Fund is incorporated herein by
reference to Exhibit 1(c) to Post-
Effective Amendment No. 42.
(d) Certificate of Designation for Janus
Twenty Fund is incorporated herein by
reference to Exhibit 1(d) to Post-
Effective Amendment No. 46.
(e) Certificate of Designation for Janus
Flexible Income Fund is incorporated
herein by reference to Exhibit 1(e) to
Post-Effective Amendment No. 46.
(f) Certificate of Designation for Janus
Intermediate Government Securities Fund
is incorporated herein by reference to
Exhibit 1(f) to Post-Effective Amendment
No. 46.
C-1
<PAGE>
(g) Certificate of Designation for Janus
Venture Fund is incorporated herein by
reference to Exhibit 1(g) to Post-
Effective Amendment No. 47.
(h) Certificate of Designation for Janus
Enterprise Fund is incorporated herein
by reference to Exhibit 1(h) to Post-
Effective Amendment No. 48.
(i) Certificate of Designation for Janus
Balanced Fund is incorporated herein by
reference to Exhibit 1(i) to Post-
Effective Amendment No. 48.
(j) Certificate of Designation for Janus
Short-Term Bond Fund is incorporated
herein by reference to Exhibit 1(j) to
Post-Effective Amendment No. 48.
(k) Certificate of Designation for Janus
Federal Tax-Exempt Fund is incorporated
herein by reference to Exhibit 1(k) to
Post-Effective Amendment No. 54.
(l) Certificate of Designation for Janus
Mercury Fund is incorporated herein by
reference to Exhibit 1(l) to Post-
Effective Amendment No. 54.
(m) Certificate of Designation for Janus
Overseas Fund is incorporated herein by
reference to Exhibit 1(m) to
Post-Effective Amendment No. 60.
(n) Form of Amendment to the Registrant's
Agreement and Declaration of Trust is
incorporated herein by reference to
Exhibit 1(n) to Post-Effective Amendment
No. 62.
(o) Form of Certificate of Designation for
Janus Money Market Fund, Janus
Government Money Market Fund and Janus
Tax-Exempt Money Market Fund is
incorporated herein by reference to
Exhibit 1(o) to Post-Effective Amendment
No. 62.
(p) Form of Certificate of Designation for
Janus High-Yield Fund and Janus Olympus
Fund is incorporated herein by reference
to Exhibit 1(p) to Post-Effective
Amendment No. 68.
(q) Certificate of Designation for Janus
Equity Income Fund is incorporated
herein by reference to Exhibit 1(q) to
Post-Effective Amendment No. 72.
(r) Form of Certificate of Establishment and
Designation for Janus Special Situations
Fund is filed herein as Exhibit 1(r).
C-2
<PAGE>
(s) Form of Amendment to Registrant's
Agreement and Declaration of Trust is
filed herein as Exhibit 1(s).
Exhibit 2 (a) Restated Bylaws are incorporated herein
by reference to Exhibit 2(a) to
Post-Effective Amendment No. 71.
(b) First Amendment to the Bylaws is
incorporated herein by reference to
Exhibit 2(b) to Post-Effective Amendment
No. 71.
Exhibit 3 Not Applicable.
Exhibit 4 (a) Specimen Stock Certificate for Janus
Fund(1) is incorporated herein by
reference to Exhibit 4(b) to
Post-Effective Amendment No. 42.
(b) Specimen Stock Certificate for Janus
Growth and Income Fund is incorporated
herein by reference to Exhibit 4(b) to
Post-Effective Amendment No. 42.
(c) Specimen Stock Certificate for Janus
Worldwide Fund is incorporated herein by
reference to Exhibit 4(c) to Post-
Effective Amendment No. 42.
(d) Specimen Stock Certificate for Janus
Twenty Fund(1) is incorporated herein by
reference to Exhibit 4(d) to Post-
Effective Amendment No. 46.
(e) Specimen Stock Certificate for Janus
Flexible Income Fund(1) is incorporated
herein by reference to Exhibit 4(e) to
Post-Effective Amendment No. 46.
(f) Specimen Stock Certificate for Janus
Intermediate Government Securities
Fund(1) is incorporated herein by
reference to Exhibit 4(f) to
Post-Effective Amendment No. 46.
(g) Specimen Stock Certificate for Janus
Venture Fund(1) is incorporated herein
by reference to Exhibit 4(g) to
Post-Effective Amendment 47.
(h) Specimen Stock Certificate for Janus
Enterprise Fund is incorporated herein
by reference to Exhibit 4(h) to Post-
Effective Amendment No. 48.
(i) Specimen Stock Certificate for Janus
Balanced Fund is incorporated herein by
reference to Exhibit 4(i) to Post-
Effective Amendment No. 48.
- -------------------
(1)Outstanding certificates representing shares of predecessor entity to this
series of the Trust are deemed to represent shares of this series.
C-3
<PAGE>
(j) Specimen Stock Certificate for Janus
Short-Term Bond Fund is incorporated
herein by reference to Exhibit 4(j) to
Post-Effective Amendment No. 48.
(k) Specimen Stock Certificate for Janus
Federal Tax-Exempt Fund is incorporated
herein by reference to Exhibit 4(k) to
Post-Effective Amendment No. 54.
(l) Specimen Stock Certificate for Janus
Mercury Fund is incorporated herein by
reference to Exhibit 4(l) to Post-
Effective Amendment No. 54.
(m) Specimen Stock Certificate for Janus
Overseas Fund is incorporated herein by
reference to Exhibit 4(m) to
Post-Effective Amendment No. 60.
(n) Specimen Stock Certificates for Janus
High-Yield Fund and Janus Olympus Fund
are incorporated herein by reference to
Exhibit 4(n) to Post-Effective Amendment
No. 68.
(o) Specimen Stock Certificate for Janus
Equity Income Fund is incorporated
herein by reference to Exhibit 4(o) to
Post-Effective Amendment No. 72.
(p) Specimen Stock Certificate for Janus
Special Situations Fund is filed herein
as Exhibit 4(p).
Exhibit 5 (a) Investment Advisory Agreement for Janus
Fund is incorporated herein by reference
to Exhibit 5 to Post-Effective Amendment
No. 30.
(b) Investment Advisory Agreement for Janus
Growth and Income Fund and Janus
Worldwide Fund is incorporated herein by
reference to Exhibit 5(b) to
Post-Effective Amendment No. 42.
(c) Form of Investment Advisory Agreement
for Janus Twenty Fund and Janus Venture
Fund is incorporated herein by reference
to Exhibit 5(c) to Post-Effective
Amendment No. 46.
(d) Form of Investment Advisory Agreement
for Janus Flexible Income Fund and Janus
Intermediate Government Securities Fund
is incorporated herein by reference to
Exhibit 5(d) to Post-Effective Amendment
No. 46.
(e) Form of Investment Advisory Agreement
for Janus Enterprise Fund, Janus
Balanced Fund and Janus Short-
C-4
<PAGE>
Term Bond Fund is incorporated herein by
reference to Exhibit 5(e) to
Post-Effective Amendment No. 48.
(f) Form of Investment Advisory Agreement
for Janus Federal Tax-Exempt Fund and
Janus Mercury Fund is incorporated
herein by reference to Exhibit 5(f) to
Post-Effective Amendment No. 54.
(g) Form of Investment Advisory Agreement
for Janus Overseas Fund is incorporated
herein by reference to Exhibit 5(g) to
Post-Effective Amendment No. 60.
(h) Form of Investment Advisory Agreement
for Janus Money Market Fund, Janus
Government Money Market Fund and Janus
Tax-Exempt Money Market Fund is
incorporated herein by reference to
Exhibit 5(h) to Post-Effective Amendment
No. 64.
(i) Restated form of Investment Advisory
Agreement for Janus High-Yield Fund is
filed herein as Exhibit 5(i).
(j) Restated form of Investment Advisory
Agreement for Janus Olympus Fund is
filed herein as Exhibit 5(j).
(k) Form of Investment Advisory Agreement
for Janus Equity Income Fund is
incorporated herein by reference to
Exhibit 5(k) to Post-Effective Amendment
No. 73.
(l) Form of Investment Advisory Agreement
for Janus Special Situations Fund is
filed herein as Exhibit 5(l).
Exhibit 6 Form of Distribution Agreement between
Janus Investment Fund and Janus
Distributors, Inc. is incorporated
herein by reference to Exhibit 6 to
Post-Effective Amendment No. 57.
Exhibit 7 Not Applicable.
Exhibit 8 (a) Custodian Contract between Janus
Investment Fund and State Street Bank
and Trust Company is incorporated herein
by reference to Exhibit 8(a) to
Post-Effective Amendment No. 32.
(b) Amendment dated April 25, 1990 of State
Street Custodian Contract is
incorporated herein by reference to
Exhibit 8(b) to Post-Effective Amendment
No. 40.
(c) Letter Agreement dated February 1, 1991
regarding State Street Custodian
Contract is incorporated herein by
reference to Exhibit 8(c) to
Post-Effective Amendment No. 42.
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<PAGE>
(d) Custodian Contract between Janus
Investment Fund and Investors Fiduciary
Trust Company is incorporated herein by
reference to Exhibit 8(d) to
Post-Effective Amendment No. 42.
(e) Letter Agreement dated October 9, 1992
regarding State Street Custodian
Agreement is incorporated herein by
reference to Exhibit 8(e) to
Post-Effective Amendment No. 52.
(f) Letter Agreement dated April 28, 1993
regarding State Street Custodian
Agreement is incorporated herein by
reference to Exhibit 8(f) to
Post-Effective Amendment No. 60.
(g) Letter Agreement dated April 4, 1994
regarding State Street Custodian
Agreement is incorporated herein by
reference to Exhibit 8(g) to
Post-Effective Amendment No. 64.
(h) Form of Custody Agreement between Janus
Investment Fund, on behalf of Janus
Money Market Fund, Janus Government
Money Market Fund and Janus Tax-Exempt
Money Market Fund, and United Missouri
Bank, N.A. is incorporated herein by
reference to Exhibit 8(h) to Post-
Effective Amendment No. 64.
(i) Letter Agreement dated December 12, 1995
regarding State Street Custodian
Contract is incorporated herein by
reference to Exhibit 8(i) to
Post-Effective Amendment No. 72.
(j) Amendment dated October 11, 1995 of
State Street Custodian Contract is
incorporated herein by reference to
Exhibit 8(j) to Post-Effective Amendment
No. 71.
