CONTENTS
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THE FUND AT A GLANCE
Brief description of the Fund ............................................... 1
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EXPENSE INFORMATION
The Fund's annual operating expenses ........................................ 1
Financial Highlights - a summary
of financial data ........................................................ 2
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THE FUND IN DETAIL
The Fund's Investment
Objective and Policies ................................................... 3
General Portfolio Policies .................................................. 4
Additional Risk Factors ..................................................... 5
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PERFORMANCE TERMS
An explanation of
performance terms ........................................................ 6
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SHAREHOLDER'S MANUAL
Types of Account Ownership .................................................. 7
How to Open Your Janus Account .............................................. 8
Minimum Investment Policies ................................................. 8
How to Purchase Shares ...................................................... 8
How to Exchange Shares ...................................................... 9
How to Redeem Shares ........................................................ 9
SHAREHOLDER SERVICES
AND ACCOUNT POLICIES
JETS(R) ..................................................................... 11
Transactions Through
Processing Organizations ................................................. 11
Taxpayer Identification Number .............................................. 11
Share Certificates .......................................................... 11
Involuntary Redemption ...................................................... 11
Telephone Transactions ...................................................... 11
Making Changes to Your Account .............................................. 11
Statements and Reports ...................................................... 11
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MANAGEMENT OF THE FUND
Investment Adviser and
Portfolio Manager ........................................................ 12
Management Expenses ......................................................... 12
Portfolio Transactions ...................................................... 13
Other Service Providers ..................................................... 13
Other Information ........................................................... 13
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DISTRIBUTIONS AND TAXES
Distributions ............................................................... 14
Taxes ....................................................................... 14
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APPENDIX A
Glossary of Investment Terms ................................................ 15
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APPENDIX B
Explanation of Rating Categories ............................................ 17
JANUS FLEXIBLE INCOME FUND
100 Fillmore Street
Denver, CO 80206-4923
1-800-525-3713
February 18, 1996, as supplemented June 27, 1996 and January 13, 1997
Janus Flexible Income Fund (the "Fund") is a no-load, diversified mutual fund
that seeks to obtain maximum total return, consistent with preservation of
capital, by investing primarily in income-producing securities.
For complete information on how to purchase, exchange and sell shares, please
see the Shareholder's Manual beginning on page 7.
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 February 18, 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.
<PAGE>
THE FUND
AT A GLANCE
INVESTMENT OBJECTIVE:
The investment objective of the Fund is to obtain maximum total return,
consistent with preservation of capital.
PRIMARY HOLDINGS:
A diversified fund that pursues its objective primarily through investments in
income-producing securities. The Fund may have substantial holdings of lower
rated debt securities or "junk" bonds.
SHAREHOLDER'S
INVESTMENT HORIZON:
The Fund is designed for investors who primarily seek current income.
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 more than $30 billion in assets.
FUND MANAGERS:
Sandy R. Rufenacht
Ronald V. Speaker*
*Mr. Speaker will not manage the Fund for the 90-day period starting on or about
January 27, 1997. See Management of the Fund on page 12.
FUND INCEPTION:
July 1987
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.
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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.
**You may be charged a $5 transaction fee for excessive exchanges. See "How to
Exchange Shares" on page 9.
ANNUAL FUND OPERATING EXPENSES(1)
(expressed as a percentage of average net assets)
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Management Fee 0.62%
Other Expenses 0.34%
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Total Fund Operating Expenses 0.96%
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(1) The information in the table above is based on expenses before expense
offset arrangements for the fiscal period ended October 31, 1995.
<TABLE>
EXAMPLE
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<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
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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. $10 $31 $53 $118
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE RETURNS
OR EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
1
<PAGE>
FINANCIAL HIGHLIGHTS
Unless otherwise noted, the information below is for fiscal periods ending on
October 31 of each year. The accounting firm of Price Waterhouse LLP has audited
the Fund's financial statements since October 1, 1990. Their report is included
in the Fund's Annual Report, which is incorporated by reference into the SAI.