(k) Form of Amendment dated September 10,
1996 of State Street Custodian Contract
is filed herein as Exhibit 8(k).
(l) Letter Agreement dated September 10,
1996 regarding State Street Custodian
Contract is filed herein as Exhibit
8(l).
(m) Form of Subcustodian Contract between
United Missouri Bank, N.A., and State
Street Bank and Trust Company is filed
herein as Exhibit 8(m).
Exhibit 9 (a) Transfer Agency Agreement with Investors
Fiduciary Trust Company is hereby
withdrawn.
C-6
<PAGE>
(b) Subagency Agreement between Janus
Service Corporation and Investors
Fiduciary Trust Company is hereby
withdrawn.
(c) Form of Administration Agreement with
Janus Capital Corporation for Janus
Money Market Fund, Janus Government
Money Market Fund and Janus Tax-Exempt
Money Market Fund is incorporated herein
by reference to Exhibit 9(c) to
Post-Effective Amendment No. 64.
(d) Transfer Agency Agreement dated December
9, 1994 with Janus Service Corporation
for Janus Money Market Fund, Janus
Government Money Market Fund and Janus
Tax-Exempt Money Market Fund filed as
Exhibit 9(d) to Post-Effective Amendment
No. 64 is withdrawn.
(e) Transfer Agency Agreement dated
September 27, 1995 with Janus Service
Corporation for Janus Money Market Fund,
Janus Government Money Market Fund,
Janus Tax-Exempt Money Market Fund,
Janus High-Yield Fund and Janus Olympus
Fund is incorporated herein by reference
to Exhibit 9(e) to Post-Effective
Amendment No. 70.
(f) Letter Agreement dated December 21, 1995
regarding Janus Service Corporation
Transfer Agency Agreement is
incorporated herein by reference to
Exhibit 9(f) to Post-Effective Amendment
No. 72.
(g) Letter Agreement dated May 21, 1996
regarding Janus Service Corporation
Transfer Agency Agreement is
incorporated by reference to Exhibit
9(g) to Post-Effective Amendment No. 73.
Exhibit 10 (a) Opinion and Consent of Messrs. Davis,
Graham & Stubbs with respect to shares
of Janus Fund is incorporated herein by
reference to Exhibit 10 (a) to
Post-Effective Amendment No. 31.
(b) Opinion and Consent of Fund Counsel with
respect to shares of Janus Growth and
Income Fund and Janus Worldwide Fund is
incorporated herein by reference to
Exhibit 10(b) to Post-Effective
Amendment 42.
(c) Opinion and Consent of Fund Counsel with
respect to shares of Janus Enterprise
Fund, Janus Balanced Fund and Janus
Short-Term Bond Fund is incorporated
herein by reference to Exhibit 10(d) to
Post-Effective Amendment No. 48.
C-7
<PAGE>
(d) Opinion and Consent of Messrs. Sullivan
and Worcester with respect to shares of
Janus Twenty Fund is incorporated herein
by reference to Exhibit 10(e) to Post-
Effective Amendment No. 49.
(e) Opinion and Consent of Messrs. Sullivan
and Worcester with respect to shares of
Janus Venture Fund is incorporated
herein by reference to Exhibit 10(f) to
Post-Effective Amendment No. 49.
(f) Opinion and Consent of Messrs. Sullivan
and Worcester with respect to shares of
Janus Flexible Income Fund is
incorporated herein by reference to
Exhibit 10(g) to Post-Effective
Amendment No. 49.
(g) Opinion and Consent of Messrs. Sullivan
and Worcester with respect to shares of
Janus Intermediate Government Securities
Fund is incorporated herein by reference
to Exhibit 10(h) to Post-Effective
Amendment No. 49.
(h) Opinion and Consent of Fund Counsel with
respect to shares of Janus Federal
Tax-Exempt Fund and Janus Mercury Fund
is incorporated herein by reference to
Exhibit 10(i) to Post-Effective
Amendment No. 54.
(i) Opinion and Consent of Fund Counsel with
respect to shares of Janus Overseas Fund
is incorporated herein by reference to
Exhibit 10(i) to Post-Effective
Amendment No. 60.
(j) Opinion and Consent of Fund Counsel with
respect to shares of Janus Money Market
Fund, Janus Government Money Market Fund
and Janus Tax-Exempt Money Market Fund
is incorporated herein by reference to
Exhibit 10(j) to Post-Effective
Amendment No. 62.
(k) Opinion and Consent of Fund Counsel with
respect to Institutional Shares of Janus
Money Market Fund, Janus Government
Money Market Fund and Janus Tax-Exempt
Money Market Fund is incorporated herein
by reference to Exhibit 10(k) to
Post-Effective Amendment No. 65.
(l) Opinion and Consent of Fund Counsel with
respect to shares of Janus High-Yield
Fund and Janus Olympus Fund is
incorporated herein by reference to
Exhibit 10(l) to Post-Effective
Amendment No. 68.
(m) Opinion and Consent of Fund Counsel with
respect to shares of Janus Equity Income
Fund is incorporated herein
C-8
<PAGE>
by reference to Exhibit 10(m) to
Post-Effective Amendment No. 72.
(n) Opinion and Consent of Fund Counsel with
respect to shares of Janus Special
Situations Fund is filed herein as
Exhibit 10(n).
Exhibit 11 Consent of Price Waterhouse LLP is filed
herein as Exhibit 11.
Exhibit 12 Not Applicable.
Exhibit 13 Not Applicable.
Exhibit 14 (a) Model Individual Retirement Plan is
incorporated herein by reference to
Exhibit 14(a) to Post-Effective
Amendment No. 57.
(b) Model Defined Contribution Retirement
Plan is incorporated herein by reference
to Exhibit 14(b) to Post-Effective
Amendment No. 41.
(c) Model Section 403(b)(7) Plan is
incorporated herein by reference to
Exhibit 14(c) to Post-Effective
Amendment No. 38.
Exhibit 15 Not Applicable.
Exhibit 16 (a) Computation of Total Return is
incorporated herein by reference to
Exhibit 16 to Post-Effective Amendment
No. 44.
(b) Computation of Current Yield and
Effective Yield is incorporated herein
by reference to Exhibit 16(b) to Post-
Effective Amendment No. 67.
Exhibit 17 Powers of Attorney dated as of June 30,
1995, are incorporated herein by
reference to Exhibit 17 to Post-
Effective Amendment No. 67.
Exhibit 18 (a) Form of plan entered into by Janus Money
Market Fund, Janus Government Money
Market Fund and Janus Tax-Exempt Money
Market Fund pursuant to Rule 18f-3
setting forth the separate arrangement
and expense allocation of each class of
such Funds filed as Exhibit 18 to
Post-Effective Amendment No. 66 is
withdrawn.
(b) Restated form of Rule 18f-3 plan entered
into by Janus Money Market Fund, Janus
Government Money Market Fund and Janus
Tax-Exempt Money Market Fund is
C-9
<PAGE>
incorporated by reference to Exhibit
18(b) to Post-Effective Amendment No.
69.
Exhibit 27 A Financial Data Schedule for the
following Fund will be filed by
amendment:
Janus Special Situations Fund
ITEM 25. Persons Controlled by or Under Common Control with Registrant
None
ITEM 26. Number of Holders of Securities
The number of record holders of shares of the Registrant as of August
15, 1996, was as follows:
Number of
Title of Class Record Holders
Janus Fund shares 800,829
Janus Growth and Income Fund shares 94,417
Janus Worldwide Fund shares 231,854
Janus Overseas Fund shares 38,479
Janus Twenty Fund shares 334,120
Janus Flexible Income Fund shares 31,098
Janus Intermediate Government
Securities Fund shares 4,576
Janus Venture Fund shares 132,657
Janus Enterprise Fund shares 83,543
Janus Balanced Fund shares 20,973
Janus Short-Term Bond Fund shares 4,400
Janus Federal Tax-Exempt Fund shares 3,867
Janus Mercury Fund shares 215,206
Janus Money Market Fund - Investor Shares 73,781
Janus Money Market Fund - Institutional Shares 87
Janus Government Money
Market Fund - Investor Shares 11,670
Janus Government Money
Market Fund - Institutional Shares 7
Janus Tax-Exempt Money
Market Fund - Investor Shares 5,982
Janus Tax-Exempt Money
Market Fund - Institutional Shares 5
Janus High-Yield Fund shares 5,023
Janus Olympus Fund shares 34,469
Janus Equity Income Fund shares 2,224
Janus Special Situations Fund shares N/A
ITEM 27. Indemnification
Article VIII of Janus Investment Fund's Agreement and Declaration of Trust
provides for indemnification of certain persons acting on behalf of the Funds.
In general, Trustees and officers will be indemnified against liability and
against all expenses of litigation incurred by them in connection with any
claim, action, suit or proceeding (or settlement of the same) in which they
become involved by virtue of their Fund office, unless their conduct is
determined
C-10
<PAGE>
to constitute willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties, or unless it has been determined that they have not
acted in good faith in the reasonable belief that their actions were in or not
opposed to the best interests of the Funds. A determination that a person
covered by the indemnification provisions is entitled to indemnification may be
made by the court or other body before which the proceeding is brought, or by
either a vote of a majority of a quorum of Trustees who are neither "interested
persons" of the Trust nor parties to the proceeding or by an independent legal
counsel in a written opinion. The Funds also may advance money for these
expenses, provided that the Trustee or officer undertakes to repay the Funds if
his conduct is later determined to preclude indemnification, and that either he
provide security for the undertaking, the Trust be insured against losses
resulting from lawful advances or a majority of a quorum of disinterested
Trustees, or independent counsel in a written opinion, determines that he
ultimately will be found to be entitled to indemnification. The Trust also
maintains a liability insurance policy covering its Trustees and officers.
ITEM 28. Business and Other Connections of Investment Adviser
The only business of Janus Capital Corporation is to serve as the
investment adviser of the Registrant and as investment adviser or subadviser to
several other mutual funds and private and retirement accounts. Business
backgrounds of the principal executive officers and directors of the adviser
that also hold positions with the Registrant are included under "Officers and
Trustees" in the currently effective Statements of Additional Information of the
Registrant. The remaining principal executive officers of the investment adviser
and their positions with the adviser and affiliated entities are: Mark B.
Whiston, Vice President and Chief Marketing Officer of Janus Capital
Corporation, Director and President of Janus Capital International Ltd.;
Marjorie G. Hurd, Vice President of Janus Capital Corporation, Director and
President of Janus Service Corporation; and Stephen L. Stieneker, Assistant
General Counsel, Chief Compliance Officer and Vice President of Compliance of
Janus Capital Corporation. Mr. Michael E. Herman, a director of Janus Capital
Corporation, is Chairman of the Finance Committee (1990 to present) of Ewing
Marion Kauffman Foundation, 4900 Oak, Kansas City, Missouri 64112. Mr. Michael
N. Stolper, a director of Janus Capital Corporation, is President of Stolper &
Company, Inc., 525 "B" Street, Suite 1080, San Diego, California 92101, an
investment performance consultant. Mr. Thomas A. McDonnell, a director of Janus
Capital Corporation, is President, Chief Executive Officer and a Director of DST
Systems, Inc., 1055 Broadway, 9th Floor, Kansas City, Missouri 64105, provider
of data processing and recordkeeping services for various mutual funds, and is
Executive Vice President and a director of Kansas City Southern Industries,
Inc., 114 W. 11th Street, Kansas City, Missouri 64105, a publicly traded holding
company whose primary subsidiaries are engaged in transportation, information
processing and financial services. Mr. Landon H. Rowland, a director of Janus
Capital Corporation, is President and Chief Executive Officer of Kansas City
Southern Industries, Inc.
ITEM 29. Principal Underwriters
(a) Janus Distributors, Inc. ("Janus Distributors") does not serve as
a principal underwriter for any investment company other than
Registrant.
(b) The principal business address, positions with Janus Distributors
and positions with Registrant of David C. Tucker and Steven R.
Goodbarn, officers and directors of Janus Distributors, are
described under "Officers
C-11
<PAGE>
and Trustees" in the Statement of Additional Information included
in this Registration Statement. The remaining principal executive
officers of Janus Distributors are Dana R. Cunningham, President,
and Jennifer A. Davis, Secretary. Mr. Cunningham and Ms. Davis do
not hold any positions with the Registrant. The principal
business address of each person is 100 Fillmore Street, Denver,
Colorado 80206-4923.
(c) Not applicable.
ITEM 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained by Janus Capital Corporation and Janus Service
Corporation, both of which are located at 100 Fillmore Street, Denver, Colorado
80206-4923, and by State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts 02101, and United Missouri Bank, P.O. Box 419226, Kansas City,
Missouri 64141-6226.
ITEM 31. Management Services
The Registrant has no management-related service contract which is not
discussed in Part A or Part B of this form.
ITEM 32. Undertakings
(a) Not applicable.
(b) The Registrant undertakes to file one or more post-effective
amendments for Janus Special Situations Fund, using financial
statements which need not be certified, within four to six months
of the later of the effective date of this Amendment to the
Registration Statement or the commencement of operations of such
Fund.
(c) The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
C-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Denver, and State of Colorado, on the
11th day of September, 1996.
JANUS INVESTMENT FUND
By: /s/ Thomas H. Bailey
Thomas H. Bailey, President
Janus Investment Fund is organized under the Agreement and Declaration of
Trust of the Registrant dated February 11, 1986, a copy of which is on file with
the Secretary of State of The Commonwealth of Massachusetts. The obligations of
the Registrant hereunder are not binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Registrant personally, but bind
only the trust property of the Registrant, as provided in the Agreement and
Declaration of Trust of the Registrant. The execution of this Amendment to the
Registration Statement has been authorized by the Trustees of the Registrant and
this Amendment to the Registration Statement has been signed by an authorized
officer of the Registrant, acting as such, and neither such authorization by
such Trustees nor such execution by such officer shall be deemed to have been
made by any of them personally, but shall bind only the trust property of the
Registrant as provided in its Declaration of Trust.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
/s/ Thomas H. Bailey President September 11, 1996
Thomas H. Bailey (Principal Executive
Officer) and Trustee
/s/ Steven R. Goodbarn Vice President and September 11, 1996
Steven R. Goodbarn Chief Financial Officer
(Principal Financial
Officer)
/s/ Glenn P. O'Flaherty Treasurer and Chief September 11, 1996
Glenn P. O'Flaherty Accounting Officer
(Principal Accounting
Officer)
<PAGE>
/s/ James P. Craig, III Trustee September 11, 1996
James P. Craig, III
Gary O. Loo* Trustee September 11, 1996
Gary O. Loo
Dennis B. Mullen* Trustee September 11, 1996
Dennis B. Mullen
John W. Shepardson* Trustee September 11, 1996
John W. Shepardson
William D. Stewart* Trustee September 11, 1996
William D. Stewart
Martin H. Waldinger* Trustee September 11, 1996
Martin H. Waldinger
/s/ Steven R. Goodbarn
*By Steven R. Goodbarn
Attorney-in-Fact
<PAGE>
INDEX OF EXHIBITS
Exhibit 1(r) Form of Certificate of Establishment and
Designation for Janus Special Situations Fund
Exhibit 1(s) Form of Amendment to Registrant's Agreement and
Declaration of Trust
Exhibit 4(p) Specimen Stock Certificate for Janus Special
Situations Fund
Exhibit 5(l) Investment Advisory Contract for Janus Special
Situations Fund
Exhibit 8(k) Form of Amendment to Custodian Contract
Exhibit 8(l) Letter Agreement to Custodian Contract
Exhibit 8(m) Form of Subcustodian Contract
Exhibit 10(n) Opinion and Consent of Fund Counsel
Exhibit 11 Consent of Price Waterhouse
EXHIBIT1(r)
JANUS INVESTMENT FUND
Certificate of Establishment and
Designation of Janus Special Situations Fund
The undersigned, being the Secretary of Janus Investment Fund, a
Massachusetts business trust with transferable shares (the "Trust"), being duly
authorized by vote of a Majority of the Trustees of the Trust acting pursuant to
Section 6.1(b) and Section 9.3 of the Trust's Agreement and Declaration of Trust
dated February 11, 1986, as now in effect (the "Declaration"), does hereby
establish and designate the Janus Special Situations Fund (in addition to the
Funds now existing) into which the assets of the Trust shall be divided (the
"Special Situations Fund"), having the relative rights and preferences as
follows:
1. The beneficial interest in the Special Situations Fund shall be
represented by a separate series of shares of beneficial interest, par value one
cent ($.01) per share (the "Shares"), which series shall bear the name of the
Special Situations Fund to which it relates and shall represent the beneficial
interest only in such Special Situations Fund. An unlimited number of Shares of
such series may be issued.
2. The Special Situations Fund shall be authorized to invest in cash,
securities, instruments and other property as from time to time described in the
Trust's then effective registration statement under the Securities Act of 1933
and the Investment Company Act of 1940, as amended.
3. The Shares of the Special Situations Fund shall have the additional
relative rights and preferences, shall be subject to the liabilities, shall have
the other characteristics, and shall be subject to other powers of the Trustees,
all as set forth in paragraphs (a) through (l) of Section 6.2 of the
Declaration. Without limitation of the foregoing sentence, each Share of such
series shall be redeemable, shall be entitled to one vote, or a ratable fraction
of one vote in respect of a fractional share, as to matters on which Shares of
such series shall be entitled to vote, and shall represent a share of the
beneficial interest in the assets of the Special Situations Fund, all as
provided in the Declaration.
4. Subject to the provisions and limitations of Section 9.3 of the
Declaration and applicable law, this Certificate of Designation may be amended
by an instrument in writing signed by a Majority of the Trustees (or by an
officer of the Trust pursuant to the vote of a Majority of the Trustees),
provided that, if any amendment adversely affects the rights of the Shareholders
of the Special Situations Fund, such amendment may be adopted by an instrument
in writing signed by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees) when authorized to do so by
the vote in accordance with Section 7.1 of the Declaration of the holders of a
majority of all the Shares of the Special Situations Fund outstanding and
entitled to vote.
1
<PAGE>
5. All capitalized terms which are not defined herein shall have the same
meanings as are assigned to those terms in the Declaration filed with the
Secretary of State of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, I have hereunto set my hand as of the day and year set
forth opposite my signature below.
Dated: September 10, 1996 /s/ Kelley Abbott Howes
Kelley Abbott Howes, Secretary
2
<PAGE>
ACKNOWLEDGMENT
STATE OF COLORADO )
)
COUNTY OF DENVER ) ss. September 10, 1996
Then personally appeared the above named Kelley Abbott Howes, Secretary of
Janus Investment Fund and acknowledged the foregoing instrument to be her free
act and deed.
Before me,
\s\ Darlene A. Trujillo
Notary Public
My Commission Expires: May 19, 1998
EXHIBIT 1(s)
JANUS INVESTMENT FUND
CERTIFICATE OF AMENDMENT
The undersigned, being the Secretary of Janus Investment Fund, a trust with
transferable shares of the type commonly called a Massachusetts business trust
(the "Trust"), DOES HEREBY CERTIFY that, pursuant to the authority conferred
upon the Trustees of the Trust by Section 9.3 of the Agreement and Declaration
of Trust, dated February 11, 1986, as amended to date (hereinafter, as so
amended, referred to as the "Declaration of Trust"), and by the affirmative vote
of a Majority of the Trustees at a meeting duly called and held on September 10,
1996, the Declaration of Trust is amended as follows:
1. Paragraph (a) ("Assets Belonging to Funds") of Section 6.2 of the
Declaration of Trust is hereby amended and restated in its entirety to read as
follows
(a) Assets Belonging to Funds. Any portion of the Trust Property
allocated to a particular Fund, and all consideration received by the Trust
for the issue or sale of Shares of such Fund, together with all assets in
which such consideration is invested or reinvested, all interest,
dividends, income, earnings, profits and gains therefrom, and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
held by the Trustees in trust for the benefit of the holders of Shares of
that Fund and shall irrevocably belong to that Fund for all purposes, and
shall be so recorded upon the books of account of the Trust, and
Shareholders who are not shareholders of that Fund, but are shareholders of
any other Fund, shall not have, and shall be conclusively deemed to have
waived, any claims to the assets of such Fund. Such consideration, assets,
interest, dividends, income, earnings, profits, gains and proceeds,
together with any General Items allocated to that Fund as provided in the
following sentence, are herein referred to collectively as "Fund Assets" of
such Fund, and as assets "belonging to" that Fund. In the event that there
are any assets, income, earnings, profits, and proceeds thereof, funds, or
payments which are not readily identifiable as belonging to any particular
Fund (collectively "General Items"), the Trustees shall allocate such
General Items to and among any one or more of the Funds established and
designated from time to time in such manner and on such basis as they, in
their sole discretion, deem fair and equitable; and any General Items so
allocated to a particular Fund shall belong to and be part of the Fund
Assets of that Fund. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Funds for all purposes.