The Fund's financial statements for fiscal periods prior to October 1, 1990 were
audited by other independent accountants whose reports are not included in the
Annual Report. Expense and income ratios and portfolio turnover rates have been
annualized for periods of less than one year. Total returns for periods of less
than one year are not annualized.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1992(1) 1991(2) 1990(2) 1989(2) 1988(2) 1987(3)
- ---------------------------------------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $8.96 $10.03 $9.26 $9.09 $8.01 $9.35 $9.99 $9.92 $10.00
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Income from investment operations:
2. Net investment income 0.72 0.74 0.77 0.68 0.68 0.95 0.97 0.92 0.40
3. Net gains or (losses) on securities (both
realized and unrealized) 0.59 (0.86) 0.79 0.15 1.29 (1.38) (0.56) 0.09 (0.07)
- ---------------------------------------------------------------------------------------------------------------------------
4. Total from investment operations 1.31 (0.12) 1.56 0.83 1.97 (0.43) 0.41 1.01 0.33
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.72) (0.72) (0.77) (0.66) (0.72) (0.91) (0.97) (0.92) (.40)
6. Distributions (from capital gains) -- (0.23) (0.02) -- (0.17) -- (0.08) (0.02) (.01)
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7. Total distributions (0.72) (0.95) (0.79) (0.66) (0.89) (0.91) (1.05) (0.94) (0.41)
- ---------------------------------------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $9.55 $8.96 $10.03 $9.26 $9.09 $8.01 $9.35 $9.99 $9.92
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9. Total return 15.35% (1.26%) 17.48% 9.43% 25.98% (4.62%) 4.12% 10.70% 3.40%
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10. Net assets, end of period (in millions) $580 $377 $473 $205 $72 $14 $18 $10 $4
11. Ratio of expenses to average net assets 0.96%(5) 0.93% 1.00%(4) 1.00%(4) 1.00%(4) 1.00%(4)1.00%(4)1.00%(4) 1.00%(4)
12. Ratio of net investment income to
average net assets 7.91% 7.75% 7.96% 8.98% 9.38% 11.24% 10.00% 9.32% 8.52%
13. Portfolio turnover rate 250% 137% 201% 210% 88% 96% 75% 76% 130%
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</TABLE>
(1) Fiscal period from January 1, 1992 to October 31, 1992.
(2) Fiscal year ended on December 31st of each year.
(3) Fiscal period from July 2, 1987 (inception) to December 31, 1987.
(4) The ratio of expenses to average net assets was 1.01% in 1993, 1.21% in
1992 and 1.74% in 1991 before voluntary waiver of certain Fund expenses.
The ratio was 2% in prior years.
(5) The Fund's expenses may be reduced through the use of brokerage commissions
and uninvested cash balances earning interest with the Fund's custodian.
The expense ratio for the fiscal period ended October 31, 1995, does not
reflect expense reductions, which had a de minimis effect on the expense
ratio (less than 0.01%).
UNDERSTANDING FINANCIAL HIGHLIGHTS
This section is designed to help you better understand the information
summarized in the Financial Highlights table. The table contains important
historical operating information that may be useful in making your investment
decision or understanding how your investment has performed. The Fund's Annual
Report contains additional information about the Fund's performance, including a
comparison to an appropriate securities index. For a copy of the Annual Report,
call 1-800-525-8983.
NET ASSET VALUE ("NAV") is the value of a single share of the Fund. It is
computed by adding the value of all of the Fund's investments and other assets,
subtracting any liabilities and dividing the result by the number of shares
outstanding. The difference between line 1 and line 8 in the Financial
Highlights table represents the change in value of the Fund's shares over the
fiscal period, but not its total return.
NET INVESTMENT INCOME is the per share amount of dividends and interest income
earned on securities held by the Fund, less Fund expenses. DIVIDENDS (FROM NET
INVESTMENT INCOME) is the per share amount that the Fund paid from net
investment income.
NET GAINS OR (LOSSES) ON SECURITIES is the per share increase or decrease in
value of the securities the Fund holds. A gain (or loss) is realized when
securities are sold. A gain (or loss) is unrealized when securities increase or
decrease in value but are not sold. DISTRIBUTIONS (FROM CAPITAL GAINS) is the
per share amount that the Fund paid from net realized gains.
TOTAL RETURN is the percentage increase or decrease in the value of an
investment over a stated period of time. A total return percentage includes both
changes in NAV and income. For the purposes of calculating total return, it is
assumed that dividends and distributions are reinvested at the NAV on the day of
the distribution. THE FUND'S TOTAL RETURN CANNOT BE COMPUTED DIRECTLY FROM THE
FINANCIAL HIGHLIGHTS TABLE.
RATIO OF EXPENSES TO AVERAGE NET ASSETS is the total of the Fund's operating
expenses divided by its average net assets for the stated period.
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS is the Fund's total net
investment income divided by its average net assets for the stated period.
PORTFOLIO TURNOVER RATE is a measure of the amount of the Fund's buying and
selling activity. It is computed by dividing total purchases or sales, whichever
is less, by the average monthly market value of the Fund's portfolio securities.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
2
<PAGE>
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
The investment objective of the Fund is to obtain maximum total return,
consistent with preservation of capital. The Fund pursues its objective
primarily through investments in income-producing securities. Total return is
expected to result from a combination of current income and capital
appreciation, although income will normally be the dominant component of total
return. As a fundamental policy, this Fund will invest at least 80% of its
assets in income-producing securities.