<PAGE>
2. Paragraph (b) ("Liabilities of Funds") of Section 6.2 of the Declaration
of Trust is hereby amended and restated in its entirety to read as follows:
(b) Liabilities of Funds. The assets belonging to each particular Fund
shall be charged with the liabilities in respect of that Fund and all
expenses, costs, charges and reserves attributable to that Fund, and any
general liabilities, expenses, costs, charges or reserves attributable to
that Fund, and any general liabilities, expenses, costs, charges or
reserves of the Trust which are not readily identifiable as pertaining to
any particular Fund shall be allocated and charged by the Trustees to and
among any one or more of the Funds established and designated from time to
time in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. The liabilities, expenses, costs,
charges and reserves allocated and so charged to a particular Fund are
herein referred to as "liabilities of" that Fund. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Funds for all purposes.
Any creditor of any Fund may look only to the assets of that Fund to
satisfy such creditor's claims.
3. Paragraph (c) ("Dividends") of Section 6.2 of the Declaration of
Trust is hereby amended and restated in its entirety to read as follows:
(c) Dividends. Dividends and distributions on Shares of a particular
Fund may be paid with such frequency as the Trustees may determine, which
may be daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to
the Shareholders of that Fund, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of the assets
belonging to that Fund, as the Trustees may determine, after providing for
actual and accrued liabilities of that Fund. Dividends and distributions
shall be in such amounts as may be declared from time to time by the
Trustees. All dividends and distributions on Shares of a particular Fund
shall be distributed pro rata to the Shareholders of that Fund in
proportion to the number of such Shares held by such holders at the date
and time of record established for the payment of such dividends or
distributions, except that in connection with any dividend or distribution
program or procedure the Trustees may determine that no dividend or
distribution shall be payable on Shares as to which the Shareholder's
purchase order and/or payment have not been received by the time or times
established by the Trustees under such program or procedure, or that
dividends or distributions shall be payable on Shares which have been
tendered by the holder thereof for redemption or repurchase, but the
redemption or repurchase proceeds of which have not yet been paid to such
Shareholder. Such dividends and distributions may be made in cash or Shares
of that Fund or a combination
-2-
<PAGE>
thereof as determined by the Trustees, or pursuant to any program that the
Trustees may have in effect at the time for the election by each
Shareholder of the mode of the making of such dividend or distribution paid
in Shares will be paid at the net asset value thereof as determined in
accordance with subsection (h) of this Section 6.2 but without any load or
sales charge.
4. Paragraph (h) ("Net Asset Value") of Section 6.2 of the Declaration of
Trust is hereby amended and restated in its entirety to read as follows:
(h) Net Asset Value. The net asset value per Share of any Fund at any
time shall be the quotient obtained by dividing the value of the net assets
of such Fund at such time (being the current value of the assets belonging
to such Fund, less its then existing liabilities) by the total number of
Shares of that Fund then outstanding, all determined i accordance with the
methods and procedures, including without limitation those with respect to
rounding, established by the Trustees from time to time. The Trustees may
determine to maintain the net asset value per Share of any Fund at a
designated constant dollar amount and in connection therewith may adopt
procedures not inconsistent with the 1940 Act for the continuing
declaration of income attributable to that Fund as dividends payable in
additional Shares of that Fund at the designated constant dollar amount and
for the handling of any losses attributable to that Fund. Such procedures
may provide that in the event of any loss each Shareholder shall be deemed
to have contributed to the shares of beneficial interest account of that
Fund his pro rata portion of the total number of Shares required to be
cancelled in order to permit the net asset value per share of that Fund to
be maintained, after reflecting such loss, at the designated constant
dollar amount. Each Shareholder of such Fund shall be deemed to have
expressly agreed, by his investment in any Fund with respect to which the
Trustees shall have adopted any such procedure, to make the contribution
referred to in the preceding sentence in the event of any such loss.
IN WITNESS WHEREOF, the undersigned has set her hand and seal this 10th day
of September, 1996.
/s/ Kelley Abbott Howes
Kelley Abbott Howes, Secretary
-3-
<PAGE>
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
BEFORE ME, the undersigned authority, on this day personally appeared
Kelley Abbott Howes, Secretary of Janus Investment Fund, who, being by me first
duly sworn, stated on her oath that the foregoing document is true and correct
and that she executed the same for the purposes and consideration therein
expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 10th day of September, 1996.
My Commission Expires: /s/ Darlene A. Trujillo
May 19, 1998 Notary Public
EXHIBIT 4(p)
[LOGO]
JANUS INVESTMENT FUND
(A Massachusetts Business Trust)
JANUS SPECIAL SITUATIONS FUND
SHARES OF BENEFICIAL INTEREST
ACCOUNT NO.
THIS CERTIFIES that CUSIP
SEE REVERSE FOR CERTAIN DEFINITIONS
Is the owner of ________________ shares of beneficial interest in the Janus
Special Situations Fund series of Janus Investment Fund (the "Fund"), fully paid
and nonassessable, the said shares being issued and held subject to the
provisions of the Agreement and Declaration of Trust of the Fund, and all
amendments thereto, copies of which are on file with the Secretary of The
Commonwealth of Massachusetts. The said owner by accepting this certificate
agrees to and is bound by all of the said provisions. The shares represented
hereby are transferable in writing by the owner thereof in person or by attorney
upon surrender of this certificate to the Fund property endorsed for transfer
(see the reverse side hereof). This certificate is executed on behalf of the
Trustees of the Fund as Trustees and not individually and the obligations hereof
are not binding upon any of the Trustees, officers or shareholders individually
but are binding only upon the assets and property of the Janus Special
Situations Fund series of Janus Investment Fund. This certificate is not valid
unless countersigned by the Transfer Agent.
Witness the facsimile seal of the Fund and the facsimile signatures of its duly
authorized officers.
Dated:
/s/ Kelley Abbott Howes /s/ Thomas H. Bailey
SECRETARY PRESIDENT
[SEAL]
COUNTERSIGNED
INVESTORS FIDUCIARY TRUST COMPANY
(KANSAS CITY MISSOURI) TRANSFER AGENT
BY JANUS SERVICE CORPORATION
(DENVER COLORADO) SUBTRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE>
NOTICE. THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATIONS, ENLARGEMENT, OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION IN
ACCORDANCE WITH FUND POLICIES.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT. _____ Custodian _____
(Cust) (Minor)
Under Uniform Gifts to Minors Act
______________________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, _____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________
___________________________________________________________________________
___________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
ASSIGNEE)
______________________________________________________________________ Shares
of beneficial interest represented by the within Certificate, and do
hereby irrevocably constitute and appoint
_______________________________________________________________________
________________________________________________________________ Attorney to
transfer the said shares on the books of the within-named Fund with full power
of substitution in the premises.
Dated, ______________________ ___________________________________
Owner
___________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
WITH NOTICE PRINTED ABOVE.
Signature(s) guaranteed by:
______________________________
EXHIBIT 5(l)
JANUS INVESTMENT FUND
INVESTMENT ADVISORY AGREEMENT
JANUS SPECIAL SITUATIONS FUND
THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made this 10th day
of September, 1996, between JANUS INVESTMENT FUND, a Massachusetts business
trust (the "Trust"), and JANUS CAPITAL CORPORATION, a Colorado corporation
("JCC").
W I T N E S S E T H:
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and has registered its shares for public offering under the Securities Act of
1933, as amended (the "1933 Act"); and
WHEREAS, the Trust is authorized to create separate funds, each with its
own separate investment portfolio of which the beneficial interests are
represented by a separate series of shares; one of such funds created by the
Trust being designated as the Janus Special Situations Fund (the "Fund"); and
WHEREAS, the Trust and JCC deem it mutually advantageous that JCC should
assist the Trustees and officers of the Trust in the management of the
securities portfolio of the Fund.
NOW, THEREFORE, the parties agree as follows:
1. Investment Advisory Services. JCC shall furnish continuous advice and
recommendations to the Fund as to the acquisition, holding, or disposition of
any or all of the securities or other assets which the Fund may own or
contemplate acquiring from time to time. JCC shall give due consideration to the
investment policies and restrictions and the other statements concerning the
Fund in the Trust's declaration of trust, bylaws, and registration statements
under the 1940 Act and the 1933 Act, and to the provisions of the Internal
Revenue Code, as amended from time to time, applicable to the Fund as a
regulated investment company. In addition, JCC shall cause its officers to
attend meetings and furnish oral or written reports, as the Trust may reasonably
require, in order to keep the Trustees and appropriate officers of the Trust
fully informed as to the condition of the investment portfolio of the Fund, the
investment recommendations of JCC, and the investment considerations which have
given rise to those recommendations. JCC shall supervise the purchase and sale
of securities as directed by the appropriate officers of the Trust.
-1-
<PAGE>
2. Other Services. JCC is hereby authorized (to the extent the Trust has
not otherwise contracted) but not obligated (to the extent it so notifies the
Trustees at least 60 days in advance), to perform (or arrange for the
performance by affiliates) the management (not to include advisory) and
administrative services necessary for the operation of the Fund. JCC is
specifically authorized, on behalf of the Trust, to conduct relations with
custodians, depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and
such other persons in any such other capacity deemed by JCC to be necessary or
desirable. JCC shall generally monitor and report to Fund officers the Fund's
compliance with investment policies and restrictions as set forth in the
currently effective prospectus and statement of additional information relating
to the shares of the Fund under the Securities Act of 1933, as amended. JCC
shall make reports to the Trustees of its performance of services hereunder upon
request therefor and furnish advice and recommendations with respect to such
other aspects of the business and affairs of the Fund as it shall determine to
be desirable. JCC is also authorized, subject to review by the Trustees, to
furnish such other services as JCC shall from time to time determine to be
necessary or useful to perform the services contemplated by this Agreement.
3. Obligations of Trust. The Trust shall have the following obligations
under this Agreement:
(a) to keep JCC continuously and fully informed as to the composition
of its investment portfolio and the nature of all of its assets
and liabilities from time to time;
(b) to furnish JCC with a certified copy of any financial statement
or report prepared for it by certified or independent public
accountants and with copies of any financial statements or
reports made to its shareholders or to any governmental body or
securities exchange;
(c) to furnish JCC with any further materials or information which
JCC may reasonably request to enable it to perform its function
under this Agreement; and
(d) to compensate JCC for its services and reimburse JCC for its
expenses incurred hereunder in accordance with the provisions
hereof.
4. Compensation. The Trust shall pay to JCC for its investment advisory
services a fee, calculated and payable for each day that this Agreement is in
effect, of 1/365 of 1% of the first $30,000,000 of the daily closing net asset
value of the Fund, plus 1/365 of 0.75% of the next $270,000,000 of the daily
closing net asset value of the Fund, plus 1/365 of 0.70% of the next
$200,000,000 of the daily closing net asset value of the Fund, plus 1/365 of
0.65% of the daily closing net asset value of the Fund in excess of
$500,000,000. The fee shall be paid monthly.
-2-
<PAGE>
5. Expenses Borne by JCC. In addition to the expenses which JCC may incur
in the performance of its investment advisory functions under this Agreement,
and the expenses which it may expressly undertake to incur and pay under other
agreements with the Trust or otherwise, JCC shall incur and pay the following
expenses relating to the Fund's operations without reimbursement from the Fund:
(a) Reasonable compensation, fees and related expenses of the Trust's
officers and its Trustees, except for such Trustees who are not
interested persons of JCC;
(b) Rental of offices of the Trust; and
(c) All expenses of promoting the sale of shares of the Fund, other
than expenses incurred in complying with federal and state laws
and the law of any foreign country or territory or other
jurisdiction applicable to the issue, offer or sale of shares of
the Fund including without limitation registration fees and
costs, the costs of preparing the Fund's registration statement
and amendments thereto, and the costs and expenses of preparing,
printing, and mailing prospectuses (and statements of additional
information) to persons other than shareholders of the Fund.
6. Expenses Borne by the Trust. The Trust assumes and shall pay all
expenses incidental to its organization, operations and business not
specifically assumed or agreed to be paid by JCC pursuant to Sections 2 and 5
hereof, including, but not limited to, investment adviser fees; any
compensation, fees, or reimbursements which the Trust pays to its Trustees who
are not interested persons of JCC; compensation of the Fund's custodian,
transfer agent, registrar and dividend disbursing agent; legal, accounting,
audit and printing expenses; administrative, clerical, recordkeeping and
bookkeeping expenses; brokerage commissions and all other expenses in connection
with execution of portfolio transactions (including any appropriate commissions
paid to JCC or its affiliates for effecting exchange listed, over-the-counter or
other securities transactions); interest; all federal, state and local taxes
(including stamp, excise, income and franchise taxes); costs of stock
certificates and expenses of delivering such certificates to the purchaser
thereof; expenses of local representation in Massachusetts; expenses of
shareholders' meetings and of preparing, printing and distributing proxy
statements, notices, and reports to shareholders; expenses of preparing and
filing reports and tax returns with federal and state regulatory authorities;
all expenses incurred in complying with all federal and state laws and the laws
of any foreign country applicable to the issue, offer, or sale of shares of the
Fund, including, but not limited to, all costs involved in the registration or
qualification of shares of the Fund for sale in any jurisdiction, the costs of
portfolio pricing services and systems for compliance with blue sky laws, and
all costs involved in preparing, printing and mailing prospectuses and
statements of additional information of the Fund; and all fees, dues and other
expenses incurred by the Trust in connection with the membership of the Trust in
any trade association or other investment company organization. To the extent
that JCC shall perform any of the above
-3-
<PAGE>
described administrative and clerical functions, including transfer agency,
registry, dividend disbursing, recordkeeping, bookkeeping, accounting and blue
sky monitoring and registration functions, and the preparation of reports and
returns, the Trust shall pay to JCC compensation for, or reimburse JCC for its
expenses incurred in connection with, such services as JCC and the Trust shall
agree from time to time, any other provision of this Agreement notwithstanding.
7. Treatment of Investment Advice. The Trust shall treat the investment
advice and recommendations of JCC as being advisory only, and shall retain full
control over its own investment policies. However, the Trustees may delegate to
the appropriate officers of the Trust, or to a committee of the Trustees, the
power to authorize purchases, sales or other actions affecting the portfolio of
the Fund in the interim between meetings of the Trustees.
8. Termination. This Agreement may be terminated at any time, without
penalty, by the Trustees of the Trust, or by the shareholders of the Fund acting
by vote of at least a majority of its outstanding voting securities, provided in
either case that sixty (60) days advance written notice of termination be given
to JCC at its principal place of business. This Agreement may be terminated by
JCC at any time, without penalty, by giving sixty (60) days advance written
notice of termination to the Trust, addressed to its principal place of
business. The Trust agrees that, consistent with the terms of the Trust's
Declaration of Trust, the Trust shall cease to use the name "Janus" in
connection with the Fund as soon as reasonably practicable following any
termination of this Agreement if JCC does not continue to provide investment
advice to the Fund after such termination.
9. Assignment. This Agreement shall terminate automatically in the event of
any assignment of this Agreement.
10. Term. This Agreement shall continue in effect until June 16, 1997,
unless sooner terminated in accordance with its terms, and shall continue in
effect from year to year thereafter only so long as such continuance is
specifically approved at least annually by the vote of a majority of the
Trustees of the Trust who are not parties hereto or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on the
approval of the terms of such renewal, and by either the Trustees of the Trust
or the affirmative vote of a majority of the outstanding voting securities of
the Fund. The annual approvals provided for herein shall be effective to
continue this Agreement from year to year if given within a period beginning not
more than ninety (90) days prior to June 16 of each applicable year,
notwithstanding the fact that more than three hundred sixty-five (365) days may
have elapsed since the date on which such approval was last given.
11. Amendments. This Agreement may be amended by the parties only if such
amendment is specifically approved (i) by a majority of the Trustees, including
a majority of the Trustees who are not interested persons of JCC and, if
required by applicable law, (ii) by the affirmative vote of a majority of the
outstanding voting securities of the Fund.
-4-
<PAGE>
12. Other Series. The Trustees shall determine the basis for making an
appropriate allocation of the Trust's expenses (other than those directly
attributable to the Fund) between the Fund and the other series of the Trust.
13. Limitation of Personal Liability. All the parties hereto acknowledge
and agree that all liabilities of the Trust arising, directly or indirectly,
under this Agreement, of any and every nature whatsoever, shall be satisfied
solely out of the assets of the Fund and that no Trustee, officer or holder of
shares of beneficial interest of the Trust shall be personally liable for any of
the foregoing liabilities. The Trust's Declaration of Trust, as amended from
time to time, is on file in the Office of the Secretary of State of the
Commonwealth of Massachusetts. Such Declaration of Trust describes in detail the
respective responsibilities and limitations on liability of the Trustees,
officers and holders of shares of beneficial interest of the Trust.
14. Limitation of Liability of JCC. JCC shall not be liable for any error
of judgment or mistake of law or for any loss arising out of any investment or
for any act or omission taken with respect to the Trust, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties hereunder and
except to the extent otherwise provided by law. As used in this Section 15,
"JCC" shall include any affiliate of JCC performing services for the Trust
contemplated hereunder and directors, officers and employees of JCC and such
affiliates.
15. Activities of JCC. The services of JCC to the Trust hereunder are not
to be deemed to be exclusive, and JCC and its affiliates are free to render
services to other parties. It is understood that trustees, officers and
shareholders of the Trust are or may become interested in JCC as directors,
officers and shareholders of JCC, that directors, officers, employees and
shareholders of JCC are or may become similarly interested in the Trust, and
that JCC may become interested in the Trust as a shareholder or otherwise.
16. Certain Definitions. The terms "vote of a majority of the outstanding
voting securities," "assignment" and "interested persons" when used herein,
shall have the respective meanings specified in the 1940 Act, as now in effect
or hereafter amended, and the rules and regulations thereunder, subject to such
orders, exemptions and interpretations as may be issued by the Securities and
Exchange Commission under said Act and as may be then in effect.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Investment Advisory Agreement as of the date and year first
above written.
JANUS CAPITAL CORPORATION
By: /s/ Steven R. Goodbarn
Steven R. Goodbarn, Vice President
JANUS INVESTMENT FUND
By: /s/ Thomas H. Bailey
Thomas H. Bailey, President
-6-
EXHIBIT 8(k)
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and Janus Investment Fund (the "Trust").
WHEREAS, the Custodian and the Trust are parties to a custodian contract,
dated July 31, 1986 as amended January 7, 1987, April 25, 1990, and October 11,
1995 (the "Custodian Contract"), governing the terms and conditions under which
the Custodian maintains custody of the securities and other assets of certain
series of the Trust, as included in notices pursuant to Section 16 of the
Custodian Contract ("Funds"); and
WHEREAS, the Securities and Exchange Commission, in an order dated October
11, 1995 and published in Investment Company Act Release No. 21407, granted an
application for exemptive relief, thereby allowing the Funds to participate in
joint trading accounts (each, a "Joint Account") to be used to enter into short
term investments; and
WHEREAS, other open-end management investment companies or series thereof
for which Janus Capital Corporation serves as investment adviser or sub-adviser
(the "Participating Funds") may, along with the Funds, participate in
transactions through a Joint Account; and
WHEREAS, the Custodian and the Trust, on behalf of the Funds, desire to
amend the Custodian Contract to provide additional terms relating to the Joint
Account;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Trust hereby amend the Custodian Contract as
follows:
Section 9 is amended by adding the following: The Custodian shall maintain
records which reflect at all times (1) the respective aggregate investment of
each of the Funds and each of the other Participating Funds in a Joint Account;
(2) each Fund's and each of the other Participating Funds' respective pro rata
share of each repurchase agreement and short-term investment held in a Joint
Account; and (3) that the short-term securities and repurchase agreements
entered into by each Fund through a Joint Account are entered into by each Fund,
severally, in proportion to its interest in that investment, and not jointly.
Section 11 is amended by adding the following: The Custodian and each Fund
agree that the compensation set forth in the Jumbo Repurchase Agreement Fee
Schedule attached to this Amendment, as such schedule may be amended from time
to time by mutual agreement of the Custodian and each Fund, shall apply with
respect to the Joint Account, in lieu of any fees otherwise applicable under the
Custodian Contract.