TYPES OF INVESTMENTS
The Fund may invest in a wide variety of income-producing securities including
corporate bonds and notes, government securities, preferred stock,
income-producing common stock, debt securities that are convertible or
exchangeable into equity securities, and debt securities that carry with them
the right to acquire equity securities as evidenced by warrants attached to or
acquired with the securities. The Fund may invest to a lesser degree in common
stocks, other equity securities or debt securities that are not currently paying
dividends or interest. The Fund may purchase securities of any maturity and
quality and the average maturity and quality of its portfolio may vary
substantially.
The Fund may invest without limit in foreign securities, including those of
corporate and government issuers. The Fund may invest without limit in
high-yield/high-risk securities and may have substantial holdings of such
securities. The risks of foreign securities and higher-yield bonds are described
under "Additional Risk Factors" on page 5.
The Fund may also invest in mortgage- and asset-backed securities; zero coupon
bonds (up to 10% of assets); securities purchased on a when-issued, delayed
delivery or forward commitment basis; and indexed/ structured securities. The
Fund may use futures, options and other derivatives for hedging purposes or for
other purposes, such as enhancing return. See "Additional Risk Factors" on page
5.
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 and similar investments are a residual - they represent the
assets that remain after the portfolio manager has committed available assets to
desirable investment opportunities. Securities that the Fund may invest in as
means of receiving a return on idle cash include high-grade commercial paper,
certificates of deposit, repurchase agreements or other short-term debt
obligations including money market funds managed by Janus Capital.
THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN INVESTMENT
IN THE FUND.
HOW DO INTEREST RATES AFFECT THE VALUE OF MY INVESTMENT?
A fundamental risk associated with any fund that invests in fixed-income
securities (e.g., a bond fund) is the risk that the value of the securities it
holds will rise or fall as interest rates change. Generally, a fixed-income
security will increase in value when interest rates fall and decrease in value
when interest rates rise. Longer-term securities are generally more sensitive to
interest rate changes than shorter-term securities, but they generally offer
higher yields to compensate investors for the associated risks. A bond fund's
average-weighted maturity and its duration are measures of how the fund may
react to interest rate changes.
WHAT IS MEANT BY THE FUND'S "AVERAGE-WEIGHTED MATURITY"?
The stated maturity of a bond is the date when the issuer must repay the bond's
entire principal value to an investor, such as a Fund. A bond's term to maturity
is the number of years remaining to maturity. A bond fund does not have a stated
maturity, but it does have an average-weighted maturity. This number is
calculated by averaging the terms to maturity of bonds held by the Fund with
each maturity "weighted" according to the percentage of net assets that it
represents.
- --------------------------------------------------------------------------------
WHAT IS MEANT BY THE FUND'S "DURATION"?
A bond's duration indicates the time it
will take an investor to recoup his or her investment. Unlike average maturity,
duration reflects both principal and interest payments. Generally, the higher
the coupon rate on a bond, the lower its duration will be. The duration of a
bond fund is calculated by averaging the duration of bonds held by a fund with
each duration "weighted" according to the percentage of net assets that it
represents. Because duration accounts for interest payments, the Fund's duration
is usually shorter than its average maturity.
- --------------------------------------------------------------------------------
HOW DOES THE FUND MANAGE INTEREST RATE RISK?
The Fund may vary the average-weighted maturity of its portfolio to reflect its
portfolio manager's analysis of interest rate trends and other factors. The
Fund's average-weighted maturity will tend to be shorter when its portfolio
manager expects interest rates to rise and longer when its portfolio manager
expects interest rates to fall. The Fund may also use futures, options and other
derivatives to manage interest rate risk. See "Additional Risk Factors" on page
5.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
3
<PAGE>
WHAT IS MEANT BY "CREDIT QUALITY"?
Credit quality measures the likelihood that the issuer will meet its obligations
on a bond. One of the fundamental risks associated with all fixed-income funds
is credit risk, which is the risk that an issuer will be unable to make
principal and interest payments when due. U.S. government securities are
generally considered to be the safest type of investment in terms of credit
risk. Municipal obligations generally rank between U.S. government securities
and corporate debt securities in terms of credit safety. Corporate debt
securities, particularly those rated below investment grade, present the highest
credit risk.
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HOW IS CREDIT QUALITY MEASURED?
Ratings published by nationally recognized rating agencies such as Standard &
Poor's Ratings Services ("Standard &Poor's") and Moody's Investors Service, Inc.