<PAGE>
Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed as a sealed instrument in its name and behalf by its duly authorized
representative this 10th day of September, 1996.
JANUS INVESTMENT FUND
By: /s/ Steven R. Goodbarn
Name: Steven R. Goodbarn
Title: Vice President
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
Name: Ronald E. Logue
Title: Executive Vice President
EXHIBIT 8(l)
LETTER AGREEMENT
September 10, 1996
Mr. Donald DeMarco, Vice President
State Street Bank and Trust Company
One Heritage Drive
Mutual Fund Services P2 North
North Quincy, MA 02171
Dear Mr. DeMarco:
In connection with our recent discussions, Janus Investment Fund (the
"Fund") proposes that the first paragraph of Section 1 of the Custodian Contract
between the Fund and State Street Bank and Trust Company ("State Street") dated
July 31, 1986, as amended by letter agreements dated February 1, 1991 and
September 23, 1993, be further amended to read as follows:
The Fund hereby employs the Custodian as the Custodian of its assets,
including securities it desires to be held in places within the United
States ("domestic securities") and securities it desires to be held
outside the United States ("foreign securities") and all cash or cash
equivalents incidental thereto, pursuant to the provisions of the
Declaration of Trust. The Fund agrees to deliver to the Custodian all
foreign and domestic securities and cash owned by it from time to
time, all payments of income, payments of principal or capital
distributions received by it with respect to all foreign and domestic
securities owned by the Fund from time to time, and the cash
consideration received by the Fund for such new or treasury shares of
capital stock as it may issue or sell from time to time. The Custodian
shall not be responsible for any property of the Fund held or received
by the Fund and not delivered to the Custodian.
In addition, to reflect changes in applicable law, the Fund proposes that
Section 13 of the Custodian Contract be amended to read as follows:
Effective Period, Termination and Amendment. This Contract shall
become effective as of its execution, shall continue in full force and
effect until terminated as hereinafter provided, may be amended at any
time by mutual agreement of the parties hereto and may be terminated
by either party by an instrument in writing delivered or mailed,
postage pre-paid, to the other party, such termination to take effect
not sooner than thirty (30) days after the date of such delivery or
mailing; provided, however, that the Custodian shall not act under
Section 2.10 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board
of Trustees of the Fund has approved the initial use of a particular
Securities System as required by Rule 17f-4 under the Investment
Company Act of 1940, as amended, and that the Custodian shall not act
under Section 2.10.A hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board
of Trustees has approved the initial use of the Direct Paper System;
provided further, however, that the
<PAGE>
Fund shall not amend or terminate this Contract in contravention of
any applicable federal or state regulations, or any provision of the
Declaration of Trust, and further provided, that the Fund may at any
time by action of its Board of Trustees (i) substitute another bank or
trust company for the Custodian by giving notice as described above to
the Custodian, or (ii) immediately terminate this Contract in the
event of the appointment of a conservator or receiver for the
Custodian by the Comptroller of the Currency or upon the happening of
a like event at the direction of an appropriate regulatory agency or
court of competent jurisdiction. Upon termination of the Contract, the
Fund shall pay to the Custodian such compensation as may be due as of
the date of such termination and shall likewise reimburse the
Custodian for its costs, expenses and disbursements.
Except as otherwise expressly amended and modified herein, the provisions
of the Custodian Contract shall remain in full force and effect. Please
acknowledge State Street's agreement to the foregoing by returning to me a copy
of this letter executed by the appropriate person in the space provided below.
JANUS INVESTMENT FUND
By: /s/ Kelley Abbott Howes
Kelley Abbott Howes, Secretary
Acknowledged and agreed to this 10th day of September, 1996
STATE STREET BANK AND TRUST COMPANY
By: /s/ Donald DeMarco
Name: Donald DeMarco Vice President
Title: Vice President
CC: Steve Goodbarn
Glenn O'Flaherty
Stephen Stieneker
David Tucker
Sue Vreeland
EXHIBIT 8(m)
SUBCUSTODIAN CONTRACT
Between
UNITED MISSOURI BANK, N.A.
Certain Mutual Funds Advised or Subadvised By
Janus Capital Management, Inc.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Subcustodian, Establishment of the Joint Account
and Property to be Held By Subcustodian..................................2
2. Duties of the Subcustodian with Respect to Property
of the Funds Held by the Subcustodian....................................2
2.1 Holding of Securities..........................................2
2.2 Delivery of Securities.........................................2
2.3 Collection of Income...........................................3
2.4 Payment of Fund Monies.........................................4
2.5 Liability for Payment in Advance of
Receipt of Securities Purchased................................4
2.6 Appointment of Agents..........................................4
2.7 Deposit of Fund Assets in Securities System....................5
2.8 Fund Assets Held in the Subcustodian's
Direct Paper System............................................6
2.9 Segregated Account.............................................6
2.10 Ownership Certificates for Tax Purposes........................7
2.11 Communications Relating to Securities..........................7
2.12 Proper Instructions............................................7
2.13 Actions Permitted Without Express Authority....................7
2.14 Evidence of Authority..........................................7
3. Records .................................................................8
4. Opinion of Funds' Independent Accountant.................................8
5. Reports to Funds by Independent Public Accountants.......................8
6. Compensation of Subcustodian.............................................8
7. Responsibility of Subcustodian...........................................8
8. Liability of Subcustodian for Actions of Third-Party Subcustodians.......9
9. Effective Period, Termination and Amendment.............................10
10. Successor Subcustodian..................................................10
11. Interpretive and Additional Provisions..................................10
12. Massachusetts Law to Apply..............................................11
13. Prior Contracts.........................................................11
Schedule A..............................................................13
<PAGE>
SUBCUSTODIAN CONTRACT
This Contract between United Missouri Bank, N.A. (hereinafter referred to
as the "Custodian"), State Street Bank and Trust Company, a Massachusetts trust
company, (hereinafter referred to as the "Subcustodian"), and each of the
registered investment companies listed on Schedule A attached hereto on behalf
of itself or, in the case of a series company, one or more of its portfolios or
series listed on Schedule A (hereinafter referred to individually as a "Fund",
and collectively as the "Funds").
WITNESSETH:
WHEREAS, the Custodian acts as custodian for the Funds, all of which are
open-end management investment companies registered under the Investment Company
Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Securities and Exchange Commission, in an order dated October
11, 1995 and published in Investment Company Act Release No. 21407, granted an
application for exemptive relief, thereby allowing the Funds to participate in
joint trading accounts to be used to enter into short term investments; and
WHEREAS, the Funds desire that the Custodian appoint the Subcustodian as
its subcustodian for the purpose of establishing one or more joint trading
accounts (a "Joint Account") and holding cash and securities for the Funds in
connection with repurchase transactions and other short-term investments
effected through a Joint Account; and
WHEREAS, other registered open-end management investment companies for
which Janus Capital Management, Inc. serves as investment adviser (the "Janus
Funds") may, along with the Funds, participate in transactions through a Joint
Account; and
WHEREAS, the Subcustodian may, from time to time, enter into subcustodian
agreements with the Janus Funds and each of the custodians employed by such
Janus Funds (the "Janus Custodians"); and
WHEREAS, the Funds and the Janus Funds may, from time to time, enter into
one or more written repurchase agreements, pursuant to which one or more of the
Funds and the Janus Funds will agree to purchase and resell, and the sellers
named in such agreements will agree to sell and repurchase through a Joint
Account, certain securities (collectively, the "Repurchase Securities")(such
repurchase agreements being hereinafter referred to collectively, as the
"Repurchase Agreements");
Whereas, the Funds and the Janus Funds may, from time to time, invest in
other short-term investments through a Joint Account (such investments
hereinafter referred to as the "Short-Term Investments").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
<PAGE>
1. Employment of Subcustodian; Establishment of the Joint Account; and
Property to be Held by Subcustodian
On behalf of the Funds, the Custodian hereby employs and appoints the
Subcustodian as a subcustodian for the Funds, subject to the terms and
provisions of this Contract. Pursuant to Article 2.9 hereof, upon receipt of
Proper Instructions (as hereinafter defined), the Subcustodian shall appoint one
or more Third-Party Subcustodians (as hereinafter defined) to exercise the
powers and perform the duties set forth in this Contract and/or additional
powers and duties related to repurchase transactions effected through a Joint
Account.
The Subcustodian shall establish a Joint Account to hold cash for the
purpose of effecting Repurchase Agreements and investing in Short-Term
Investments and to hold any Repurchase Securities and any securities
representing Short-Term Investments ("Short-Term Securities") (1)received by it
for the account of the Custodian as custodian for the Funds, (2) received by it
for the account of other Janus Custodians and (3) received or held by it as
custodian for other Janus Funds.
The Custodian may from time to time deposit cash with the Subcustodian in a
Joint Account. The Subcustodian shall not be responsible for any property of the
Funds held or received by the Funds and not delivered to the Subcustodian.
2. Duties of the Subcustodian with Respect to Property of the Funds Held By
the Subcustodian
2.1 Holding of Securities. The Subcustodian shall receive and hold the
Repurchase Securities and Short-Term Securities (hereinafter referred to
together as the "securities") as follows: (1) in the case of certificated
securities, by physical receipt of the share certificates or other
instruments representing such securities and by physical segregation of
such certificates or instruments from other assets of the Subcustodian in a
manner indicating that such securities are being held for the benefit of
the Custodian and other identified Janus Custodians, as their respective
interests therein may appear; (2) in the case of securities held in
book-entry form by a Securities System (as hereinafter defined), in
accordance with the provisions of Section 2.7 of this Contract; (3) in the
case of Short-Term Securities of an issuer for which the Subcustodian acts
as issuing and paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Subcustodian, in accordance
with Section 2.8 of this Contract.