("Moody's") are widely accepted measures of credit risk. The lower a bond issue
is rated by an agency, the more credit risk it is considered to represent. Lower
rated bonds generally pay higher yields to compensate investors for the
associated risk. Please refer to Appendix B for a description of rating
categories.
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.
DIVERSIFICATION
The Investment Company Act of 1940 (the "1940 Act") classifies investment
companies as either diversified or nondiversified. The Fund qualifies as a
diversified 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 75% 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.
o The Fund will invest no more than 25% of its assets in a single issuer.
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,
anticipated 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.
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 and municipal lease obligations.
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.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
4
<PAGE>
ADDITIONAL RISK FACTORS
HIGH-YIELD/HIGH-RISK SECURITIES
High-yield/high-risk securities (or "junk" bonds) are debt securities rated
below investment grade by the primary rating agencies (Standard & Poor's and
Moody's). Please refer to Appendix B for a description of bond rating
categories. The Fund expects that its holdings of lower quality securities, if
any, will consist primarily of bonds rated in the highest two tiers of
noninvestment grade securities.
The value of lower quality securities generally is more dependent on the ability
of the issuer to meet interest and principal payments (i.e., credit risk) than
is the case for higher quality securities. Conversely, the value of higher
quality securities may be more sensitive to interest rate movements than lower
quality securities. Issuers of high-yield securities may not be as strong
financially as those issuing bonds with higher credit ratings. Investments in
such companies are considered to be more speculative than higher quality
investments.
Issuers of high-yield securities are more vulnerable to real or perceived
economic changes (for instance, an economic downturn or prolonged period of
rising interest rates), political changes or adverse developments specific to
the issuer. Adverse economic, political or other developments may impair the
issuer's ability to service principal and interest obligations, to meet
projected business goals and to obtain additional financing, particularly if the
issuer is highly leveraged. In the event of a default, the Fund would experience
a reduction of its income and could expect a decline in the market value of the
defaulted securities.
The market for lower quality securities is generally less liquid than the market
for higher rated bonds. Adverse publicity and investor perceptions as well as
new or proposed laws may also have a greater negative impact on the market for
lower quality securities. Unrated debt, while not necessarily of lower quality
than rated securities, may not have as broad a market as rated securities.
The market prices of high-yield/high-risk securities structured as zero coupon
or pay-in-kind securities are generally affected to a greater extent by interest
rate changes and tend to be more volatile than securities which pay interest
periodically. In addition, zero coupon, pay-in-kind and delayed interest bonds
often do not pay interest until maturity. However, the Fund must recognize a
computed amount of interest income and pay dividends to shareholders even though
it has received no cash. In some instances, the Fund may have to sell securities
to have sufficient cash to pay dividends.
FOREIGN SECURITIES
Investments in foreign securities, including those of foreign governments,
involve greater risks than investing in comparable domestic securities.
Securities of some foreign companies and governments may be traded in the United
States, but 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 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 nd 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.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
5
<PAGE>
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;
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.
SPECIAL SITUATIONS
The Fund may invest in "special situations" from time to time. 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. Developments creating a
special situation might include, among others, a new product or process, a
technological breakthrough, a management change or other extraordinary corporate
event, or differences in market supply of and demand for the security.
Investment in special situations may carry an additional risk of loss in the
event that the anticipated development does not occur or does not attract the
expected attention.
See Appendix A for risks associated with certain other investments.
- --------------------------------------------------------------------------------
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 yield.
CUMULATIVE TOTAL RETURN represents the actual rate of return on an investment
for a specified period. The Financial Highlights table shows total return for a
single fiscal period. Cumulative total return is generally quoted for more than
one year (e.g., the life of the Fund). A cumulative total return does not show
interim fluctuations in the value of an investment.
AVERAGE ANNUAL TOTAL RETURN represents the average annual percentage change of
an investment over a specified period. It is calculated by taking the cumulative
total return for the stated period and determining what constant annual return
would have produced the same cumulative return. Average annual returns for more
than one year tend to smooth out variations in the Fund's return and are not the
same as actual annual results.
YIELD shows the rate of income the Fund earns on its investments as a percentage
of the Fund's share price. It is calculated by dividing a Fund's net investment
income for a 30-day period by the average number of shares entitled to receive
dividends and dividing the result by the Fund's NAV per share at the end of the
30-day period. Yield does not include changes in NAV.
Yields are calculated according to standardized SEC formulas and may not equal
the income on an investor's account. Yield is usually quoted on an annualized
basis. An annualized yield represents the amount you would earn if you remained
in a Fund for a year and that Fund continued to have the same yield for the
entire year.
THE FUND IMPOSES NO SALES OR OTHER CHARGES THAT WOULD AFFECT YIELD COMPUTATIONS.
FUND PERFORMANCE FIGURES ARE BASED UPON HISTORICAL RESULTS AND ARE NOT INTENDED
TO INDICATE FUTURE PERFORMANCE. INVESTMENT RETURNS AND NET ASSET VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
6
<PAGE>
SHAREHOLDER'S MANUAL
This section will help you become familiar with the different types of accounts
you can establish with Janus. This section also explains in detail the wide
array of services and features you can establish on your account. These services
may be modified or discontinued without shareholder approval.
HOW TO GET IN TOUCH WITH JANUS
If you have any questions while reading 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.
- --------------------------------------------------------------------------------
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 included with this Prospectus.
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 591/2.
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 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 701/2 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.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
7
<PAGE>
HOW TO OPEN YOUR JANUS ACCOUNT
Complete and sign the appropriate application. Please be sure to provide your
Social Security or taxpayer identification number on the application. Make your
check payable to Janus Funds. Send all items to one of the following addresses:
REGULAR MAIL
Janus Funds
P.O. Box 173375
Denver, CO 80217-3375
EXPRESS OR CERTIFIED MAIL
Janus Funds
100 Fillmore Street
Denver, CO 80206-4923
INVESTOR SERVICE CENTERS
Janus Funds offers two Investor Service Centers for those individuals who would
like to conduct their investing in person. Our representatives will be happy to
assist you at either of the following locations: 100 Fillmore Street, Suite 100
Denver, CO 80206 3773 Cherry Creek North Drive, Suite 101 Denver, CO 80209
MINIMUM INVESTMENT POLICIES
ACCOUNTS ESTABLISHED AFTER FEBRUARY 18, 1996
Any account opened after February 18, 1996, must meet minimum investment
requirements described at page 7.
ACCOUNTS ESTABLISHED ON OR BEFORE FEBRUARY 18, 1996
o The minimum investment requirement remains at $1,000 ($250 for retirement
accounts and UGMA/UTMA accounts) for these accounts only.
o There is no minimum initial investment requirement for Automatic Monthly
Investment Program participants that continue to make subsequent automatic
investments of at least $50.
o Subsequent investments (other than automatic monthly investments) must meet
the $100 minimum.
ALL ACCOUNTS
Due to the proportionately higher costs of maintaining small accounts, Janus
reserves the right to deduct a $10 annual maintenance fee (or the value of the
account if less than $10) from accounts with values below the minimums described
above or to close such accounts. This policy will apply to accounts
participating in the Automatic Monthly Investment Program only if your account
balance does not reach the required minimum initial investment or falls below
such minimum and you have discontinued monthly investments. This policy does not
apply to accounts that fall below the minimums solely as a result of market
fluctuations. It is expected that accounts will be valued and the $10 fee
assessed on the second Friday of September of each year. You will receive notice
before we charge the $10 fee or close your account so that you may increase your
account balance to the required minimum.
HOW TO PURCHASE SHARES
PAYING FOR SHARES
When you purchase shares, your request will be processed at the next NAV
calculated after your order is received and accepted. Please note the following:
o Cash, credit cards, third party checks and credit card checks will not be
accepted.
o All purchases must be made in U.S. dollars.
o Checks must be drawn on 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 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
8
<PAGE>
o 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 invested directly into your Fund account.
To obtain information on establishing this option, call 1-800-525-3713.
o BY SYSTEMATIC EXCHANGE
With a Systematic Exchange you determine the amount of money ($100 minimum)
you would like automatically exchanged from one Janus account to another on
any day of the month. For more information on how to establish this option,
call 1-800-525-3713.
HOW TO EXCHANGE SHARES
On any business day, you may exchange all or a portion of your shares into any
other available Janus fund.
IN WRITING
To request an exchange in writing, please follow the instructions for written
requests on page 10.
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
meet the $2,500 minimum, or be for the total account value if less than
$2,500.
o Exchanges between existing accounts must meet the $100 subsequent
investment requirement.
o You may make four exchanges out of the Fund during a calendar year
(exclusive of Systematic Exchanges) free of charge. The Fund reserves the
right to have a $5 transaction fee automatically deducted from your account
for each additional exchange.
o Exchanges between accounts will be accepted only if the registrations are
identical.
o If the shares you are exchanging are held in certificate form, you must
return the certificate to your Fund prior to making any exchanges.
o Be sure that you read the prospectus for the Fund into which you are
exchanging.
o The Funds reserve the right to reject any exchange request and to modify or
terminate the exchange privilege at any time.