2.2 Delivery of Securities. The Subcustodian shall release and deliver
securities owned by the Funds held by the Subcustodian or in a Securities
System account of the Subcustodian or in the Subcustodian's Direct Paper
book entry system account ("Direct Paper Account") only upon receipt of
Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only as follows:
(a) In the case of Repurchase Securities:
1) To the other party to the Repurchase Agreement pursuant to the
terms of such Repurchase Agreement against receipt of payment therefor
by: (i) cash, bank credit, or bank wire transfer received by the
Subcustodian; or (ii) credit to the customer only account of the
Subcustodian with a Securities System in accordance with the
provisions of Section 2.7 hereof;
2
<PAGE>
2) In the case of Repurchase Securities held in physical form, in
accordance with "street delivery custom" to a broker or its clearing
agent, against delivery to the Subcustodian of a receipt for such
Repurchase Securities; provided that the Subcustodian shall have taken
all actions possible to ensure prompt collection of the payment for,
or the return of such Repurchase Securities by the broker or its
clearing agent;
3) To the Custodian or a Third-Party Subcustodian;
4) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a resolution
of the respective Boards of Directors signed by an officer and
certified by the Secretary or an Assistant Secretary of the respective
Funds, specifying the securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such purpose
to be a proper corporate purpose, and naming the person or persons to
whom delivery of such securities shall be made.
(b) In the case of Short-Term Securities:
1) Upon sale of such Short-Term Securities for the account of the
Funds and receipt of payment therefor by (i) cash, bank credit, or
bank wire transfer received by the Subcustodian;
2) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.7 hereof;
3) In the case of Short-Term Securities held in physical form, in
accordance with "street delivery custom" to a broker or its clearing
agent, against delivery to the Subcustodian of a receipt for such
Short-Term Securities; provided that the Subcustodian shall have taken
all actions possible to ensure prompt collection of the payment for,
or the return of such Short-Term Securities by the broker or its
clearing agent;
4) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a resolution
of the respective Boards of Directors signed by an officer and
certified by the Secretary or an Assistant Secretary of the respective
Funds, specifying the securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such purpose
to be a proper corporate purpose, and naming the person or persons to
whom delivery of such securities shall be made.
2.3 Collection of Income. The Subcustodian shall collect on a timely basis all
income and other payments with respect to registered securities held
hereunder to which the Funds shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities if, on the date
of payment by the issuer, such securities are held by the Subcustodian or
its agent thereof and shall credit such income, as collected, to the
applicable Fund.
3
<PAGE>
2.4 Payment of Fund Monies. Upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, the
Subcustodian shall pay out monies of the Funds in the following cases only:
1) Upon the purchase of Short-Term Securities for the account of the
Funds but only (a) against the delivery of such Short-Term Securities
to the Subcustodian (or any bank, banking firm or trust company doing
business in the United States or abroad which is qualified under the
Investment Company Act to act as a custodian and has been designated
by the Subcustodian as its agent for this purpose) registered in the
name of the Funds or in the name of a nominee of the Subcustodian or
in proper form for transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with the provisions of
Section 2.7 hereof; or (c) in the case of a purchase involving the
Direct Paper System, in accordance with the provisions of Section 2.8;
2) In the case of Repurchase Agreements entered into between the Funds
and the Subcustodian, or another bank, or a broker-dealer which is a
member of the National Association of Securities Dealers, Inc.,
provided that payment shall be made by the Subcustodian: (a) with
respect to Repurchase Securities to be held by the Subcustodian, only:
(i) against delivery of such Repurchase Securities either in
certificate form or through a transfer of such Repurchase Securities
to a customer only account of the Subcustodian on the book-entry
records of a Securities System in accordance with the provisions of
Section 2.7 or (ii) against delivery of the receipt evidencing
purchase by the Funds of securities owned by the Subcustodian along
with written evidence of the agreement by the Subcustodian to
repurchase such securities from the Funds; or (b) with respect to
Repurchase to be held by a Third Party Subcustodian (as defined in
Section 2.9 hereof), in accordance with the terms and conditions of
the subcustodian agreement with such Third Party Subcustodian.
3) For deposit with the Custodian, which deposit will be made daily and
will represent the total principal and accrued interest allocable to
the Funds in a Joint Account on the morning of each trading day;
4) For any other proper purpose, but only upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the
respective Boards of Directors of the Funds signed by an officer of
and certified by the Secretary or an Assistant Secretary of the
respective Funds, specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or persons to
whom such payment is to be made.
2.5 Liability for Payment in Advance of Receipt of Securities Purchased. Except
as specifically stated otherwise in this Contract, in any and every case
where payment for purchase of securities for the account of the Funds is
made by the Subcustodian in advance of receipt of the securities purchased
in the absence of specific written instructions from the Funds to so pay in
advance, the Subcustodian shall be absolutely liable to the Funds for such
securities to the same extent as if the securities had been received by the
Subcustodian.
2.6 Appointment of Agents. The Subcustodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the
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Investment Company Act to act as a custodian, as its agent to carry out
such of the provisions of this Article 2 as the Subcustodian may from time
to time direct; provided, however, that the appointment of any agent shall
not relieve the Subcustodian of its responsibilities or liabilities
hereunder.
2.7 Deposit of Fund Assets in Securities Systems. The Subcustodian may deposit
and/or maintain securities held under this Contract in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934, which acts as a securities depository,
or in the book-entry system authorized by the U.S. Department of the
Treasury and certain federal agencies, collectively referred to herein as
"Securities System" in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Subcustodian may keep such securities in a Securities System
provided that such securities are represented in an account
("Account") of the Subcustodian in the Securities System which shall
not include any assets of the Subcustodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Subcustodian with respect to such securities shall
identify those securities belonging to the Funds as being held for the
benefit of the Joint Account;
3) The Subcustodian shall pay for purchases of any such securities upon
(i) receipt of advice from the Securities System that such securities
have been transferred to the Account, and (ii) the making of an entry
on the records of the Subcustodian to reflect such payment and
transfer for the account of the Custodian. The Subcustodian shall
transfer any such securities sold upon (i) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on the
records of the Subcustodian to reflect such transfer and payment for
the account of the Custodian. Copies of all advices from the
Securities System of transfers of such securities shall identify the
Joint Account, be maintained for the Funds by the Subcustodian and be
provided to the Funds at their request. Upon request, the Subcustodian
shall furnish the Funds confirmation of each such transfer in the form
of a written advice or notice and shall furnish to the Funds copies of
daily transaction sheets reflecting each day's transactions in the
Securities System for the securities held hereunder.
4) The Subcustodian shall provide the Funds with any report obtained by
the Subcustodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding securities
deposited in the Securities System;
5) The Subcustodian shall have received the initial or annual
certificate, as the case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Subcustodian shall be liable to the Funds for any loss or damage to
the Funds resulting from use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Subcustodian or any of
its agents or of any of its or their employees or from failure of the
Subcustodian or any such agent to enforce effectively such rights as
it may have
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against the Securities System; at the election of the Funds, they
shall be entitled to be subrogated to the rights of the Subcustodian
with respect to any claim against the Securities System or any other
person which the Subcustodian may have as a consequence of any such
loss or damage if and to the extent that the Funds have not been made
whole for any such loss or damage.
2.8 Fund Assets Held in the Subcustodian's Direct Paper System. The
Subcustodian may deposit and/or maintain Short-Term Securities owned by the
Funds in the Direct Paper System of the Subcustodian subject to the
following provisions:
1) No transaction relating to Short-Term Securities in the Direct Paper
System will be effected in the absence of Proper Instructions;
2) The Subcustodian may keep such Short-Term Securities in the Direct
Paper System only if such Short-Term Securities are represented in an
account ("Account") of the Subcustodian in the Direct Paper System
which shall not include any assets of the Subcustodian other than
assets held as a fiduciary, custodian or otherwise for customers;
3) The records of the Subcustodian with respect to such Short-Term
Securities which are maintained in the Direct Paper System shall
identify those securities belonging to the Funds as being held for the
benefit of the Custodian and other identified Janus Custodians through
a Joint Account as their respective interests therein may appear;
4) The Subcustodian shall pay for purchases of such securities upon the
making of an entry on the records of the Subcustodian to reflect such
payment and transfer of securities to a Joint Account. The
Subcustodian shall transfer such securities sold upon the making of an
entry on the records of the Subcustodian to reflect such transfer and
receipt of payment for a Joint Account;
5) The Subcustodian shall furnish the Funds confirmation of each transfer
to or from a Joint Account, in the form of a written advice or notice,
of Direct Paper on the next business day following such transfer and
shall furnish to the Funds copies of daily transaction sheets
reflecting each day's transaction in the Securities System for the
Short-Term Securities held hereunder;
6) The Subcustodian shall provide the Funds with any report on its system
of internal accounting control as the Funds may reasonably request
from time to time.
2.9 Third-Party Subcustodians. Upon receipt of Proper Instructions from the
Funds, the Subcustodian shall, on behalf of the Custodian and the Funds,
appoint one or more banks, trust companies or other entities designated in
such Proper Instructions to act as its subcustodian (a "Third-Party
Subcustodian") for purposes of facilitating third-party repurchase
transactions from time to time entered into by one or more of the Funds or
the Janus Funds through a Joint Account. The Subcustodian shall, at the
request of the Funds, enter into such agreements as shall be satisfactory
in form and substance to the Subcustodian , the Custodian and the Funds as
required in order to employ any Third-Party Subcustodian, and shall take
all other actions as may be reasonable and desirable to effect and
facilitate such third-party repurchase transactions.
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2.10 Ownership Certificates for Tax Purposes. The Subcustodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to securities of the Funds held by it and in connection with
transfers of such securities.
2.11 Communications Relating to Securities. If the Subcustodian shall receive
any notices or reports in respect of Repurchase Agreements, Repurchase
Securities or Short-Term Securities held by it hereunder, it shall promptly
upon receipt thereof transmit to the Custodian any such notices or reports.
2.12 Proper Instructions. Proper Instructions means a writing signed or
initialed by one or more person or persons as the respective Boards of
Directors of the Funds shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such
action is requested. Oral instructions will be considered Proper
Instructions if the Subcustodian reasonably believes them to have been
given by a person authorized to give such instructions with respect to the
transaction involved. The Funds shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the respective Boards of
Directors of the Funds accompanied by a detailed description of procedures
approved by such Board of Directors, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that such Board of Directors and the Subcustodian are
satisfied that such procedures afford adequate safeguards for the
respective Fund's assets.
2.13 Actions Permitted without Express Authority. The Subcustodian may in its
discretion, without express authority from the Funds:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to
the Funds;
2) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Funds held by the
Subcustodian except as otherwise directed by the respective Boards of
Directors of the Funds.
2.14 Evidence of Authority. The Subcustodian shall be protected in acting upon
any instructions, notice, request, consent, certificate or other instrument
or paper believed by it to be genuine and to have been properly executed by
or on behalf of a Fund. The Subcustodian may receive and accept a certified
copy of a vote of the respective Boards of Directors of the Funds as
conclusive evidence (a) of the authority of any person to act in accordance
with such vote or (b) of any determination or of any action by such Board
of Directors pursuant to the Articles of Incorporation as described in such
vote, and such vote may be considered as in full force and effect until
receipt by the Subcustodian of written notice to the contrary.
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<PAGE>
3. Records
The Subcustodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Funds under the Investment Company Act , with particular
attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such
records shall be the property of the Funds and shall at all times during the
regular business hours of the Subcustodian be open for inspection by duly
authorized officers, employees or agents of the Funds and employees and agents
of the Securities and Exchange Commission. The Subcustodian shall, at a Fund's
request, supply the Fund with a tabulation of securities owned by the Fund and
held by the Subcustodian and shall, when requested to do so by the Fund and for
such compensation as shall be agreed upon between the Fund and the Subcustodian,
include certificate numbers in such tabulations.
The Subcustodian shall maintain records which reflect at all times (1)the
respective aggregate investment of each Fund and each of the other Janus Funds
in a Joint Account and (2)each Fund's and each of the other Janus Funds'
respective pro rata share of each Repurchase Agreement and Short-Term Investment
held in a Joint Account.
4. Opinion of Funds' Independent Accountants
The Subcustodian shall take all reasonable action, as the Funds may from
time to time request, to obtain from year to year favorable opinions from the
Funds' respective independent accountants with respect to the Subcustodian's
activities hereunder in connection with the preparation of the respective Funds'
Forms N-1A, and Forms N-SAR or other annual reports to the Securities and
Exchange Commission and with respect to any other requirements of such
Commission.
5. Reports to Funds by Independent Public Accountants
The Subcustodian shall provide the Funds, at such times as the Funds may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Subcustodian under this
Contract; such reports, shall be of sufficient scope and in sufficient detail,
as may reasonably be required by the Funds to provide reasonable assurance that
any material inadequacies would be disclosed by such examination, and, if there
are no such inadequacies, the reports shall so state.
6. Compensation of Subcustodian
The Subcustodian shall be entitled to reasonable compensation for its
services and expenses as Subcustodian, as agreed upon from time to time between
the Funds and the Subcustodian and as initially set forth in the Jumbo
Repurchase Agreement Fee Schedule attached as Schedule B to this Contract.
7. Responsibility of Subcustodian
So long as and to the extent that it is in the exercise of reasonable care,
the Subcustodian shall not be responsible for the title, validity or genuineness
of any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties. The Subcustodian
shall be held to the exercise of reasonable care in carrying out the provisions
of this Contract, but shall be kept indemnified by and shall be without
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<PAGE>
liability to the Custodian and/or the Funds for any action taken or omitted by
it in good faith without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Custodian and/or the Funds)
on all matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice.
Except as may arise from the Subcustodian's own negligence or willful
misconduct or the negligence or willful misconduct of an agent, the Subcustodian
shall be without liability to the Funds or the Custodian for any loss,
liability, claim or expense resulting from or caused by; (i) events or
circumstances beyond the reasonable control of the Subcustodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of currency controls or
restrictions, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, acts
of war or terrorism, riots, revolutions, work stoppages, natural disasters or
other similar events or acts; (ii) errors by the Custodian, the Funds or Janus
Capital Management, Inc. in their instructions to the Subcustodian provided such
instructions have been in accordance with this Contract; (iii) the insolvency of
or acts or omissions by a Securities System; (iv) any delay or failure of any
broker, agent or intermediary, central bank or other commercially prevalent
payment or clearing system to deliver to the Subcustodian's agent securities
purchased or in the remittance or payment made in connection with securities
sold; (v) any delay or failure of any company, corporation, or other body in
charge of registering or transferring securities in the name of the
Subcustodian, the Funds, the Custodian, nominees or agents or any consequential
losses arising out of such delay or failure to transfer such securities
including non-receipt of bonus, dividends and rights and other accretions or
benefits; (vi) delays or inability to perform its duties due to any disorder in
market infrastructure with respect to any particular security or Securities
System; and (vii) any provision of any present or future law regulation or order
of the United States of America, or any state thereof, or any other country, or
political subdivision thereof or of any court of competent jurisdiction.
If the Funds require the Subcustodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Subcustodian, result in the Subcustodian or its nominee
assigned to the Funds being liable for the payment of money or incurring
liability of some other form, the Funds, as a prerequisite to requiring the
Subcustodian to take such action, shall provide indemnity to the Subcustodian in
an amount and form satisfactory to it.
If the Funds require the Subcustodian to advance cash or securities for any
purpose or in the event that the Subcustodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Funds shall be
security therefor and should the Funds fail to repay the Subcustodian promptly,
the Subcustodian shall be entitled to utilize available cash and to dispose of
assets of the Funds to the extent necessary to obtain reimbursement.
8. Liability of Subcustodian for Actions of Third-Party Subcustodians. The
Subcustodian shall not be liable to the Funds or the Custodian for any loss,
damage or expense resulting from any action or inaction of a Third-Party
Subcustodian, unless such loss, damage or expense is caused by , or results from
the negligence, misfeasance or misconduct of the Subcustodian. The Subcustodian
shall have no implied duty to supervise the activities of any Third-Party
Subcustodian.
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9. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
any party by an instrument in writing delivered or mailed, postage prepaid to
the other parties, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; provided, however that the
Subcustodian shall not act for any Fund under Section 2.7 hereof in the absence
of receipt of an initial certificate of the Secretary or an Assistant Secretary
of such Fund that the Board of Directors of such Fund has approved the initial
use of a particular Securities System as required by Rule 17f-4 under the
Investment Company Act and that the Custodian shall not act under Section 2.13
hereof in the absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary of such Fund that its Board of Directors has approved the
initial use of the Direct Paper System; provided further, however, that a Funds
shall not amend or terminate this Contract in contravention of any applicable
federal or state regulations, or any provision of its Articles of Incorporation,
and further provided, that the Funds may at any time by action of their
respective Boards of Directors immediately terminate this Contract in the event
of the appointment of a conservator or receiver for the Subcustodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
This Contract may be terminated as to one or more Funds (but less than all
Funds) by delivery of an amended Schedule A pursuant to this Article 9. The
execution and delivery of an amended Schedule A which deleted one or more Funds
shall constitute a termination of this Contract only with respect to such
deleted Fund(s) but shall not affect this Contract with respect to any other
Fund. In addition, this Contract shall terminate with respect to a Fund upon the
effective date of the termination of such Fund's agreement with its Custodian by
which such Custodian ceases to serve as the Custodian for the securities, cash
and other assets of the Fund.
Schedule A listing the Funds which are parties hereto may be amended from
time to time to add or delete one or more Funds, by the Fund's delivery of an
amended Schedule A to the Custodian and the Subcustodian.
Upon termination of this Contract, the Funds shall pay to the Subcustodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Subcustodian for its costs, expenses and disbursements.
10. Successor Subcustodian
In the event of termination of this Contract, the Subcustodian will deliver
any assets held by it hereunder to the Custodian or to such successor
subcustodian as the Custodian shall instruct in a manner to be mutually agreed
upon by the parties hereto or in the absence of such agreement in a reasonable
manner. Further in the event of termination, the Subcustodian shall be entitled
to receive prior to the delivery of the securities held by it all accrued fees
and unreimbursed expenses the payment of which is contemplated by Article 9
hereof.
11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Subcustodian, the
Custodian and the Funds may from time to time agree on such provisions
interpretive of or in addition to the provisions of this
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<PAGE>
Contract as may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall be in a
writing signed by such parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Articles of Incorporation
of any Fund. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Contract.
12. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
13. Prior Contracts
This Contract constitutes the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof.
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IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 10th day of September, 1996.
ATTEST UNITED MISSOURI BANK, N.A.
_______________________________ By:_____________________________________
ATTEST STATE STREET BANK AND TRUST COMPANY
_______________________________ By:_____________________________________
Executive Vice President
ATTEST FUNDS LISTED ON SCHEDULE A
_______________________________ By:_____________________________________
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Subcustodian Contract
United Missouri Bank, N.A. and
Certain Mutual Funds Advised or Subadvised
by Janus Capital Management
SCHEDULE A
Janus Investment Fund
Janus Money Market Fund
Janus Tax-Exempt Money Market Fund
Janus Government Money Market Fund
Janus Aspen Series
Money Market Portfolio
13
EXHIBIT 10(n)
JANUS GROUP OF MUTUAL FUNDS
100 Fillmore Street
Denver, Colorado 80206-4923
303/333-3863
September 10, 1996
Janus Investment Fund
100 Fillmore Street, Suite 400
Denver, Colorado 80206-9916
Re: Public Offering of Janus Special Situations Fund
Gentlemen:
I have acted as counsel for Janus Investment Fund, a Massachusetts business
trust (the "Trust"), in connection with the filing with the Securities and
Exchange Commission of a post-effective amendment to the Trust's registration
statement with respect to the proposed sale of shares of beneficial interest,
$0.01 par value, of Janus Special Situations Fund (the "Shares").
I have examined the Trust's Agreement and Declaration of Trust and Bylaws,
as amended, the proceedings of its trustees relating to the authorization,
issuance and proposed sale of the Shares, and such other records and documents
as I have deemed relevant. Based upon such examination, it is my opinion that
upon the issuance and sale of the Shares in the manner contemplated by the
aforesaid post-effective amendment to the Trust's registration statement, such
Shares will be legally issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion as an exhibit to the
above-referenced registration statement. This opinion is for the exclusive use
of the Trust in connection with the filing of such post-effective amendment to
the Trust's registration statement with the Securities and Exchange Commission
(and certain securities regulators of other jurisdictions) and is not to be
used, circulated, quoted, relied upon or otherwise referred to by any other
person or for any other purpose. This opinion is given as of the date hereof and
I render no opinion and disclaim any obligation to revise or supplement this
opinion based upon any change in applicable law or any factual matter that
occurs or comes to my attention after the date hereof.
Very truly yours,
/s/ David C. Tucker
David C. Tucker
DCT/dat
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the reference to us under the heading "Independent
Accountants" in the Statement of Additional Information constituting part of
this Post-Effective Amendment No. 75 to the Registration Statement on Form N-1A
of Janus Investment Fund.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Denver, Colorado
September 10, 1996