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.
QUICK ADDRESS AND TELEPHONE REFERENCE
REGULAR MAIL
Janus Funds
P.O. Box 173375
Denver, CO 80217-3375
JANUS INVESTOR SERVICES 1-800-525-3713
To speak to a service representative
JETS(R) 1-800-525-6125
For 24-hour access to account and
fund information.
TDD 1-800-525-0056
A telecommunications device for our hearing and speech-impaired shareholders.
EXPRESS OR CERTIFIED MAIL
Janus Funds
100 Fillmore Street
Denver, CO 80206-4923
JANUS QUOTELINE# 1-800-525-0024
For automated daily quotes on fund share prices, yields and total returns.
JANUS LITERATURE LINE 1-800-525-8983
To request a prospectus, shareholder reports or marketing materials.
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 10.
BY TELEPHONE
Most accounts have the telephone redemption option, unless this option was
specifically declined on the application or in writing.
This option enables you to redeem up to $100,000 daily from your account by
simply calling 1-800-525-3713 by 4:00 p.m. New York time.
SYSTEMATIC WITHDRAWAL PLAN ("SWP")
SWPs allow you to redeem a specific dollar amount from your account on a regular
basis. For more information on SWPs or to request the appropriate form, please
call 1-800-525-3713.
PAYMENT OF REDEMPTION PROCEEDS
o By Check
Redemption proceeds will be sent to the shareholder(s) of record at the
address of record within seven days after receipt of a valid redemption
request.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
9
<PAGE>
o ELECTRONIC TRANSFER
If you have established this option, your redemption proceeds will be
electronically transferred to your predesignated bank account on the second
business day after receipt of your redemption request. To establish this
option, call 1-800-525-3713. There is no fee for this option.
o BY WIRE
If you are authorized for the wire redemption service, your redemption
proceeds will be wired directly into your designated bank account on the
next business day after receipt of your redemption request. There is no
limitation on redemptions by wire; however, there is an $8 fee for each
wire and your bank may charge an additional fee to receive the wire. If you
would like to establish this option on an existing account, please call
1-800-525-3713 to request the appropriate form. Wire redemptions are not
available for retirement accounts.
IF THE SHARES BEING REDEEMED WERE PURCHASED BY CHECK, TELEPHONE OR THROUGH THE
AUTOMATIC MONTHLY INVESTMENT PROGRAM, THE 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 8 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
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
591/2) or premature (before age 591/2) 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.
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.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
10
<PAGE>
SHAREHOLDER SERVICES
AND ACCOUNT POLICIES
JANUS ELECTRONIC TELEPHONE
SERVICE (JETS(R))
JETS, our electronic telephone service line, offers you 24-hour access by
TouchTone(TM) telephone to obtain your account balance, to confirm your last
transaction or dividend posted to your account, to order duplicate account or
tax statements, to reorder money market fund checks or to exchange your shares.
JETS can be accessed by calling 1-800-525-6125. Calls on JETS are limited to
seven minutes.
TRANSACTIONS THROUGH
PROCESSING ORGANIZATIONS
You may purchase or sell Fund shares through a broker-dealer, bank or other
financial institution, or an organization that provides recordkeeping and
consulting services to 401(k) plans or other qualified plans (a "Processing
Organization"). Processing Organizations may charge you a fee for this service
and may require different minimum initial and subsequent investments than the
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. Share certificates cannot
be issued for retirement accounts. In addition, if the certificate is lost,
there may be a replacement charge.
INVOLUNTARY REDEMPTION
The Fund reserves the right to close an account if the shareholder is deemed to
engage in activities which are illegal or otherwise 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.
It may be difficult to reach the Fund by tele- phone during periods of unusual
market activity. If you are unable to reach a repre- sentative 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.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
11
<PAGE>
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 certain series of the Trust
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
SANDY R. RUFENACHT is Executive Vice President and co-manager of the Fund which
he has managed since June 1996. He is Executive Vice President and portfolio
manager of Janus Intermediate Government Securities Fund and Janus Short-Term
Bond Fund, each of which he has managed since January 1996. Since June 1996 he
has served as Executive Vice President and co-manager of Janus High-Yield Fund.
Mr. Rufenacht joined Janus Capital in 1990 and gained experience as a trader and
research analyst before assuming management of these funds. He holds a Bachelor
of Arts in Business from the University of Northern Colorado.
RONALD V. SPEAKER is Executive Vice President and portfolio manager of the Fund,
which he has managed since December 1991. Mr. Speaker joined Janus Capital in
1986 and also manages Janus High-Yield Fund. He previously managed Janus
Intermediate Government Securities Fund, Janus Short-Term Bond Fund and Janus
Federal Tax-Exempt Fund from their inceptions through December 1995. He holds a
Bachelor of Arts in Finance from the University of Colorado and is a Chartered
Financial Analyst.
On January 13, 1997, Mr. Speaker settled an SEC administrative action involving
two personal trades made by him in January of 1993. Without admitting or denying
the allegations, Mr. Speaker agreed to civil money penalty, disgorgement, and
interest payments totaling $37,199 and to a 90-day suspension starting on or
about January 27, 1997. During that time, the Fund will be managed by its
co-manager, Sandy Rufenacht.
- --------------------------------------------------------------------------------
PERSONAL INVESTING
Janus Capital does not permit portfolio managers to purchase and sell securities
for their own accounts, except under the limited exceptions contained in 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 equal to .65% of the first $300 million in assets and .55% of all assets
in excess of $300 million. The advisory agreement with the Fund spells out the
management fee and other expenses that the Fund must pay. Janus Capital has
currently agreed to waive certain fees and expenses to the extent that the
Fund's total expenses exceed 1.00%. Janus Capital may modify or terminate this
waiver at any time upon 90 days' notice to the Trustees.
The actual management fee paid by the Fund for the fiscal year ended October 31,
1995, was .62% of the value of the Fund's average daily net assets. 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.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
12
<PAGE>
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.
OTHER SERVICE PROVIDERS
The following parties provide the Fund with administrative and other services.
DOMESTIC CUSTODIAN
Investors Fiduciary Trust Company
127 W. 10th Street
Kansas City, Missouri 64105
FOREIGN CUSTODIAN
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
TRANSFER AGENT
Janus Service Corporation
P.O. Box 173375
Denver, Colorado 80217
DISTRIBUTOR
Janus Distributors, Inc.
100 Fillmore Street
Denver, Colorado 80206
Janus Service Corporation and Janus Distributors, Inc. are wholly-owned
subsidiaries of Janus Capital. Investors Fiduciary Trust Company is a
wholly-owned subsidiary of State Street Bank and Trust Company.
OTHER INFORMATION
ORGANIZATION
The Trust is a "mutual fund" that was organized as a Massachusetts business
trust on February 11, 1986. A mutual fund is an investment vehicle that pools
money from numerous investors and invests the money to achieve a specified
objective. As of the date of this Prospectus, the Trust offers 18 separate
series, three of which currently offer two classes of shares.
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.
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 all series of the Trust created after April
30, 1992, have voted to vest authority to use this investment structure in the
sole discretion of the Trustees. No further approval of the shareholders of the
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.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
13
<PAGE>
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DISTRIBUTIONS
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 DIVIDENDS. NET REALIZED LONG-TERM GAINS ARE PAID TO
SHAREHOLDERS AS CAPITAL GAINS DISTRIBUTIONS. DIVIDENDS ARE DECLARED DAILY
AND PAID AS OF THE LAST BUSINESS DAY OF EACH MONTH, 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.
"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 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.
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.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
14
<PAGE>
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.
CERTIFICATES OF PARTICIPATION ("COPs") are certificates representing an interest
in a pool of securities. Holders are entitled to a proportionate interest in the
underlying securities. Municipal lease obligations are often sold in the form of
COPs. See "Municipal lease obligations" below.
COMMERCIAL PAPER is a short-term debt obligation with a maturity ranging from 1
to 270 days issued by banks, corporations and other borrowers to investors
seeking to invest idle cash. The 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 (BB or lower by Standard & Poor's and Ba or
lower by Moody's). Other terms commonly used to describe such securities include
"lower rated bonds," "noninvestment grade bonds" and "junk bonds."
INDUSTRIAL DEVELOPMENT BONDS are revenue bonds that are issued by a public
authority but which may be backed only by the credit and security of a private
issuer and may involve greater credit risk. See "Municipal securities" below.
MORTGAGE- AND ASSET-BACKED SECURITIES are shares in a pool of mortgages or other
debt. These securities are generally pass-through securities, which means that
principal and interest payments on the underlying securities (less servicing
fees) are passed through to shareholders on a pro rata basis. These securities
involve prepayment risk, which is the risk that the underlying mortgages or
other debt may be refinanced or paid off prior to their maturities during
periods of declining interest rates. In that case, 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.
MUNICIPAL LEASE OBLIGATIONS are revenue bonds backed by leases or installment
purchase contracts for property or equipment. Lease obligations may not be
backed by the issuing municipality's credit and may involve risks not normally
associated with general obligation bonds and other revenue bonds. For example,
their interest may become taxable if the lease is assigned and the holders may
incur losses if the issuer does not appropriate funds for the lease payments on
an annual basis, which may result in termination of the lease and possible
default.
MUNICIPAL SECURITIES are bonds or notes issued by a U.S. state or political
subdivision. A municipal security may be a general obligation backed by the full
faith and credit (i.e., the borrowing and taxing power) of a municipality or a
revenue obligation paid out of the revenues of a designated project, facility or
revenue source.
PASSIVE FOREIGN INVESTMENT 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.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
15
<PAGE>
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.
TENDER OPTION BONDS are generally long-term securities that have been coupled
with an option to tender the securities to a bank, broker-dealer or other
financial institution at periodic intervals and receive the face value of the
bond. This type of security is commonly used as a means of enhancing the
liquidity of municipal securities.
U.S. GOVERNMENT SECURITIES include direct obligations of the U.S. government
that are supported by its full faith and credit. Treasury bills have initial
maturities of less than one year, Treasury notes have initial maturities of one
to ten years and Treasury bonds may be issued with any maturity but generally
have maturities of at least ten years. U.S. government securities also include
indirect obligations of the U.S. government that are issued by federal agencies
and government sponsored entities. Unlike Treasury securities, agency securities
generally are not backed by the full faith and credit of the U.S. government.
Some agency securities are supported by the right of the issuer to borrow from
the Treasury, others are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations and others are supported only by
the credit of the sponsoring agency.
VARIABLE AND FLOATING RATE SECURITIES have variable or floating rates of
interest and, under certain limited circumstances, may have varying principal
amounts. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate
index or market interest rate. The floating rate tends to decrease the
security's price sensitivity to changes in interest rates.
WARRANTS are securities, typically issued with preferred 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 on
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 contracts. An option on a futures contract gives the buyer the
right, but not the obligation, to buy or sell a futures contract at a specified
price on or before a specified date. Futures contracts and options on futures
are standardized and traded on designated exchanges.
INDEXED/STRUCTURED SECURITIES are typically short- to intermediate-term debt
securities whose value at maturity or interest rate is linked to currencies,
interest rates, equity securities, indices, commodity prices or other financial
indicators. Such 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).
INVERSE FLOATERS are debt instruments whose interest rate bears an inverse
relationship to the interest rate on another instrument.
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.
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
16
<PAGE>
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
<TABLE>
<S> <C>
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 issuer's capacity to meet required interest
and principal payments.
CCC, CC, C BB - lowest degree of speculation; C - the highest degree of speculation. Quality and
protective characteristics outweighed by large uncertainties or major risk exposure to
adverse conditions.
D In default.
- ------------------------------------------------------------------------------------------------------------------------------------
MOODY'S INVESTORS SERVICE, INC.
Investment Grade
Aaa Highest quality, smallest degree of investment risk.
Aa High quality; together with Aaa bonds, they compose the high-grade bond group.
A Upper-medium grade obligations; many favorable investment attributes. Baa Medium-grade
obligations; neither highly protected nor poorly secured. Interest and principal appear
adequate for the present but certain protective elements may be lacking or may be unreliable
over any great length of time.
Non-Investment Grade
Ba More uncertain, with speculative elements. Protection of interest and principal payments not
well safeguarded during good and bad times.
B Lack characteristics of desirable investment; potentially low assurance of timely interest
and principal payments or maintenance of other contract terms over time.
Caa Poor standing, may be in default; elements of danger with respect to principal or interest
payments.
Ca Speculative in a high degree; could be in default or have other marked shortcomings.
C Lowest-rated; extremely poor prospects of ever attaining investment standing.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Unrated securities are treated as noninvestment grade unless the portfolio
manager determines that such securities are the equivalent of investment grade
securities. Split rated securities may be treated as investment grade so long
as at least one major agency has rated the security as investment grade.
SECURITIES HOLDINGS BY RATING CATEGORY
During the fiscal period ended October 31, 1995, the percentage of securities
holdings for the Fund by rating category based upon a weighted monthly average
was:
<TABLE>
<S> <C>
BONDS - S&P RATING The Fund
AAA 17%
AA 0%
A 15%
BBB 27%
BB 13%
B 23%
CCC 1%
CC 0%
C 0%
Preferred Stock 1%
Cash and Options 3%
------------------------------------------------------------
TOTAL 100%
------------------------------------------------------------
</TABLE>
FEBRUARY 18, 1996, AS SUPPLEMENTED JUNE 27, 1996 AND JANUARY 13, 1997
JANUS FLEXIBLE INCOME FUND PROSPECTUS
17
<PAGE>
